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What's going on with Microchip?

I just received this letter from our microchip's distributor. it seems they will lost their one advantage amoung other uC manufacturers - their uC were always available in stock or 3-4 weeks.

Any comments? Did you get the same letter?

Best regards Tsvetan

---letter---

Dear Customer, December 15, 2003 About 2 months ago I wrote a letter to you that was also posted on Microchip's web-site informing you that the semiconductor industry is going through an up-cycle. I advised you that because of a strong demand environment there is a risk of longer lead-times. Because of that risk I requested all our customers to review their requirements and place an order with Microchip for up to 12 weeks of your product consumption. Many of you listened to that genuine request and acted accordingly, and I want to thank you for helping us help you. For the rest of our customers who have not responded to my request, I make that request again. Please review your needs and place an order with Microchip for the next 8 to 12 weeks of your requirements. For most of our products the lead-time is 3 weeks, so many of the products are still available for your manufacturing needs in January 2004 and beyond. Many of the customers that did not respond to my request a couple of months ago are now finding it difficult to live with even 3 to 4 week lead-times. We are bombarded with expedite requests from such customers. It is hurting our productivity as it costs more to expedite. Therefore, starting January 1, 2004 Microchip will be instituting a new policy to manage the demand in this environment. Microchip will charge a 20% expedite charge for improving the delivery performance from our published lead-times. The lead-times themselves are a moving target because they are demand dependent. Therefore, to create a comfort zone for the customers, we will not charge an expedite fee as long as the requested delivery date is more than 8 weeks beyond the date ordered. We feel that this policy is fair for everyone. The customers who are unable to plan their requirements should bear the extra charge of expedites instead of being subsidized by those customers that are placing their orders well ahead of time. I request again that you review your requirements and place an order with Microchip for at least 8 weeks of your production needs. We are continuing to add capacity in all areas of our business. We feel that we will be able to maintain lead-times in the range of 4 to 6 weeks. However, lead-times are always product mix sensitive. By getting visibility of your requirements, we will be better able to build product in exact mix and maximize our capacity. Once again, I would like to thank you for your business. With best regards, Steve Sanghi President and CEO Microchip Technology Inc.

---end letter---

Reply to
Tsvetan Usunov
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I didn't get such a letter. When I tried to order Atmel AVR last November, I was told the lead time to be in the order of 12-16 weeks.

Rene

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Reply to
Rene Tschaggelar

I have also experienced this with a range of Atmel micros, so it's not just Microchip.

Atmel don't offer you a "pay extra get them earlier" deal like microchip are doing.

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Tim Mitchell
Reply to
Tim Mitchell

I got this as well. Seems to me that they appreciate that people have got used to their generally very short leadtimes, and they are just asking customers help them maintain this in the face of tight capacity by placing orders in advance wherever possible, to avoid getting into an Atmel situation. I think this is the best thing they can do in the circumstances, and are doing their customers a big favour by keeping them 'in the loop'.

If Microchip are forseeing problems, you can bet every other micro maker will be having the same, if not worse problems - at least Microchip are trying to pre-empt problems.

Seems Atmel haven't learnt from their disastrous problems of a few years ago - a customer of mine has recently been quoted 16 weeks on an Atmel part..!

Reply to
Mike Harrison

The moral is allways keep a stock of your critical single sourced components.

Reply to
CBarn24050

Its not just Microchip. Arrow UK have been advising customers to expect delivery issues with many of the major semiconductor manufacturers. Many are described as 'On Formal Allocation' for the next quarter, and there are 10-15% price increases for Flash and SRAM.

Martin

Reply to
Martin Walton

a customer of mine

I love Atmel chips, but I will NEVER put a Atmel in a new design just for this reason. I've found the TI MSP430's to be a fine replacement and they are in stock every where...

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Reply to
Egads

be having the same, if

a customer of mine

OK, but I don't get the background for this situation. Perhaphs Microchip got more business than they can handle?

Best regards Tsvetan

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Reply to
Tsvetan Usunov

It's OK for running projects which you can plan ahead, but what to say to customer with new design who wants 10K units tomorrow (what usually customers with new projects do)? Please wait 3 months to get the PICs or pay 20% more? I don't think he will understand this.

Best regards Tsvetan

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(http://www.olimex.com/dev)
Reply to
Tsvetan Usunov

In article , Tsvetan Usunov writes

I think it's normally caused by lack of fabrication capacity when there is a rise in demand for the products. They obviously don't want to have factories standing idle, so try to match their capacity to the demand, but it takes quite a while to bring a factory on-line.

