Trends in Electronics Inventories: Sales are all that matter now

The global electronics industry posted spectacular growth of more than 50 per cent year-on-year in the first half of 2010. Apart from factors such as the corporate IT replacement cycle, pent-up consumer electronics demand in the US and stimulus effects in China, many analysts have also attributed this strong growth to inventory restocking activities. This has thrown the spotlight on the role of inventories during recessionary and recovery periods, and led to questions about the sustainability of the restocking activities and hence the pace of the electronics recovery.

This paper attempts to shed light on this issue. It first provides a brief introduction to inventory and explains how inventory adjustments can lead to swings in output. It then examines the trends in electronics inventory adjustments in the US and to a lesser extent, Asia, in recent years including during the crisis and the subsequent recovery phase. It further provides an assessment of whether the adjustments will continue to provide a fillip to global electronics output in the quarters ahead. Taking the inventory cycle into account, the paper concludes with an outlook for the global electronics industry.

The views expressed in this paper are solely those of the author and do not necessarily reflect those of the Ministry of Trade and Industry or the Government of Singapore.

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