Distributor Avnet Time has combined a bullish statement about the passive component market with a warning on over-ordering by customers as the industry moves into the new year.

According to the passives and electromechancial specialist, along with definite signs of an upturn in the electronics industry there is increasing potential for over ordering resulting in extended lead times for electronic components.

The distributor has asked for more realistic ordering from customers because, as it pointed out, “without this there is the obvious, but potentially catastrophic, consequence that components will not be delivered on time, order quantities will not be met or that recommended alternative products turn out to be unsuitable for their intended use.”

The statement seems to have been prompted by a change in ordering patterns as the industry emerges from one of its longest down turns.

"For some time companies have avoided holding significant component stock and have relied on distributors to deliver virtually on demand. We are now seeing a change in this strategy. Buyers are now purchasing larger volumes and are scheduling their orders with us further in advance in anticipation that availability might become limited at some point in the future,” said Darren Poulton, marketing director at Avnet Time.

There has also been an increase in spot business as buyers try to cover shortfalls in supply.

"Both of these are good news for the electronics industry because they are clear indications that confidence is growing in the future stability of the market," Poulton said.

This supports similar talk of lengthening lead times in the semiconductor market. Demand for wireless ICs in particular is very strong and suppliers may be struggling to meet demand with the result that foundry lead-times lengthening, prices resisting further decline and semiconductor companies seeking forward forecasts from customers.
 
Foundry lead-times for RF chips are reported to be six weeks in Q3, up from four weeks in Q2.

After months of declining prices, it seems that wireless handset chipset prices (RF and baseband) are stabilizing at around $10 for GSM chipsets and $20 for GPRS chipsets.
According to Avnet Time, the electronics industry is now showing signs of sustained recovery, which supports economic forecasts that predict the market will grow steadily in value to 2006. 

By: DocMemory
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