While electronic component prices have generally continued to soften for buyers, EPS News reports that excess component inventory so far has not flooded the market to drive prices further down. Instead, manufacturers are apparently holding onto inventory anticipating future shortages.
According to EPS News, the amount of excess may be estimated as electronics customers report their calendar 2023 H1 earnings, including these examples:
- Hewlett Packard Enterprise inventory for 2022 was $5.161 billion, a 14.41 percent increase from 2021.
- Intel’s inventory rose to $13.224 billion, a 22.72 percent increase from 2021.
- AMD’s inventory for 2022 was $3.771 billion, a 92.89 percent increase.
- NVIDIA inventory on January 31, 2023, was $5.159 billion, a 98.04 percent rise in 12 months,
- NXP Semiconductors inventory for 2022 was $1.782 billion, a 49.87 percent increase from 2021.
Electronics research company, Lytica, told EPS they are predicting price turbulence from a surplus in electronic components. Lytica’s CEO, Ken Bradley, told EPS there are two factors: the first is cooling in demand, and the second is a large number of over-committed purchases by manufacturers due to supply chain shortages.
Overall, said Lytica’s Bradley, there’s a lot of hesitancy in the electronics market. “If inventory purchases were financed through loans, the cost to maintain a $1 component likely exceeds the component’s price. Companies could re-sell those parts at a discount or hold on to them until the market rebounds.”
EPS News says the U.S. economy has remained resilient through the first half of the year, despite significant headwinds from stubbornly high inflation, aggressive interest rates hikes, and a number of high-profile bank failures. “This resiliency probably will not last,” said IPC Chief Economist Shawn DuBravac in a statement. “Consumer spending was strong in Q1, up 3.8 percent at an annual rate, after growing just 1 percent in Q4. A number of contributing factors supported spending at the start of the year, but these forces might wane in the back half of the year.”
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