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Supply Chain Risk Assessments
Advances in quantitative methods
Four levels of supply chain risk management
1. Anecdotal, un-calibrated opinion
 Read the papers, ask around, develop an opinion
2. Objective data informed opinion
 Independent tracking of critical supply chain metrics, develop a more
informed opinion or an informal model
3. Objective data,
objective projections
 Independent tracking of critical
supply chain metrics that enable
a projection of supply/demand
balance with confidence levels
4. Quantification of risk
scenario planning
 Multiple scenarios
analyzed
Presentation Title – 2
Opinion
Supply Chain
information
 Risk quantified
Supply Chain
Projections
Opinion
1
Objective
2
Supply Chain
Scenarios
Objective
w/
confidence
level
Opinion
Objective
w/
confidence
level
3
3.5
4
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
Critical supply chain metrics
 Multi-sourced or substitutable products




Inventory
Capacity
Demand profiles and elasticity
Price – as the reflection of where supply = demand
 Proprietary sole sourced products
 Process Cpk (manufacturing and supply chain processes)
 Available supplier capacities and inventories
 Other demand for the capacity and end product demand for
hardware that consume products that use the capacity
Presentation Title – 3
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
Semiconductor supply chain – 2005
 The semiconductor supply chain is highly inter-connected
$47,572
$16,168
EMS
$42,774
$342
$27,235
$42,432
Presentation Title – 4
$2,972
All Semiconductor Flow
Values are at Supplier
Point-of-Purchase and
Do Not Include
Intermediate Mark-Ups
$69,323
$690
$45,060
$24,894
$25,584
$4,169
$5,580
Distributor
$24,263
$36,678
OEMs
11 To 100
$89,338
$55,802
$50,222
$6,301
Semiconductor
Suppliers
$241,055
OEMs
Top 10
$75,253
$16,311
$47,572
$5,803
$41,769
ODM
OEMs
> 100
$76,464
$25,584
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
Days of Inventory for Communication Chip Companies
45
40
30
25
20
15
10
5
0
Q199
Q299
Q399
Q499
Q100
Q200
Q300
Q400
Q101
Q201
Q301
Q401
Q102
Q202
Q302
Q402
Q103
Q203
Q303
Q403
Q104
Q204
Q304
Q404
Q105
Q205
Q305
Q405
Q106
Q206
Days (Sales Basis)
35
Presentation Title – 5
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
Total Inventory Levels Relative to Targets
15
10
Days Over/Under Target
Retail
5
Wireless
OEMs
Computer
Networking Automotive
Systems
EMS
WSP
ODM
Distribution
0
Storage
Semiconductor
-5
-10
-15
-20
-25
Q205
Q305
Q405
Q106
Q206
*COGS, except Semi Companies and Semi Foundry, which are calculated on a Cost of Revenue basis
Presentation Title – 6
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
Memory Semiconductor Factory Capacity and Utilization
210
100
90
150
80
120
90
70
60
Percentage Utilization
60
30
0
2000
2001
Q102
Q202
Q302
Q402
Q103
Q203
Q303
Q403
Q104
Q204
Q304
Q404
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
Q107
Q207
Q307
Q407
2008
2009
2010
Millions Sq.In./ Month
180
Capacity million Sq. In/ mo.
Presentation Title – 7
50
Memory Utilization
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
Mobile PC Value Chain Entering Q2 2006, DOI Trends
HDD
CPUs
Substrates
remain tight
Inventories
healthy, but
some gains in
the quarter
Mobile Chipsets
DRAM
Display
Distributors
Inventories
declining
Supply coming
down; tight
supply
expected
exiting the
quarter
Overall,
inventories
remain lean
ODM
OEM
Over Supply
Under Supply
Presentation Title – 8
Supply
leveling off
Stocks leveling off from
gains/corrections in H1 2006
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
Component Health Watch
Price and lead time trending for 12 different commodity groups
Presentation Title – 9
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
Component Health Watch
Presentation Title – 10
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
CPT (Component Price Tracking)
Price is adjusting factor to equalize supply and demand
 So tracking and projecting REAL prices is the single most important factor in
assessing supply chain risk
Rolling Four-Quarter
Forecast
(Contract only)
Client can
compare their
survey points to
CPT graphs
Graph a Single Price Type
or Region or Combine the
Graph Views
Presentation Title – 11
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending
Predicting next month’s DRAM market
 iSuppli has now constructed an “iSuppli Index” that uses our
weekly pricing, inventory, mix, and capacity utilization data
sets to accurately predict market dynamics month ahead (2
months ahead of release of WSTS) with very high confidence
 A key step to giving quantitative market and supply chain risk
measurements
Predicted vs. Actual Sales
Time Series Model with Regressor (iSuppli Index)
15.4
actual
15
forecast
95.0% limits
LnSales
14.6
14.2
13.8
13.4
13
1/02
1/03
1/04
Coefficient
iSuppli Index 0.589214
Presentation Title – 12
1/05
t-statistic
7.86084
1/06
1/07
p-value
0.000000
Copyright  2000-2005 | iSuppli Corporation | All Worldwide Rights Reserved | Confidential – Patents Pending