Component Prices Set to Decline

It's a good time for bargain hunting in the electronic component industry, but will anybody bite?

IHS iSuppli reported today that a number of components are set for higher-than-seasonal price declines in third and fourth quarters of this year. The market research firm specifically cited oscillators. Voltage-controlled crystal oscillator (VCXO) prices are set to decline 2 percent this quarter, 2.4 percent next quarter, and 2.6 percent in the first quarter of 2013. Normal quarterly reductions range from 1 to 2 percent, the firm said.

Pricing for widely used components, including capacitors, crystals, filters, magnetics, oscillators, and printed circuit boards (PCBs), all are set to decline at above-average rates in the third and fourth quarters, IHS said in a press release.

"Those companies that were not planning on buying right now should consider bringing in their orders and purchasing parts sooner rather than later," Rick Pierson, principal analyst for semiconductor pricing at IHS, said in the release. "This represents a prime opportunity for bargain hunters."

It may be difficult for some of the industry's biggest buyers (distributors) to take advantage of the bargains. Market analysts who have flagged opportunistic buys in the past watch channel inventory levels closely. In its most recent conference call with analysts, Arrow Electronics Inc. (NYSE: ARW) chalked up an increase in its global component inventory to a large customer engagement and increased stock in Asia, where Arrow's sales increased. The company's inventory turns also increased, and it considers its inventory in balance.

Another factor, at least in distribution, is that orders are being pushed out. Continuing delays in deliveries could push inventory levels up even further, and distributors will be hesitant about adding stock. The market might see some activity among brokers, which typically take advantage of low prices with the hopes of selling high in the future.

Despite the anticipated price declines, the global semiconductor industry is set for stronger growth in the second half, IHS iSuppli said.

After declining by 3.3 percent in the first quarter and rising by 5.4 percent in the second quarter, global semiconductor revenue is expected to increase by 8.7 percent sequentially in the third quarter, before settling down to 1.0 percent growth in the fourth quarter.