Issue link: https://iconnect007.uberflip.com/i/1071356
30 DESIGN007 MAGAZINE I JANUARY 2019 still going to be constraints. I'm going to be a little bit of a contrarian here because I find in our industry, when things are good, people never think there will be another constraint, and when there are constraints, they think we'll never come out of it. Right now, it would be irresponsible for me not to share with folks that lead times continue to be long in a number of product areas like passives, so stay close to us or any of your sources of supply. But I also tend to find that suppliers are adding capacity and tend to normalize fairly quickly. Perhaps a large OEM has double-ordered in their supply chain, and once they start to normalize, they trim back their backlog. The next thing you know, that trimmed-back backlog frees up some capacity for somebody else who may have over-forecasted. The correction tends to come more quickly, so I think we'll still be in some level of constraints Q1 and Q2. However, I think the uptick of the supplier activity, as well as the fact that we're seeing some slowing on the general production demand, could help. If you know what to attribute it to, whether it's some of the tariffs or just general economic conditions seem to be a little less robust, I think the combination of the two will lead us to more normal conditions by the second half of 2019. Shaughnessy: I've heard a couple of fairly intelligent people say that this is actually a sign that things are going well. Maybe not the 80-week lead time in itself, but it's a good problem to have because when we come out of this, we'll be stronger than we were. What do you think about that? Doherty: I think it's a good thing that it doesn't feel good right away, but our suppliers are taking a more measured approach to capacity. I mentioned earlier they've been reluctant and careful not to add too much capacity too quickly. When the systems are in balance, that's optimal. For our suppliers—us as consumers or customers—I'm sure we'd love to get things for free, but we realize it's not a sustainable model. So, if our suppliers can match the capacity with the true demand where they can have an economically sustainable model, that's good for the industry. Again, some of the problems are that we've gotten ourselves into is a situation where we had overcapacity for an extended period of time, and responded to our own boards and shareholders as they had to. We cut back or froze capacity, and demand kept inching up to the point that it flipped on us. Having some level of lead times isn't the worst thing in the world. Predictable lead times aren't an issue for us. We plug them into our system, give the information to our suppliers, and buy ahead. It's the quickly changing lead times where your system is gearing towards nine or 18 weeks, and within four weeks, it flips out to 60 and you can't react. That's the unpredictability that causes strife in our supply chain. I think this is going to pull itself back a little more slowly. It's taking longer but in a more organized fashion. To your point, Andy, I think it's going to be a healthy return. We talk about soft landings in the economy. The worst thing that could happen is they all overproduce capacity and flip this back into the situation where none of them are making money or can sustain their model, and then we're back into maintaining this unstable environment of production and availability. Does that make sense?