Falling component prices spell buying opportunity

Sluggish global economy causing above-average price declines in capacitors, crystals, filters, magnets, and more, new report says

The slow economy is causing unseasonably large price declines for a wide range of electronic parts, creating near-term buying opportunities for purchasers, according to a new report from industry analyst IHS iSuppli.  The company says pricing for widely used components such as capacitors, crystals, filters, magnetics, oscillators and printed circuit boards (PCBs) are all 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.”

Pricing for voltage-controlled crystal oscillators (VCXO), for example, is set to decline by 2% in the third quarter, by 2.4% in the fourth quarter and by 2.6% in the first quarter of 2013, according to the report. This compares to normal quarterly price reductions of 1% to 2%. VCXOs are high-volume devices extensively used in electronic products ranging from wristwatches, to notebook PCs, to mobile phones.

IHS predicts component pricing will continue to decline until the second quarter of 2013, when a rebound is expected.  And Pierson added that the faster-than-expected pricing declines may represent a good buying opportunity for purchasers.

 “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.”

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% in the first quarter and rising by 5.4% in the second quarter, global semiconductor revenue is expected to increase by 8.7% sequentially in the third quarter, before settling down to 1% growth in the fourth quarter, IHS said.

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