Standard logic prices could rise in third quarter
Prices may increase in second half because of stronger demand and lower inventories.
By Jim Carbone -- Purchasing, 6/4/2009 10:10:00 AM
The global standard logic market will decline by about 19% this year because of the global economic downturn, but buyers should not expect any steep price drops. In fact, modest price increases are possible in the second half because of low inventory levels and stronger demand.
Analysts and component manufacturers say that prices have fallen dramatically over the past years and are just about as low as they can go. “There is just not a lot of margin to give up at this point,” says Hank Volin, senior business marketing manager of Fairchild Semiconductor in South Portland, Maine. “The price freefall has stopped. It has been hard to reduce costs to keep up with the rate of price decline,” he says.
Standard logic prices have fallen sharply since 2001. The average price was about 21¢ in 2001 and has since fallen to 9¢.
Roger Banks, principal analyst for researcher iSuppli, says prices were under pressure in the first quarter, but should stabilize towards the end of the second quarter as third quarter demand starts to build.
“A modest increase in pricing is forecast for the third and fourth quarters as leadtimes extend and the purchasing focus moves towards making sure that the components are there to support the equipment production builds,” says Banks.
Banks adds that in a “normal market environment” price increases for standard logic are expected when leadtimes move out past 14 weeks. “But in the current environment with so many uncertainties it is expected that pricing will increase at a shorter leadtime point as purchasers scramble to fill the inevitable short-term shortfalls,” he says.
Even if prices rise, the standard market will still decline to $1.75 billion from $1.9 billion in 2008 because of overall weaker demand for the year, says iSuppli.
Also see Expect lower prices, smaller packages for standard logic
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