Supply chain management professionals are often attuned to the weakest link that may develop among various tiers of the product value-chain. There are now building concerns that consumer electronics supply chains may be dealing with a potential industry-wide shortage of a key component during its most critical product demand period.Order Allopurinol Hyperuricemia Without Prescription Where To Buy Naltrexone no Prescription Over The Counter
The Wall Street Journal recently called attention to a looming battle between electronic game console producer Nintendo against high-volume consumer electronics producers such as Apple. (Paid subscription required)
Component supply challenges include liquid-crystal displays (LCD’s), miniature motors and NAND flash-memory chips. The latter specifically points to NAND supplier Toshiba, which has become the second largest supplier of more advanced NAND memory chips.
For Nintendo, enthusiastic consumer demand for its newly released Switch gaming console is leading to aggressive planning for console output for its current fiscal year that ends in March 2018. According to the report, while Nintendo’s official sales target is 10 million units, the producer is reportedly pursuing plans to produce as many as 20 million units, double the official amount.
As supply chain planners are acutely aware, that is a considerable variance to hedge for. A Toshiba spokesperson indicated to the WSJ that demand for NAND has been overwhelmingly greater than existing supply and the situation is expected to remain the same through the end of the current year. Compounding the component challenge are the realities of high-volume smartphone producers such as Apple, who can garner a heck of a lot of NAND memory supplier influence based on shear buying volume.
Companies such as Nintendo therefore must factor such realities and find more ways to garner added influence with Toshiba as well as other NAND suppliers. A further, and likely more dynamic situation involves a building significant financial crisis surrounding Toshiba itself.
The supplier’s U.S. focused Westinghouse Electric nuclear reactor construction business unit has incurred significant financial losses forcing that unit to file for bankruptcy in March, leading to concerns for Toshiba’s financial survival as well. In March, in what was reported as an acrimonious annual shareholder meeting, Toshiba shareholders agreed to split off the prized NAND flash memory unit in hopes of raising at least $9 billion to cover U.S. nuclear unit losses.
According to various reports, Toshiba’s NAND chip business includes a venture originally contracted with memory producer SanDisk, and that company was since acquired by Western Digital, which in-essence took ownership of the SanDisk stake in Toshiba’s memory operations. Toshiba began making overtures that it would sell its attractive memory chip business to raise immediate cash. Upon learning of that move, Western Digital threatened to block such a sale, based on its stake in the business. The latest reported iteration is that Toshiba has made a legal concession, in-essence keeping part of the memory unit in-house to appease Western Digital. However, the reality is that there are many active bidders for the prized memory business, including Western Digital. Other reported bidders are industry leader SK Hynix, Broadcom as well as contract manufacturing services provider Foxconn. The latter, to little surprise, has sought the influence of Apple in helping to leverage its financial offer for the NAND business. As has been the case with Japan’s high-tech producers, the government of Japan, in the presence of Innovation Network Corp. of Japan, remains active behind the scenes to ensure that any sale address concerns for intellectual and advance technology protection.
Where all this maneuvering ends-up is the purview of lawyers and industry-watchers. A recent published report by The Financial Times concludes that negotiations are likely to be complex and subject to further delay, which adds more pressure on Toshiba’s need to stem overwhelming red ink. The length and overall outcome adds to the obvious uncertainties as to Toshiba’s plans to continue to be able to meet overall customer demand for NAND chips, not to mention the overall industry’s capacity availability. With Apple planning to ramp-up production for the 10th anniversary editions of the iPhone, along with other global smartphone producers hoping to outdo Apple in second-half consumer demand, supplier influence and bargaining power are likely to be important determinants as to which producers garner the bulk of capacity-constrained supply.
Supplier contingency planning, along with the adherence to business and product-margin objectives will be a further challenge for industry supply chain teams, once-again placing an emphasis on more informed and data-driven planning and decision-making capabilities, not to mention supply chain risk mitigation as-well.
Approaching the mid-point of the year, with keen awareness that the second-half is most critical for business results, consumer electronics and high-tech supply chains have likely awareness to a difficult period ahead, one where agility, built-up supplier relationships and overall planning and execution capabilities will again be put to the test.
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