Rising material costs stifle price cuts

Higher costs for metals are impacting prices for passive components

By Gina Roos -- Purchasing, 6/18/2008 12:02:00 PM

Buyers should prepare for higher prices for specialty components, and only modest price declines for commodity passives for the rest of this year and into first quarter 2009.

Suppliers say rising raw materials costs are impacting prices of capacitors, resistors, and other components. Rising labor rates in China and currency exchange rates are also affecting prices.

"The number one factor influencing pricing for components right now is raw materials and a lot of it is metal-related,” says Shawn M. Harrison, vice president, senior research analyst, electronics supply chain, for Longbow Research in Independence, Ohio. “Depending on the component, it may be palladium, silver, copper, gold, nickel and tin. All those costs are up year over year."

At the same time there are “oil-related charges whether it's for transportation or if there is plastics content,” he says. “The final pieces are currency and higher operating or labor rates in China," Harrison adds.

He says there are some transportation surcharges being passed along to the distributor, but price increases for capacitors aren't getting through to distribution or to buyers.

Harrison says distributors and buyers at electronics manufacturing service (EMS) providers are getting low single-digit price declines, rather than 8-9% price drops because of the higher raw materials costs. Suppliers say rising costs for metals and plastics used in component production and higher transportation costs will result in stable to slightly down pricing.

For instance, the average price for commodity multilayer ceramic capacitors (MLCCs) is expected to be flat or down by about 2% in 2008. MLCC tags typically fall by about 5% per year. However, prices will remain stable for high-capacitance and high-voltage parts.

Also see
2008 Electronics Pricing Outlook: Here’s what you’ll pay this year