At the recent National Electronic Distributors Association annual conference, many distributors noted that unit shipments are increasing monthly although prices continue to fall. That indicates there is still a lot of inventory and capacity in the supply chain.

The scenario is presenting some electronics buyers with purchasing opportunities with nonfranchised independent distributors. A lot of OEMs and electronics manufacturing services providers' excess inventory is being sold through consignment programs with independent distributors. Business conditions being what they are, the excess is being sold for pennies on the dollar. "If they get 10 cents on the dollar they are lucky," says the founder of one East Coast independent distributor. Buyers who don't have excess inventory are able to get quality parts at a fraction of their original cost.

Such a scenario is likely to continue for a while as demand will remain weak for months. There is plenty of unused capacity that can come on line even if demand picks up significantly over the next year. For the foreseeable future, prices, at worst, will remain flat and likely will decline especially in the first quarter when demand for end equipment is typically weak.

In fact, most analysts say a pickup in the electronics industry won't occur until the second half of 2003 when businesses finally begin to upgrade their IT systems and start making serious capital expenditures.