Factors Affecting Product Cost
Staff -- Purchasing, 10/21/2004 2:00:00 AM
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Expect prices for 16 megabit NOR-type flash memory chips to fall for the rest of the year. Reason: Suppliers have finally increased production of lower-density flash devices (including 16 Mb units) after months of tight supply. Suppliers had focused die shrinks on higher density and higher margin 64-, 128- and 256-Mb parts. Tags for 16Mb devices should fall by about 7% in the fourth quarter and another 6% in the first quarter of 2005, says market researcher iSuppli.
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Look for prices to remain stable for most resistor networks and arrays through the first quarter of 2005. However, prices will likely rise 2-3% for precision thin-film resistor networks because of increasing material costs for ceramics and precious metals. The good news is that prices for thin-film parts are expected to fall over the same period because of declining demand and excess supply.
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Expect price erosion for standard linear ICs for the rest of the year. Price should fall 2-3% in the fourth quarter because of weakening demand and rising inventories. Buyers can also expect prices for analog application specific standard products to fall by about 1%, according to iSuppli.
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Prices of futures contracts for natural gas delivery during heating-season months have climbed close to 12% lately. That's because hurricanes have disrupted autumn production and delivery, according to the Energy Department. Demand for natural gas this winter is expected to increase across all sectors, says a market forecast by the Natural Gas Supply Association. The group says that a slight decline expected in domestic production from last winter "is further aggravating the situation (and) could impact consumer bills in some regions."
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The upward revision of second-quarter U.S. growth failed to add market support to the dollar, prompting gold futures to a high $420/ounce in New York at the end of September. That was the highest futures price level in more than five months—and pushed the nine-month gold average just over $400. Also, silver prices rose to end the month at $6.94/oz, the highest price of the year.
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GFMS Metals Consulting predicts that the annual average world price of nickel this year will be $6.03/lb versus a 2003 annual average price of $4.37. Since nickel has averaged $6.26 on the London Metal Exchange for the first eight months of 2004, that means the price would have to average $5.80 for the final four months. Barclays Capital remains bullish, and predicts $6.24/lb as the average annual price this year.
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