Discrete Component Pricing Set to Decline in First Half 2011

But lead times will remain elongated.

The good news for buyers of discrete components is that prices—which have increased sequentially during every quarter for more than one year—will begin an inevitable decline beginning in the first quarter of 2011 as demand softens during the seasonally slow period. The bad news is that lead times for these discretes will continue to extend well beyond normal parameters, maybe by as much as 20 weeks or more in some cases, according to semiconductor market research firm iSuppli Corp.

Across the board, discrete components—including bipolar power, power MOSFETS, small signal and rectifiers—are forecasted to decline in price during the first quarter of 2011. While such drops—amounting to less than 1 percent for all discretes—won’t come close to offsetting the gradual increases that have happened since October 2009, the contractions at the very least will give buyers some relief from demand outpacing supply.

Additional bad news could come, however, for the remainder of 2010: Average Selling Prices (ASPs) for all discretes are expected to continue to move upward until supply can come into balance and realign with the heavy demand situation.

Discrete Component Pricing

Feeling Bipolar
The makers and buyers of bipolar power components are probably feeling a bit bipolar themselves after suffering through major sales declines in 2009—only to see demand go through the roof in 2010 as the products came more into vogue, in line with the macroeconomic recovery.

Prices for such parts have increased during the past 12 months—a trend that should continue through the remainder of 2010—and then level off for the first half of 2011.

Perhaps more of a concern, however, is that lead times will continue to extend into the third and fourth quarters of 2010, with some suppliers quoting as much as 26 weeks or more. While iSuppli predicts these lead times will fall in the first half of 2011, they remain bloated at about the 18-week range.

No Relief for MOSFETS in 2010
Mounting pressure from both the front and back ends of the supply chain is also continuing to stress the power MOSFET market, causing lead time extensions and the allocation of certain devices from a number of suppliers, including On Semiconductor, Fairchild Semiconductor, Infineon Technologies and International Rectifier.

While the need for more power MOSFETs began in the first quarter of 2010, demand has since grown quickly to outpace supply—a situation that iSuppli expects to continue throughout the current year. Altogether, such developments have had a noticeable effect on pricing, demonstrated by increases during the last 12 months.

And while pricing is expected to stabilize at some point in the first half of 2011, given the elevated prices and the state of high demand, one can expect to continue seeing bottlenecks in the power MOSFET market despite demand-driven production expansion efforts.

Small Gains
Much like other discrete components, small signal transistors and rectifiers will continue their price uptick for the remainder of 2010, with prices then falling early in 2011. And again, much like other components, small signal transistors are also experiencing larger-than-normal lead times with no relief in sight. Even in the first quarter of 2011, iSuppli sees small signal transistor lead times at levels 20 weeks or longer.

Rectifying 2009 Price Drops
For rectifiers, prices had come down hard in 2009, falling by as much as 20 percent due to a drop in demand. Since that time, however, the ASP has inched back up while also experiencing a 12-month sequential rise. For the first half of 2010, ASPs increased in the face of insufficient supply as well as continued demand for parts.

As iSuppli forecasted earlier, rectifier prices were expected to trend upward through the first half, with perhaps some relief in sight to come in the second. That isn’t happening, as iSuppli now forecasts prices to continue increasing for the remainder of 2010 until the first quarter of 2011. By then, prices will contract following the stabilization of supply and demand.

Lead times for rectifiers will continue to be unusually extended—lasting as much as 20 weeks or longer— owing to an increase in demand and to capacity constraints. Much like the rest of the discrete market, lead times at these levels will reamin an issue even after 2010.