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Electronic Component Price Declines Spur Buying Opportunity
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Friday, August 03, 2012:
Economic troubles are spurring unseasonably large price declines for a broad range of electronic parts, creating a near-term buying opportunity for purchasers, according to an IHS iSuppli Component Price Tracker report from information and analytics provider IHS (NYSE: IHS).
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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.
“Electronic component pricing typically is stronger in the second half of the year, as suppliers strategically boost prices to take advantage of strong demand during the back-to-school and holiday build seasons,” said Rick Pierson, principal analyst, semiconductor pricing, for IHS. “However, prices are weak this year because of a global economic malaise due to the crisis in Europe and a rapid slowdown of manufacturing in China. Although overall semiconductor revenue is expected to rise in the second half, pricing for many specific components is falling at a faster rate in reaction to poor economic news.”
Price effects
The weakness represents a sharp reversal in the outlook compared to earlier this year, when it appeared that pricing was set to rise for many component categories.
The discouraging pricing trend is illustrated by oscillators, which are high-volume devices extensively used in electronic products ranging from wristwatches, to notebook PCs, to mobile phones. Pricing for voltage-controlled crystal oscillator (VCXO) oscillators is set to decline by 2.0 percent in the third quarter, by 2.4 percent in the fourth quarter and by 2.6 percent in the first quarter of 2013, as presented in the figure attached. This compares to a normal quarterly price reductions of 1.0 to 2.0 percent.
While the price decline for oscillators may appear to be only slightly greater than normal, this excess rate of decrease is sufficient to raise eyebrows among procurement managers, Pierson observed.
Buy now
The faster-than-expected declines in pricing could represent a buying opportunity.
“Those companies that were not planning on buying right now should consider bringing in their orders and purchasing parts sooner rather than later,” Pierson said. “This represents a prime opportunity for bargain hunters.”
The IHS iSuppli Component Price Tracker Service predicts that pricing for the components will continue to decline until the second quarter of 2013, when a rebound is expected to commence. Prices for capacitors, crystals, filters, magnetics, PCBs and oscillators all are expected to increase during the second quarter of 2013.
In particular, pricing for TCXO oscillators is expected to rise by 2.7 percent during the period.
Semis going steady
Despite the above-normal price declines, the global semiconductor industry is set for stronger growth in the second half compared to the first.
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.
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