Prices still falling
Staff -- Purchasing, 1/16/2003 2:00:00 AM
Electronic component manufacturers and distributors expect prices to increase in 2003 as demand picks up. However, in December, tags were still falling due to overcapacity and less-than stellar demand in the fourth quarter, which usually is a strong quarter for electronics manufacturers.
Buyer should keep a close watch on DRAM tags for volatility. Prices for double data rate DRAM declined late in the fourth quarter after rising in September and October. SDRAMs continued their price decline. Most component suppliers and distributors saw little change in business conditions and did not see an appreciable increase in demand in December.
Widespread price increases are not likely until the second half of the year at the earliest although short-term price increases are likely for various versions of DRAM. While manufacturers say most of the excess inventory that has plagued the industry for 18 months has been worked off, many analysts say electronics manufacturing service (EMS) providers still have significant amounts of inventory. As a result, there is plenty of capacity to meet increasing demand. What's more, there don't appear to be any "killer applications" that will consume a lot of parts, so demand should remain sluggish for a while, keeping prices weak. Businesses are overdue to upgrade their IT systems however. If that occurs in 2003, component DRAM prices could rise.
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