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What’s going glut and what’s not?

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The 1 July 2006 Restriction of Hazardous Substances (RoHS) deadline has effectively arrived, because any product being produced now for Europe will be on the shelf this summer. A mammoth shift from non-compliant to lead-free parts will almost certainly arrive with supply glitches. Yet a question remains, will shortages and over-supply occur in compliant or non-compliant parts?

The market is already seeing a tightening of lead times for compliant parts. “From what we’ve seen in the last 30 days, lead times are stretching out a week, but no more than two weeks for compliant parts,” says Jeff Shafer, senior VP at US-based distributor Newark InOne (Farnell InOne is Australia). “It’s slight, though, not like four or eight weeks.”

The picture looks much the same over at Phoenix-based distributor Avnet Inc. “What we’re seeing is that most of the compliant product lead times are firming up and creeping out,” Jim Smith, Avnet’s senior VP of warehouse and distribution worldwide, says. “If the lead time was two weeks, now it’s four. If it was four weeks, it’s going to six or eight weeks.”

One thing Smith notes is there is less inventory in the supply chain as the RoHS deadline nears. “Inventories have come down, but I can’t tell you what impact that will have on RoHS compliance,” he says. “You hear all kinds of opinions, but nobody knows for sure.”

Newark InOne’s Shafer believes there could be a last-minute rush on compliant parts as we move closer to the summer RoHS deadline. “My concern is with the customer who says, ‘We want to be RoHS compliant tomorrow,’” Shafer says. “How are we going to deal with OEMs that are not prepared? What if their suppliers are not prepared? Will that create a market-share shift?

Lead times may go out a bit more for a while because some distributors won’t be ready [for customers that demand compliant products at the last minute].”

One hard-to-judge supply situation is with non-compliant parts. “There may be a glut of non-compliant parts, but there will also be a market for those parts,” Shafer continues. “We have a large volume of MRO business, and those customers will be using non-compliant parts for 12 to 18 months.”

He notes that some suppliers have already announced that they will not take non-compliant parts as returns any longer. “Right now we’re stocking both compliant and non-compliant parts,” Shafer said, adding that he has received inquiries from brokers who are interested in any leftover non-compliant parts.

The demand for non-compliant parts after RoHS has long been a question in the components industry. Some have predicted a glut of leaded parts, while others believe they will rise in value as suppliers discontinue their non-compliant production. Avnet’s Smith has noticed non-compliant parts are already rising in price and lead times are stretching out further than the lead times of compliant parts. “The compliant product lead times are static by comparison,” he says.

Smith believes the supply balance is still a mystery as we near the RoHS deadline. “I compare it to Y2K where we were asking, ‘Will the elevators still work?’ In some cases, sure you’ll see a glut of product.

“You’ll see people suddenly switch from non-compliant to compliant and there will be a glut in that component. But nobody knows what components will be affected.”

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