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.
Barbara, reducing the price at component level is good for the industry, but I think if prices are coming down further there may be chances for short cutting the production. If that's the case due to unavailability again prices may shoot up. Any particular reason for this decline in component prices.
Hi Jacob: prices are declining because of the overall economy and slow demand. My guess is inventories at component makers is beginning to build and they want to siphon off excess. However, every time this happens we end up with a lag when demand picks up and prices climb again. It's usually not across the board, but there are always spot shortages when come of a cycle such as this one.
Barbara, if we are closely observing the market, we can found that everything is in a circle. If demand is there, then pricing may goes up and at low demand corrections happens. While correction happens, companies reduce the production and this generates more demand from market segment. So everything is happens in a cyclic way.
@Barbara,thanks for the post. Its good to know that component prices will decline in coming quarters. Do you think this price decline will eventually get reflected in the end product pricing?
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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