It has been years since the “A” word – allocation – has been used in association with a widely-used commodity component. On Friday, however, one of the industry’s largest independent distributors, America II Electronics, announced it was putting its memory inventory on allocation.
The move is related to the recent fire at the SK Hynix facility in Wuxi, China, which America II says is responsible for approximately 15 percent of the world’s DRAM wafer production. In a press release, America II said the move will protect its current customer base by preventing others from exhausting America II’s memory inventory.
In 2011, two major disasters – the Japan earthquake/tsunami and flooding in Thailand – threatened the electronics industry with shortages. However, suppliers and distributors stopped short of putting products on allocation. Disk drives were in short supply following the Thailand flooding and prices increased, but the distribution channel did not report incidents of allocation.
“Over the past several months, we’ve seen a significant increase in our OEM base,” said Brian Ellison, president of America II Electronics. “We’re committed to each and every one of those customers, and will stay focused on delivering the best solutions and services. To do that, we needed to take a preemptive approach to our inventory position. The supply chain has been disrupted. In reaction to the tragic fire that recently took place at the SK Hynix manufacturing facility, we felt the need to protect those customers by placing all DRAM and NAND flash inventory on allocation.”
TrendForce reports that many module manufacturers have stopped providing shipping and pricing quotes and the spot market prices have risen by about 20 percent. The market researcher also expects a “major rebound” for contract prices.
“We see a lot of people relying on the independent channel these days,” added Ellison. “It’s a multi-billion dollar channel and the demand is high. So at this time, it’s important that America II secures its memory inventory for its existing customers. Placing product on allocation was done for that purpose. Going forward, we will monitor the situation and lift the allocation once we see normalcy.”
Following the disaster in Japan in 2011, independent distributors reported customers were making sure existing semiconductor orders were filled, but that there were no reports of panic buying.
Joe Stern, America II’s product manager responsible for its global memory inventory, is analyzing market conditions and working to restore the company’s product pipeline. “This is a global situation. Manufacturers stopped quoting, so we’re working around the clock to limit the impact it has on our customers and avoid short- and long-term service interruptions,” he said.