Circuits Assembly’s own research of 18 North American EMS firms found just two companies saw year-over-year revenues climb faster than inventories during their most recently reported quarter: SigmaTron (52.35% and 45.56%, respectively) and Winland Electronics (49.5% and 48.7%, respectively). Only one company, Suntron, actually saw stock levels drop, but revenues there fell 4%.

At a $10 billion-plus company the cost of excess inventory can mean millions to the bottom line. Take Solectron, for example. As of May 31, the Tier 1 EMS firm was sitting on $1.48 billion worth of inventory. Should an extra 0.2% to 0.5% of it be determined to be excess and obsolete, the company’s gross profit would have dropped by $3 million, its operating income by $7.4 million. Simclar, a $60-million EMS company, wrote down $1.86 million in parts due to obsolescence during its March quarter – nearly 10% of its total inventory valuation of $18.4 million. The company’s net income that period? $720,000.

Circuits Assembly’s research found that in many cases work-in-process is falling while and raw materials and finished goods are on the rise. At Samnina-SCI, WIP dropped 7% from April 2005 to April 2006 yet raw materials climbed 31% and finished goods 7%. At Raven Industries, (fiscal 2005 sales – $204 million): WIP down, raw materials and finished goods up. At Suntron, WIP is down 10% but overall inventories are up 0.5%.

Among EMS companies Plexus is the outlier. Raw materials are up 197% and finished goods have increased 70%. But WIP has shot up 221%.

iSuppli says seasonality, RoHS component purchasing, mergers and acquisitions (Flextronics’ purchase of 

WIP dropped 7% from April 2005 to April 2006 yet raw materials climbed 31% and finished goods 7%. At Raven Industries, (fiscal 2005 sales – $204 million): WIP down, raw materials and finished goods up. At Suntron, WIP is down 10% but overall inventories are up 0.5%.

Among EMS companies Plexus is the outlier. Raw materials are up 197% and finished goods have increased 70%. But WIP has shot up 221%.

iSuppli says seasonality, RoHS component purchasing, mergers and acquisitions (Flextronics’ purchase of Nortel added $175 million in stocks to its balance sheet), and new program ramps were to blame.

Circuits Assembly determined that most of the imbalance has occurred in the past seven quarters, the timing of which suggests that greater upfront purchases of various hard-to-get (and potentially soon-to-be obsolete) components due to events like the RoHS deadline. Many EMS firms say that customers are pushing them to hold finished product. iSuppli noted that initiatives at Cisco will move nearly $100 million worth of inventory onto Jabil’s books over its second and third quarters, while $250 million worth will flow back to Solectron and Celestica between now and early 2007.