On July 7, Microchip issued an open letter informing its customers and distributors that the lead time for orders will be extended.
In the letter, Microchip stated that in the past two months, the company has received a large and growing number of orders, some of which require immediate delivery. Microchip said that these surges of emergency demand may stem from the following three factors:
- Customers whose businesses have strengthened due to COVID-19 conditions (ex: “work from home” initiatives and Medical Devices)
- The recovery in May/June of some customers’ business which experienced a sharp decline in the March/April timeframe (ex: Automotive and some industrials)
- An erroneous expectation that despite not providing backlog visibility, orders placed with short lead times can be supported by slack in the supply chain
Microchip said that due to the short lead time orders backlog, the actual delivery date of orders will be later than the customer requested. In addition, in order to respond to customers' urgent delivery requirements, Microchip is suffering from higher supply chain costs and resulting in inefficient production line operations.
At the end of the letter, Microchip requested that its customers give them at least 12 weeks of backlog visibility when ordering their standard products.
For more detailed content, please visit the original letter from Microchip.