Electronic component market review - October 2017

Current Market Conditions

The most frequent question right now being asked within the industry, is “how much longer will component shortages last?" Unfortunately, these shortages are forecast to continue into 2018, and possibly stretch beyond mid-2018, even for passive components.

Defence, automotive and aerospace sectors are further strengthening. They are both adding to, and driving the increased component demand across the market.

For the availability of product to improve, the demand within the market needs to slow, or electronic component manufactures need to implement additional production facilities and capacity. This however is unlikely to happy quickly, especially in legacy or older technology components.

Product availability and workable lead-times have been achieved with effective supply chain management and forecasting. However, there is always a danger that as these solutions expire and need to be renewed, we will see the impact of the extended lead-times and pricing increases.  Forecasting, scheduling and underwriting stock within the supply chain can work to mitigate these risks as much as possible.

Key Capacity and lead-time issues

• DRAM devices are still on allocation or have extended lead-times from 20 weeks upwards. Micron are experiencing particular difficulty. Unfortunately this difficulty does not appear to be easing, with Flash and EEPROM memory now becoming harder to source, leaving the memory market volatile.
• Vishay’s fab constraints are also not improving. Lead-times in excess of 50 weeks are being observed, notably with their passive division.
• Texas Instruments have made customers aware that they have seen a significant increase in demand, and are advising all Q4 orders are secured as the market tightens further, to ensure customers continuity of supply. Their lead-times have doubled for Interface and Voltage Regulators to 24 weeks.
• Almost all manufacturers are now offering extended lead-times or allocation as standard. Lead-times are extending beyond ‘usual’, and they do not appear to be stabilising.  The passive market is experiencing exceptional lead-times, with R+C’s such as Yageo offering 40 weeks, and Murata 30 weeks plus.
• ON Semiconductor and ST Micro lead-times are still stable at around 26 weeks, and are not yet showing signs of improvement.

Pricing Uncertainty

• Texas Instruments are continuing to remove support and design registration across their product range. This, coupled with the October 2017 price increases should be considered when reviewing pipeline orders.  At the end of November 2017, all distributor supported pricing will be removed.  Following this, at the end of December 2017, all design registered pricing will be removed.
• Effective from 1^st October 2017, STM will increase costs by around 5%. Lines include Circuit Protection (SM30Txx, SMA6Txx), Diodes TVS (SMA/SMB/SMCJ), Linear (LM324/339/358/393; LM2903DT; TS0xx), Transistors, Triacs/Rectifiers (BDxx/TIPxx) and MOSFETS.

Manufacturer mergers

• Toshiba look set to sell their Flash Memory unit to a group led by Bain Capital. The deal is expected to be closed by 31^st March 2018 and is estimated to be worth $18million.
• Qualcomm extended their offer for the remaining NXP shares to add to the 3% of shares already tendered.

PCB Technology

• There is still some concern over copper shortages, this along with the value of the dollar, is starting to filter down to major PCB suppliers who are purchasing raw materials with cost increases of around 5%.
• For the short term, PCB lead-times seem to be stable, but this could change if raw material costs take a steep upward turn as copper clad laminate is becoming scarcer.