Global Freight Demand Sinks; U.S. Focuses on Essential Goods
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Component pricing and lead times remain stable in the month of August, with a few exceptions. Similar to July, lead times for discretes and memory continue to inch up, according to Avnet Inc.’s most recent Market and Technology Trends report.
Source: Avnet
Pricing is moving up slightly in discretes as suppliers see increased booking rates on most products, Avnet reports. Discretes are a heavily used commodity, and suppliers are investing heavily in newer 300- mm geometries, according to Alex Iuorio, senior vice president, supplier marketing for Avnet Electronics Marketing Americas. Typically, as newer products come on the market, last-generation chips have the potential to be eventually phased out. Although this is a long-term transition, the trend toward 300-mm could be one reason discretes have been showing activity for consecutive months.
DRAM is also seeing lead times stretch and DRAM and flash prices are increasing, Avnet finds. In fact, the market is seeing some common trends in commodity products, which may have longer term implications for overall business. “When we talk about pure play commodities – where most DRAM falls – we’d expect to see movement upward if the market is seeing an uptick in demand,” Iuorio said.
Buyers have been accustomed to short lead times and stable pricing as the overall economic market remains uncertain. But longer lead times and upward movement in pricing would be welcome to suppliers and distributors who have seen slow to no growth for a number of quarters.
The industry’s two largest global distributors – Avnet and Arrow Electronics Inc. – saw sales increase slightly for the most recent calendar quarter ended in June, but both had trouble earning money on those sales.
The electronics industry overall has been waiting for signs that a prolonged period of lackluster demand is beginning to abate. Electronics companies, including the supply base, have been hesitant to look too far forward regarding demand trends as customers have been placing orders as they need them rather than scheduling orders to forecasts.
Avnet’s Market and Technology Trends report is generated monthly by Avnet component specialists compiling data from customer orders and input from component suppliers. The data represents about 90 percent of the distribution component market. Before publishing its market trends report, Avnet spends a lot of time talking with suppliers, and Iuorio said some non-commodity component segments are also showing increased activity. “Companies in the analog space are beginning to see backlogs increase with the exception of legacy products,” he said. “Wireless, industrial and automotive backlogs are growing.”
Iuorio also notes that suppliers’ commentaries regarding recent earnings results are reflecting a more positive outlook toward business in the second half of the year. In microcontrollers, for example -- where Avnet sees lead times between two and 16 weeks -- suppliers are beginning to build to forecast rather than to order. Suppliers also indicated that customers are expediting shipments – meaning if they ordered 12 weeks in advance they are asking for delivery in six weeks. “Typically when you see expediting, it means there’s been some forecasted uptick in demand,” Iuorio says.
A couple of other notable trends in August: Programmable logic lead times have moved out slightly and pricing in military electromechanical products has increased. These two segments tend to be weighted toward a few, large companies. Avnet says in some cases, movement by a small set of suppliers will prompt an uptick in either lead times or pricing and not necessarily reflect overall market trends.
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