Chips Supply Chain Still Operating ‘Hand to Mouth’: Analog Devices CFO

The economic recovery from COVID-19 “continues to take shape,” with demand for semiconductors “still far exceeding supply,” said Analog Devices CEO Vincent Roche on an earnings call Wednesday for fiscal Q3 ended July 31: “We, like many others in our industry, will face a constrained supply environment into 2022.” Demand continues to grow across all “end markets,” said Chief Financial Officer Prashanth Mahendra-Rajah. “The supply-demand gap is growing,” he said. Order backlogs are increasing “quarter over quarter,” extending “well into 2022,” he said. “This gap is likely to persist into calendar year ’22, given the long lead time it takes to add supply in the industry, plus just the broad strength of the demand.” Though Analog Device inventories are up year over year, that’s mainly for raw materials, said Mahendra-Rajah. “We can’t keep a finished good in stock, so when it’s produced, it either goes to the customer or it goes into the channel and then it goes out of the channel immediately. We’re struggling to build finished-goods inventory.” The semiconductor supply chain is operating “very much hand to mouth,” he said. The company’s focus is on increasing “our ability to supply by making some significant investments in capacity,” he said.