VMI for electronics manufacturing has become part of the annual material-planning process for a global leader in valve automation that has worked with Fumax for years on electronics used in its industrial actuator products.
The customer is a large OEM with its own procurement organization and established global sourcing capabilities. Fumax’s role is different. We manufacture the electronics, work with the relevant supply chain every day, and have accumulated a detailed understanding of the products’ BOMs, SKUs and actual production patterns over the years.
At the beginning of each year, the customer provides forecasts for several product SKUs.
That forecast starts the year’s material planning cycle.
It does not mean that the customer has placed all of its production orders for the year. Instead, Fumax reviews the forecast against historical quarterly purchase orders, the current BOM and the supply conditions we are seeing at the time, then prepares a VMI proposal for selected components and bare PCBs.
The list is not fixed.
It can change from one year to the next.
The customer’s annual forecast provides an expected demand range for several products.
For a product that has been manufactured for years, however, the forecast is only one part of the picture.
Fumax’s purchasing team already knows the relevant BOMs and has access to the customer’s actual purchasing history.
Previous quarterly POs show how the forecast has translated into real production demand over time.
A product may have a certain annual forecast, for example, while actual PCBA orders are released in several smaller batches throughout the year.
That difference matters when considering which components or bare PCBs should be purchased in advance.
The purchasing team therefore looks at several pieces of information together:
annual forecast, historical quarterly POs, the current BOM, supplier MOQ, lead time, quotations and the current supply situation.
The forecast shows what the customer expects to need.
The historical POs show how that demand has behaved in practice.
The current supplier market shows what may be more difficult, more expensive or more time-consuming to purchase in the coming months.
For a long-term program, these three views can be considered together rather than starting from a new BOM every year.
There is no permanent VMI list that simply gets copied from one year to the next.
A component may be considered for advance purchasing because its lead time has become longer.
Another may have a supplier MOQ that is higher than the quantity normally required by one quarterly production order.
A different component may offer a meaningful price difference when purchased against the annual demand instead of several smaller orders.
Sometimes more than one of these conditions applies.
There is also a practical question about the product itself.
When a customer has already qualified an alternative component and can switch without difficulty, there is usually less reason to commit inventory to the original part in advance.
The components and bare PCBs considered for VMI are generally those that the customer expects to continue using, where the purchasing conditions make early procurement worthwhile.
That means the VMI list is reviewed again each year.
The 2026 supply environment provided a useful example.
This year’s VMI discussion included selected power-management ICs as well as 6-layer ENIG bare PCBs.
They were not simply carried over from an old VMI list.
The supply environment around them had changed.
AI infrastructure demand has been putting pressure on different parts of the semiconductor supply chain.
The pressure is not limited to wafer fabrication.
In July 2026, NVIDIA and Amkor announced a multi-year agreement worth $1.5 billion to expand advanced semiconductor packaging and testing capacity in the United States.
Reuters described the agreement as a move to:
“expand advanced semiconductor packaging and test capacity in the U.S.”
Source: Reuters — Nvidia, Amkor strike $1.5 billion chip packaging deal
The following month, Reuters also reported that Samsung had raised prices for some advanced contract chipmaking services by up to 15%, citing strong AI-chip demand and tighter capacity. The report said Samsung’s SF4 production line had been running at full capacity since late 2025.
“demand for AI chips tightens capacity”
Source: Reuters — Samsung hikes chipmaking prices by up to 15% on demand spike
TrendForce has separately reported that AI-server demand is reallocating more mature-node foundry capacity toward AI-related products, including power-related processes, putting additional pressure on mature-node supply and pricing.
For Fumax’s purchasing team, these public reports are only one layer of information.
We work directly with semiconductor, component and manufacturing suppliers across the Asian electronics supply chain. Our purchasing team regularly receives information about lead times, production schedules, quotations, allocation conditions and how suppliers expect the coming months to develop.
Some of those signals can appear in supplier conversations before they become obvious in public market data.
They do not automatically become a purchasing decision.
But when the annual VMI review is carried out, they become part of the information available to the purchasing team.
That was one of the factors behind the decision to include selected power-management ICs in this year’s VMI proposal.
The 2026 discussion was not limited to semiconductor components.
Selected 6-layer ENIG bare PCBs were also included in the VMI proposal.
The reason was not simply the finished-board price.
AI-server and high-performance computing demand has been moving further upstream into high-end PCB manufacturing and the materials used to produce those boards.
DIGITIMES reported in June that:
“AI infrastructure demand is lifting high-end PCB orders”
while also pointing to tighter supply in upstream copper-clad laminate and HVLP4 copper foil.
Source: DIGITIMES — Nvidia takes PCB material competition upstream as HVLP4 copper foil gap widens
A later DIGITIMES report in July also described the continued upgrade of CCL materials for higher-frequency and higher-speed AI-server applications.
Source: DIGITIMES — Elite Material, TUC race ahead in AI CCL push
Our purchasing team was receiving similar signals directly from PCB suppliers.
In July, several suppliers reported sharp short-term movements in quotations for certain high-end PCB raw materials.
In one case, a PCB supplier told us that the quotation for a particular HDI substrate material had increased to nearly twice its previous level within a very short period.
That did not mean that our bare-PCB quotation doubled.
The supplier was referring to the upstream substrate material, not the finished PCB.
The substrate is only one part of the total board cost. A finished PCB quotation also includes copper foil, inner- and outer-layer processing, lamination, drilling, plating, solder mask, surface finish and other manufacturing costs.
As a result, a sharp increase in one upstream material does not translate one-for-one into the finished bare-board price.
In some cases, the impact becomes more obvious only when larger production quantities and longer periods are considered.
