Buying Trends: Passive Components Update
With the second quarter of 2015 well underway, demand for passive electronic components has waned to the point where lead times are getting shorter—good news for anyone who is buying these parts.
“It’s basic supply and demand economics,” says Jeff Ray, vice president of corporate product supply marketing for TTI, Inc., in Fort Worth, Texas. “When the business climate slows down, lead times begin to stabilize. However, [buyers] should not confuse stabilized lead times with available-to-sell inventory. It is still very important for them to schedule their orders at full forecast to ensure a proper supply chain.”
Rewind back to 2014 and the landscape was quite different. At the time, Ray says he saw “quarter-on-quarter increases in demand” over a roughly six-quarter-long period—an environment that’s since shifted over into the buyer’s favor.
“In general, the second quarter of this year can be categorized as a ‘slower’ business climate,” says Ray. “The manufacturers’ capacity for amount of supply is more consistent with the level of business, as opposed to what we saw in 2014.”
Understanding the negative impact that a sudden decrease in lead times could have on their businesses, suppliers of passive components are looking carefully at future demand and being “pretty cautious about bringing in lead times a week here, and two weeks there,” says Ray, who is currently witnessing a “flat to slight reduction” in lead times. From a capacity utilization standpoint, passive component makers are taking a similarly cautious approach to the market for capacitors, resistors, and other passive products.
“Capacity levels are within fairly normal ranges right now,” says Ray, “versus the upper-end ranges that they were in back in 2014.”
From a vertical business standpoint, Ray says sectors such as medical, industrial, and transportation—and the industries that support them—all remain strong in 2015.
“They’re not using typical, base commodity passive products,” he points out, “but rather those that meet industrial regulatory and/or automotive standards (for instance, under-hood temperature specifications). “Those components are actually still pretty robust,” says Ray, “with lead times remaining flat to slightly extended.”