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Materials Pressures Easing

There are indications that ongoing supply pressure on materials used in the manufacturing of passive components is beginning to ease. Nevertheless, materials suppliers are working at full capacity in an effort to maintain a steady stream of materials and bolster company profits.

Despite component makers' expectations that third-quarter demand will be soft, Asian trade journal DigiTimes says Taiwan-based materials suppliers are running full throttle:

    The upstream material producers continue to receive enough orders to fully utilize their production capacity, and are seeing clear order visibility through the end of the third quarter, according to the sources. It is noted that the firms have maintained a cautious attitude towards expansion even during the previous up cycle for the passive component market, the sources said. Aluminum foil maker Liton Technology has registered NT$256 million (US$8.87 million) in June revenues, up 6.9% on month and 95.7% on year to set monthly sales records for four consecutive months. Leatec Fine Ceramic, a supplier of chip resistor substrates, expects its revenues to exceed NT$300 million in the third quarter. The company confirmed that it has been running at full capacity.

The latest business report from the Institute for Supply Management (ISM) provides further evidence materials constraints are easing. Several commodities such as copper, nickel, stainless steel, and steel saw prices decline in June from the prior month. Petroleum-based commodities, however, including plastics, continue to increase in price. Passive and electronics components continue to be listed as in “short supply” by the ISM — this has been ongoing for six months.

A clearer picture of overall component supply trends will emerge as publicly-traded distributors begin to report their earnings. {complink 453|Arrow Electronics Inc.} will report its earnings on July 27; {complink 577|Avnet Inc.} on August 10.

10 comments on “Materials Pressures Easing

  1. JADEN
    July 22, 2011

    Material availability and cost is a boost to manufacturing industry, it determines the cost and availability of a product.  it is some way of achieving sustainability of a product.

     

  2. Ms. Daisy
    July 23, 2011

    It is good news to hear that the supply chain is preempting potential shortages in materials and adjusting accordingly in light of the Japan's natural disaster. I am optimistic that the market will continue to grow inspite of the difficult road ahead.

  3. Clairvoyant
    July 23, 2011

    This is good news to hear! I am optimistic as well that pressure for materials will continue to ease going forward.

  4. Anna Young
    July 23, 2011

    Barbara,

    I noticed that your article did not mention the potential effects of the Japan earthquake and tsunami, which must have disrupted supplies initially. Would you know if the Japan events affected the supply of passive components? A few of the world's biggest passive components suppliers (TDK and Kyocera come to mind) are based in Japan and it's likely they were effected by the earthquake. Any update on this? Thanks.

  5. mfbertozzi
    July 23, 2011

    It is a good question Anna, as per news outlined in the weeks following that dramatical event, it seems major impact was on mobile devices, as of today materials or chipset for home electronics come mostly from China or Taiwan and even disconfort is still in progress, impact in supply chain was minimal.

  6. Anna Young
    July 24, 2011

    @mfbertozzi, thank you for the clarification.

  7. mario8a
    July 24, 2011

    Hello

    how about Automotive insdustry? it was equaly affected as the mobile industry?

    Regards

  8. Eldredge
    July 24, 2011

    I keep hearing that FEP materails are still in short supply – don't know if it is still on allocation. I think this was a result of the disater in Japan more than anything else. Hopefull that will ease soon.

  9. Houngbo_Hospice
    July 25, 2011

    @Anna, @mfbertozzi,

    According to Witsview the earthquake did affect the global Information Technology supply chain. However not all the electronics industries are equally affected. Some leading manufacturers are far from the disaster area in Northeast Japan. In the case of LCD supply chain, “Witsview believes that as serious as the outcome caused by earthquake is, in general, it did not harm the core of TFT industry. Therefore, the damage it brings to the panel market is limited.” 

  10. Barbara Jorgensen
    July 25, 2011

    Thanks, readers, for updating the information and the issue regarding Japan. The earthquake did (and will continue to) have an impact on the global materials supply. However, for most of the materials listed as commodities by the ISM, there are alternatives sources of materials available. So at least for the period covered, June, things seem to be stablizing.

    If Q3 is soft, as DigiTimes sources predict, then there may be a period of catch-up in the materials supply chain. But it sounds like many materials suppliers did not add capacity when things got tight, so there won't be an oversupply as in the past. Maybe we are learning from our mistakes. 🙂

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