Tags are on the move
By Staff -- Purchasing, 9/20/2001 2:00:00 AM
Deteriorating demand is finally affecting the high-tech sector's number-
one inflation bandit: capacitors. In July, tags for U.S.-made electronic capacitors (SIC 3675) fell 2.2%. That was the third largest one-month drop on record over the 1987-2001 period. The ICE model indicates four-fifths of this decline came out of the industry's bottom line while the rest was subsidized by lower per-unit manufacturing costs. Almost all of July's price decline can be attributed to multi-layer ceramic dielectric capacitor chips where prices plunged 5.4%, indicating exceptional market weakness.
Producers in SIC 3675 have a great deal of room to negotiate on price. Over the last 24 months, industry prices rose an average of 54.2% while the cost of making a typical unit of output advanced just 8.9%. This huge disparity has added an estimated $17.56 to margins for each $100 of product sold. The TCS ICE model calculates that the average producer can afford to lower tags 23.5% and still earn a fair return on money spent on manufacturing activities. ("Fair" means a margin equal to its five-year average.) Beyond profit issues, buyers should bear in mind that end-market growth for SIC 3675 is decelerating at its sharpest rate ever. Capacitor producers need to attract customers, so they may be more willing to cut prices now. TCS expects average prices in the capacitor industry to fall 8.4% in 2002, after rising 19.5% in 2001.
Arm yourself with detailed industry cost/price data for upcoming negotiations by calling Thinking Cap Solutions at 360-452-6159, fax 360-457-2913 or email ebaatz@ice-alert.com. A single DIRECT-ICE ON DEMAND report costs $95 for ICE-Alert subscribers and $190 for non-subscribers.
Electronic capacitors (SIC 3675)
| Cost/price analysis | Jul-00 | Mar-01 | Apr-01 | May-01 | Jun-01 | July-01 |
| Average product price index (annual % chg) | 13.36 | 38.02 | 37.55 | 36.52 | 35.62 | 32.95 |
| Industry direct manufacturing costs (annual % chg) | 4.33 | 6.28 | 6.11 | 5.92 | 5.66 | 5.26 |
| Direct manufacturing costs per $100 of product | $46.05 | $41.81 | $42.07 | $41.84 | $41.40 | $42.14 |
| Manufacturing costs | Weight* | Index, (1991=100 Jul-00 | Index, (1991=100 Jun-01 | Index, (1991=100 Jul-01 | % chg 06/01-07/01 | % chg 07/00-07/01 |
| Industry direct manufacturing costs | 1.000 | 118.6 | 121.5 | 120.9 | -0.47 | 2.01 |
| Direct materials—delivered | 0.709 | 113.5 | 114.9 | 113.7 | -1.00 | 0.20 |
| Freight costs | 0.017 | 124.3 | 129.7 | 130.1 | 0.32 | 4.62 |
| Direct materials—undelivered | 0.692 | 113.2 | 114.5 | 113.3 | -1.04 | 0.08 |
| Imported direct materials | 0.089 | 121.7 | 116.7 | 113.8 | -2.51 | -6.49 |
| Domestic direct materials | 0.603 | 112.0 | 114.2 | 113.2 | -0.82 | 1.14 |
| Direct labor | 0.291 | 131.0 | 137.8 | 138.6 | 0.61 | 5.84 |
| Key materials | ||||||
| Aluminum and aluminum-base alloy: Sheet, plate, and foil | 121.4 | 120.3 | 121.1 | 0.65 | -0.26 | |
| Precious metals, all forms, except gold | 135.3 | 132.0 | 127.1 | -3.71 | -6.06 | |
| Metal powders | 108.9 | 121.4 | 121.0 | -0.32 | 11.14 | |
| Resistors, capacitors, transformers, electron tubes, semiconductors, etc. | 105.0 | 106.5 | 106.0 | -0.44 | 0.96 | |
| * All weights represent a given category's contribution to total direct manufacturing costs. Prepared by: Thinking Cap Solutions Inc., a company specializing in industry cost escalation analysis for purchasing applications. For more information, contact Elizabeth Baatz, Thinking Cap Solutions Inc. (360) 452-6159, or FAX (360) 457-2913 or E-mail ebaatz@ice-alert.com. |
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