The same pattern can appear in passive components.
A resistor or capacitor may represent only a very small part of an individual BOM, so a significant percentage increase in a single component can still be difficult to notice in a single quotation.
But when current mass-production purchasing prices are compared with historical data from two years earlier, cumulative changes across a large number of passive components can become much easier to see.
TrendForce’s July 2026 MLCC research provides another example of the broader market direction. It reported that AI-server upgrades and custom ASIC growth were pushing demand for high-end MLCCs higher, with Japanese and Korean suppliers reaching their highest book-to-bill ratios since the pandemic.
“accelerating AI server platform upgrades … have significantly boosted demand for high-end MLCCs”
For the VMI review, the important point was not that every semiconductor or PCB-related price was suddenly increasing.
It was that the supply environment being observed in 2026 was different from the environment behind previous VMI decisions.
That was enough to put some components and bare PCBs on this year’s list for further consideration.
Once the annual forecast, historical consumption and current supplier conditions have been reviewed, the purchasing team prepares the actual VMI proposal.
The proposal is based on specific components and bare PCBs rather than a general instruction to “buy more.”
For each selected item, the purchasing team can compare factors such as:
For one component, the reason may mainly be lead time.
For another, it may be that the supplier MOQ is larger than the customer’s normal quarterly PO.
For another, a higher annual purchasing quantity may create a more attractive price tier.
The recommendation can therefore change from year to year.
The purchasing team then provides the proposal to the customer, including the suggested quantities and the expected purchasing difference where it can be reasonably estimated.
The customer has its own procurement organization and its own global sourcing strategy.
Fumax provides another view based on the products we manufacture, the historical purchasing pattern and the supplier market we see around us.
The customer reviews the VMI proposal internally.
A recommendation may be accepted as proposed.
A quantity may be adjusted.
Only part of the proposal may be approved.
Another item may not be approved at all.
The final VMI purchase is therefore not a fixed Fumax decision.
The two sides contribute different information to the same planning discussion.
Once the customer confirms which components and bare PCBs it wants to purchase through VMI, the actual purchasing process begins.
The first step is the VMI purchase itself.
The customer issues a PO for the approved components and bare PCBs.
Fumax prepares the corresponding PI.
The customer makes the payment.
Fumax purchases the approved items and receives them into the warehouse.
The customer is then notified that the VMI inventory is available.
At this stage, however, the customer has not necessarily placed its full-year PCBA production orders.
The VMI program has prepared part of the inventory ahead of time.
The actual production schedule still follows the customer’s real demand.
This separation is an important part of how the program operates.
Several months later, the customer may need a particular SKU in a specific quantity.
The customer sends the SKU and required quantity to Fumax by email.
Fumax then prepares the PI for that production order.
The corresponding components and bare PCBs already purchased through VMI are taken into account in the calculation.
Their cost is deducted from the new production PI.
The remaining components still need to be purchased according to the actual production requirement.
The customer then sends the formal production PO together with the payment confirmation.
Fumax purchases the remaining components and begins PCBA production.
The result is a separation between material commitment and finished-product commitment.
The customer has been able to secure selected components and bare PCBs in advance without committing the entire year’s PCBA production volume at the beginning of the year.
Once the production program is running, the VMI inventory becomes part of the normal production flow.
A customer places a PCBA order for a specific SKU.
The corresponding VMI components and bare PCBs are issued against that order.
Other components are purchased according to the current production requirement.
The PCBA is assembled and delivered.
The remaining VMI inventory stays available for later production orders.
As those orders are released during the year, the actual consumption becomes increasingly clear.
That information then becomes part of the historical data used in the next planning cycle.
The process therefore creates a continuous loop:
Annual Forecast → BOM and Historical PO Review → Current Supply Review → VMI Proposal → Customer Decision → Component / Bare PCB Purchase → Inventory → Actual PCBA Orders → Consumption → Next Planning Cycle
This is why the VMI list is not simply copied from one year to the next.
A component that had a long lead time this year may return to a more normal supply position next year.
A supplier MOQ may change.
A higher price tier may become available at a different quantity.
The customer’s SKU mix may change.
A new approved alternative may become available.
Or a completely different part of the electronics supply chain may become the new constraint.
The 2026 example illustrates the point.
Selected power-management ICs and 6-layer ENIG bare PCBs entered the VMI discussion because the supply environment around semiconductors and high-end PCB materials had changed.
Public industry reporting provided one view of the broader trend:
AI infrastructure was increasing pressure on advanced semiconductor capacity, packaging and testing, high-end PCB materials and selected passive components.
Fumax’s purchasing team was seeing another view directly through day-to-day supplier interactions in Asia.
Neither replaced the other.
Public reporting helped put the broader movement into context.
Supplier feedback provided closer-to-production information about quotations, lead times and availability.
The customer then brought its own demand forecast and procurement judgment into the discussion.
That combination produced the VMI recommendation for the year.
For this long-term customer, VMI has become part of the normal annual planning cycle.
At the beginning of the year, the customer provides forecasts for selected product SKUs.
Fumax reviews the BOM, historical quarterly POs and the current supplier environment.
Selected components and bare PCBs are proposed for advance purchasing.
The customer decides what to approve.
Fumax purchases the approved items and holds them in inventory.
Later, the customer’s actual PCBA orders are released according to real production demand, with the previously purchased VMI inventory deducted from the relevant production orders as it is consumed.
The following year starts the review again.
The VMI list may change with the product mix, the customer’s forecast and the supply environment.
The planning cycle remains the same:
Forecast → Review → VMI Proposal → Customer Decision → Purchase → Inventory → Actual Production → Consumption → Next Review
