Overall chip and electronic component prices to rise in Q3; decline to resume in Q4

EL SEGUNDO, USA: The average global pricing for commodity electronic components is likely to rise by 2.3 percent in the third quarter compared to the second quarter due to shortages and resulting price hikes for memory chips, according to iSuppli Corp.

Following declines of 8.4 percent in the fourth quarter of 2008, 9.2 percent in the first quarter 2009 and 5 percent in the second quarter of 2009, overall prices are expected to undergo a short-term rise in the third quarter.

Most components actually are expected to experience price declines in the third quarter, but the average is being skewed by DRAM. Furthermore, prices will revert to declines in the fourth quarter, with a moderate 0.2 percent decrease.

“Overall component pricing is being heavily impacted by price hikes for DRAM, spurred by a shortage of DDR3 parts,” said Eric Pratt, vice president, pricing and competitive analysis, at iSuppli. “Overall DRAM pricing is expected to rise by 10.2 percent in the third quarter.”

With DRAM accounting for 9.1 percent of global semiconductor revenue in 2008, the price increase in this area is having an inordinate impact on overall component costs.

Other areas seeing price increases include analog integrated circuits (ICs), discretes and filters.

The figure presents the results of iSuppli’s Procurement Pricing Index (PPI), which encompasses an overall average of global commodity component pricing.

iSuppli Procurement Pricing Index (PPI) Average Sequential Pricing Trends for Commodity Electronic Components (Percentage Change in Pricing in US Dollars)Source: iSuppli, August 2009

Pricing will decrease moderately during the third quarter for most major memory segments. NAND-type flash will experience a 0.3 percent decline. NOR pricing will decrease by 1.1 percent. EEPROMs pricing will remain flat.

Declines also are expected for standard logic ICs, crystals, oscillators, connectors, resistors and magnetics. An overall decline is expected for capacitors.

Despite these decreases, the overall rise in the PPI indicates pricing conditions are changing for commodity components.

“iSuppli previously expected price decreases would be of a greater magnitude in the third quarter as commodity component suppliers cut tags to capitalize on rising demand,” Pratt said.

“However, semiconductor suppliers have scaled back their capacity significantly during the downturn. This means supplies are somewhat tighter than expected, preventing prices from declining as much as expected.”