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Inventory
 Our inventory practices vary by product type. For standard products, where the risk of obsolescence is low, we generally carry higher levels of inventory. These products usually have many customers and long life cycles, and are often ordered in small quantities. Standard product inventory is sometimes held in unfinished form, giving us greater flexibility to meet final package and test configurations in a timely manner.
For custom products, where the risk of obsolescence is higher, we carry lower levels of inventory, when possible. These products usually have a single customer, are sold in high volumes and have shorter life cycles. Life cycles of these products are often determined by end-equipment upgrade cycles and can be as short as 12 to 24 months.
Our inventory levels have generally increased over time due to:
- the impact of consignment programs at our largest customers, where we carry the inventory and customers pull it only as they need it;
- the gradual implementation of a consignment program with distributors, where we hold more of the inventory required to support distribution resales combined with distributors' desire to carry less inventory; and
- our increased mix of standard products such as high-performance analog and standard embedded processing products.
More than 45 percent of our revenue goes through our distribution channel, and about 40 percent of our revenue is supported by consignment or EDI (electronic data interchange) programs.
Our distributor consignment program today is about a third of our distributor revenue with the anticipation it will reach the 50 percent range by the time the program is fully implemented. We believe this program benefits both us and our distributors and will help us gain share over the long term.
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