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Tim Mitchell
Reply to
Tim Mitchell

you would be lucky to get the option to pay extra, mostly you have to wait.

Reply to
CBarn24050

Bad News: When you are sold out, you are sold out.

Good News: Delivery date has not change so if the lead time was 12-16 week in November, (Delivery in March-April) the lead time now probably has dropped to maybe 8-10 weeks (Still delivery in March-April)

--
Best Regards
Ulf at atmel dot com
These comments are intended to be my own opinion and they
may, or may not be shared by my employer, Atmel Sweden.
Reply to
Ulf Samuelsson

This is nothing new. At least today you normally have only one or two critical parts. When we built everything out of 7400 series logic we would often have to scurry around through 10 or more distributors to find any parts whatsoever, and still have 6 months or more delivery. The price was a large variable. Repeat the process for each of a few dozen chips.

Those weren't even sole-sourced. A few years ago nobody in their right mind would design in a sole-sourced product without a very good reason.

The situation would flip from shortage to plenty and back every few years.

Nowadays the US distributors seem to be gone: Cramer, Arrow, Schweber at least. Even Radio Shack was in the game.

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Reply to
CBFalconer

components.

I think everyone needs to understand that normal semiconductor company lead time *is* 16 weeks. This is the time it takes from start of production to delivery of goods. A semiconductor can only offer shorter leadtime if they happen to have stock. Good planning ensures that stocks never run out. Bad information combined with never running out of stock is probably an indication of poor use of money. Parts will become more expensive if you maintain a stock which is way above the need. If you dont agree, that it is waste, then why not order two years maximum usage now ;-)

By commitment to volume through annual contracts you can guarantee yourself parts, because the semiconductor vendor can plan accordingly. Without committment, the semiconductor company tries to make an intelligent guess, which fails when the sudden upturn comes, and everyone starts to put in orders. Current stock is sold out, and you see a temporary increase in leadtime until new batches can be completed.

As long as the factory is not running at max capacity like Atmel did a couple of years ago, the lead times will soon go back to normal.When max capacity is reached, new orders will book from followon batches, and leadtimes will be longer than the 16 weeks.

The situation at Atmel is very different now since the AVR is produced in two fabs. The original AVR fab location in Colorado and the large fab bought from Siemens in North Tyneside U.K.. The North Tyneside fab will allow doubling of the Atmel wafer capacity so that should make people a little more comfortable.

--
Best Regards
Ulf at atmel dot com
These comments are intended to be my own opinion and they
may, or may not be shared by my employer, Atmel Sweden.
Reply to
Ulf Samuelsson

Tough. He can't have it. Maybe next time he will plan ahead more.

In times of limited capacity, you won't get a different answer from any other supplier, unless you chance upon a stash of devices at a distributor or on the surplus market.

Reply to
Mike Harrison

All good points.

The distributor system is in a major upheaval right now. Has anyone noticed that sample requests from a couple of *major* manufacturers actually ship from Digikey? The few distributors that call on us are fighting tooth and nail to get the design win credits, something they don't get if we order our samples on-line.

I think Microchip is trying to accomplish 2 things with this move 1) acually change the behavior of it's customers so that Microchip can better control it's inventory and cash flow.

2) cash in on the shortage market. Distibuters, particularly grey-market have done this for years. The grey-market people are totally market driven. Pay them 10%-40% premium in good times, get a 20% discount in bad times. So Microchip asks, "why can't I get a piece of that action?"
Reply to
Jim Stewart

I received a similar letter from Microship.

Thus anyone know what the real reason is behind this ? Production picking up ? New comsumer products in a hype ? Or have the semiconductor comapanies just been under investing in production.

Stijn

Reply to
Jon S.

Microchip recently (well, mid-2002) bought a huge mothballed semi plant, in Gresham WA, from Fujitsu for pennies on the dollar. It should be coming on line sometime around now- wonder how that's going?

Best regards, Spehro Pefhany

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Reply to
Spehro Pefhany

That was a sale Fujisu lived to regret when their Japnese plant got hit with an eartquake.

Reply to
CBarn24050

This often happens in this industry, typically there is an unforeseen across the board demand for certain product types, or, say Westinghouse has just completed trials of a new PIc based washing machine controller, and placed an order for 2million. The really big players (millions per annum) don't seem to get hurt, nor do the minnows (less than 5k parts pa) but the guys in the middle who typically are too big to want to hold stock, but not big enough to make the supplier want to piss off a megabucks customer, are the ones who seem to cop it on the chin.

Al

Tsvetan Usunov wrote:

be having the same, if

a customer of mine

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Reply to
onestone

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