While all leading indicators are pointing to the return of seasonal growth in the second half of 2013, the global electronic component industry including semiconductors is currently seeing weaker orders than expected during this phase of market recovery. This hole in demand is likely to limit the magnitude of electronic component market growth this year, according to the Component Price Tracker service from information and analytics provider IHS.
The overall outlook for commodity chips in 2013 remains firm with semiconductor revenue forecast to grow 4.8 percent, even though not all segments of the market are equally strong.
Specifically, MOSFETs, capacitors and logic components are not seeing the typical levels of order activity common during this time of year in the build-up to the holidays. A typical result of this cycle is extended lead times and rising prices, even though those have not yet been seen for now. Meanwhile, other components that are used in consumer electronics, automotive, wired and wireless and industrial sectors will continue to drive the market.
Search for stability
Suppliers are looking to fill the demand hole by expediting incentives that were planned for later on in the fiscal calendar, such as strategic sector pricing initiatives, internal test and assembly programs as well as fab loading schemes. Stability for components will take place, IHS believes, but it won't happen until late in 2013, which is much later than initially forecast.
Luckily, lead times for the most part have remained on average with only certain areas experiencing extended delays. That's good news for a market that for the past several years has struggled with lead times ballooning into the 20-plus week range. Furthermore, as demand increases, pricing on commodity type components will gradually rise through the remainder of the year.
Return to seasonal growth to take place?
After two years of declining or slight sales growth, all of the leading indicators of demand for the semiconductor market-such as PCB book-to-bill, IC inventory levels, IC fab capacities and component lead times-seem to point to a return in seasonal expansion for the second half of 2013. The component sector and its supply chain partners should also be returning to its seasonal increase because the sectors that will drive demand through 2015-consumer electronics, automotive, industrial and telecom-are showing signs of growth.
The net result of such growth for component manufacturers would have been rising orders for their commodity chips. But because the volume orders that usually appear in the typical cycle time have not appeared, component makers are being forced to recalculate, replan and reschedule to get the orders they need to avoid a continued soft recovery.
As a result, the pent-up demand seen in the commodity chip space over the past few years may not fully be realized in this cycle and will likely carry over to the next round. But given the wary nature of component suppliers, they are likely to play everything close to their vests for a while, so the pent-up demand for chips may not fully materialize in the near future. One thing is certain: don't expect any future build-up of manufacturing on the part of component suppliers.
Read more >> Supply Chain Bracing for Start of Semiconductor Cycle in Second Half of 2013 - June 2013
