My friend Dominique Numakura writes from Japan that consumer electronics is rebounding in Taiwan, Korea, China and Japan. But, that bit of good news is tempered, he says, by constrained capacity — so many companies cut inventories and took down production lines, they now face material, component and labor shortages, he says.

“Everyone’s warehouses are almost empty! Distributors and suppliers can’t feed the manufacturing houses fast enough. Manufacturing companies have secured large orders for products, but materials are back-ordered, and there are not enough workers to accommodate these new sales.

The result, he notes, is material price spikes.

In Southern China, he adds, things are more grim, with reportedly more than 200 area EMS companies unable to obtain sufficient materials for production, and caught between the higher materials prices and lower end-product margins. Many will close.

This is not unusual. Several case studies have shown as many companies exit an industry in recovery
as do leave during a downturn. They get caught in the cash flow trap, where the upfront costs and associated risk to running the business outweigh the margin.

Not unusual, but unfortunate nonetheless.