LONDON The price of commodity chips between February 2009 to January 2010 is expected to fall at a relatively moderate pace of 1.1 percent per month, according to market research group iSuppli (El Segundo, Calif.).
This, the researchers suggest, is a more moderate rate than might be expected, given plunging worldwide demand.
However, they caution the reason for such relatively modest pace of erosion reflects the fact that pricing has already hit rock bottom in many commodity categories.
They note that, in contrast with the last major electronics downturn following the dot-com bust from June 2002 to May 2003, the average monthly price fell by 2.5 percent.
The market research group's Component Price Tracker (CPT) index follows pricing trends for devices such as analog-monolithic, capacitors, connectors, crystals, filters, logic, magnetics, memory, oscillators, printed circuit boards, rectifiers, resistors, diodes, transistors and LEDs.
"Amid weak worldwide demand, there is little opportunity for component suppliers to expand their market share or to gain incremental business," said Eric Pratt, vice president, pricing and competitive analysis for iSuppli. "
"Because of this, there is really no incentive for suppliers to reduce pricing. This is especially true when many commodities have been experiencing constant price declines for such an extended period. Prices in many cases are already at rock bottom."
Between October 2007 and February 2009, the index showed 17 consecutive months of decline, said iSuppli.
The index, unfortunately, also indicates that even when demand for electronic components recovers, it is unlikely to bring renewed strength to pricing—and ironically may lead to further declines.
"When the volume comes back, we may see component suppliers actively taking down prices again," Pratt said. "After the downturn, every piece of demand will become a jump ball. The second there’s anything to be gained by cutting prices, suppliers will take action."
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