Prices rise as component shortages loom

Prices for most major categories of electronic parts tracked by iSuppli’s Component Price Tracker service rose in the third quarter compared to the second as vendors’ tight control over inventory began to conflict with increasing demand.

Lead times in the third quarter also increased or were on an upward trend for nearly all parts categories tracked by iSuppli, such as analogue parts, capacitors, standard logic ICs, discretes, crystals, oscillators, connectors, resistors, magnetics and most memory devices. Several analysts have predicted that the recovery will lead to severe shortages in semiconductors in particular.

“For component suppliers, these strains have resulted in increased utilisation rates and improved bottom lines,” said Eric Pratt, vice president for pricing and competitive analysis at iSuppli. “These companies in the first half of 2009 cut staffing, reduced capacity and slashed inventory levels to adjust to lower demand levels amid the global economic meltdown. Normally, as demand improves, these companies would move to boost capacity and expand inventories in anticipation of further sales gains. However, with the underlying economic forces that caused the downturn still not having been fully corrected, component companies are wary of increasing capacity and inventory until the seasonal, fourth-quarter uptick passes.”

Although electronics market visibility has improved, considerable uncertainty lingers regarding the market outlook in the first half of 2010. Most suppliers are likely to continue to hold off on significant capacity increases until their outlook improves.

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