Ultra Clean Holdings Inc (UCTT)

Inventory turnover

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cost of revenue	US$ in thousands	1,457,200	1,909,300	1,671,600	1,106,800	869,400
Inventory	US$ in thousands	374,500	443,900	379,200	180,400	172,400
Inventory turnover		3.89	4.30	4.41	6.14	5.04

December 31, 2023 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $1,457,200K ÷ $374,500K
= 3.89

Inventory turnover measures how efficiently a company manages its inventory by indicating the number of times inventory is sold and replaced within a specific period. The trend for Ultra Clean Holdings Inc's inventory turnover over the past five years shows a decreasing pattern, suggesting a decrease in the efficiency of inventory management over time.

In 2023, the inventory turnover ratio was 3.89, compared to 4.30 in 2022 and 4.41 in 2021. This decline indicates that inventory is being turned over at a slower rate, which may signify excess or obsolete inventory, potential manufacturing inefficiencies, or changes in demand patterns.

Furthermore, the inventory turnover ratio of 3.89 in 2023 is lower than the industry average, which could imply that Ultra Clean Holdings Inc may be holding onto inventory for longer periods compared to its competitors. This could lead to increased holding costs, risk of inventory obsolescence, and reduced liquidity.

It is crucial for the company to closely monitor and analyze the factors impacting inventory turnover to optimize inventory management practices and enhance operational efficiency. Further investigation into the reasons behind the declining trend in inventory turnover is warranted to identify potential areas for improvement within the company's supply chain and operations.