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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, {complink 453|Arrow Electronics Inc.} 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,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?
Along with lower prices, availability becomes scare too. Sometime you may have to wait much loger for delivery.
Hmmm…I'm trying to follow the author's logic here. On two of the four point he makes, technology enables us to do our own design amd manufacturing:
…told him that AI is going to revolutionize manufacturing, because we'll be able to design and build our own products at home.
3D printers will be doing small-scale manufacturing of previously labor-intensive crafts and goods, Wadhwa wrote. We might even see the emergence of a Kinkos for 3D printing. You could go to your corner store and print out a new toy for your child, for example
I'm not seeing manufacturing jobs here. The technologies will benefit the companies that develop them, but I don't see job growth in a DIY environment as described above.
Let's say that someone does manufacture these things…imagine to supply chain complications they'll have…
I cannot see how all this is related to electronics either. Maybe the plastic toy industry (that specifically designs 15 cm x 15 cm x 15 cm toys) will get a hit in China due to the cheap 3D printers but that's about it. The oher thing I found interesting was why would anyone want to replace a cheap labour force with an army of specialised robots? This sounds like false economy to me. My guess is the maintenance and running cost of one million robots will probably be much higher than employing one million unskilled workers in China (not to mention the huge one off costs one million robots will bring). When you average all the costs over 10 years, I have a feeling that employing real people will work out to be cheaper in China.
@Barbara: Yes, I agree with you. Reasons mentioned, does not have much logical connections of bringing back much of jobs back to USA.
However, there are other catalyst which will bring back many of jobs back to USA. Prime reason is that the whole concept of outsourcing was preposterrous.
I do not really feel these technologies could have any sort of immediate effect to bring the manufacturing back to USA. But I really admire the way wadhwa thinks about all this. Is America manufacturing is really blooming?
In it's current form, 3D printing is a very interesting process, but is limited by throughput. It appears to be a great technology for prototyping, but probably is not economical for mass production.
The oher thing I found interesting was why would anyone want to replace a cheap labour force with an army of specialised robots?
@Cryptoman, the reason is Inflation. Inflation in china has gone up substantially and there is nothing called cheap labour force now. Cost of maintaining the labour force is significantly higher than cost of maintaining the robots.
What impact will these new technologies have on electronics?
@Tam, thanks for the interesting post. I think the new molecular materials will have significant impact on the electronics industry. Advances in nanotechnology and materials science will help us build smaller transistors with low-leakage.
This is a very interesting point of view. While I can see many possibilites from these ideas and innovations, I don't see how it will create jobs. It will bring manufacturing back stateside, but it will limit the amount of workers involved. I guess if we go by volume, even if 1 company produces a few hundred jobs, hundreds of companies should create thousands of jobs. And that is better than no jobs at all.
@anadvy I did not realise inflation would have such a huge impact. It is also surprising that the effect of inflation is strong enough to justify the initial investment needed to utilise 1 million robots. As I do not have solid figures to provide on this kind of investment, I cannot provide a comparison on this but I cannot see how it all adds up.
@Jay-Bond that's a valid point. We do have to consider that loss, which has major ripple effects on the economy.
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.
I have to wonder if the proposal to replace thelabor force with robots is more of a scare tactic, providing a message for the labor force.