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than 50 percent in the first half of 1989. The
inventory build-up is due to suppliers catching up
on long-teim agreed contract delivery dates and
prices. We expect inventories to be used up by the
fourth quartet of 1989.
One sign of major concern facing this sector
is diat most Japanese vendors soe cutting back on
1Mb DRAM cs^mcity in favor of 256K SRAMs
and 4Mb DRAMs. This situation could cause some
hicci^s in supply of 1Mb DRAMs, especially
when 4Mb DRAMs become widely available
in 1990.
Communications Segment
The major central office equipment manufacturers
indicated a growth of 10 to IS percent in
semiconductor purchases in 1989 over 1988. However,
this growth is expected to decline to 5 to
10 pocent in 1990. This segment is also a very large
user of ASIC devices. Dataquest believes that fiillcustom
ASICs will still dominate ova standard cell
and gs^ array devices ta terms of purchasing dollars
sp«it in 1990.
The next biggest expenditure should be for
memories, followed by microcontrollers. Inventory
levels in diese products are two weeks over targets!
levels and are expected to remain the same in
the near future. The datacommunication sector
showed some signs of weakness, with some buyers
indicating very little growth in 1989 over 1988 and a
minimal increase of 5 percent in 1990.
Issues that caused procurement managers in
the telecommunications sector most concern were
pricing, on-time delivery, and quality of incoming
goods—ranked in that order.
Transportation Segment
Most survey respondents indicated that they
are two to three weeks below their targeted inventory
levels of three to four weeks holdings. The
majority of them participate in just-in-time programs
with their key vendors. Comparatively
speaking, they spend a large portion of their purchasing
dollars on discrete and optoelectronics
products, followed by linear devices and microcontrollns.
Exceptionally, most buyers indicated that
they were budgeting for a 10 percent growth in 1990
in contrast to other segments that indicated a
gradual slowdown in semiconductor purchase
0005330
EUROPEAN SEMICONDUCTOR PROCUREMENT SURVEY
dollars. This growth is being driven specifically by
the greater use of electronic systems and components
in the mass market range of automobiles.
Major issues ranked by transportation buyers
were on-time delivery, pricing, quality, and
accurate forecasting of demand. Interestingly, a
number of buyers intimated that they relied upon
making up to S percent of their purchases via
distributors in order to make up for shortfalls in
delivered quantities from major vendors.
Industrial Segment
As in the transportation segment, discrete and
optoelectronic devices enjoy a relatively high
proportion of the total semiconductor expenditure
in the industrial segment These devices make up
more than 50 percent of the purchased devices in
dollars, followed by linear, memory, and standard
logic. Most respondents indicated that between 20
and 35 percent of their purchases were via &anchised
distributors. Despite this fact, most of the
microcontrollers and ASICs are purchased directly
from semiconductor vendors.
Inventory levels in this segment are three
weeks over targeted levels. Overall, industrial segment
buyers anticipate that their 1990 spending
will be flat compared with 1989 despite buoyant
market conditions in the test, instrumentation, and
medical markets.
Military Segment
Most military buyers indicated a slowdown in
their purchasing power in 1990, with some stating
a positive 20 percent growth in 1989 over 1988.
Inventory levels do not seem to be a major problem
because of the availabiiky of standard parts from
distributor shelves and the long lead times required
for some military parts.
Major concerns are the shrinking base of military
high-density memory suppliers and the switch
from bipolar to CMOS devices. A large percentage
of dollars is spent on memory products, followed
by ASICs, linear, microcomponents, and standard
logic. A number of respondents intimated that a
high proportion of their memory spending is taken
up by q)ecialized hybrid configurations. Among
their ASIC expenditures, 80 percent were in the
PLD segment, with standard ceUs becoming more
popular.
(D1989 Dataquest Incoipoiated October-Reproduction Prohibited
ESAM Volume II. Newsletters 1989-22
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