Commodity chip prices hit rock bottom

El Segundo (CA) – Prices for high volume consumer electronics components — those we often take for granted and rarely pay much attention to anymore — are hovering at near-record lows, according to a report released by iSuppli. These include such common things as memory and supporting chips used to handle analog to digital switching, along with more traditional electronics components including capacitors, resistors, crystals, connectors and more.

While the market research said that the price decline is not as dramatic as in other areas of the semiconductor industry and global pricing is expected to drop at a “moderate pace” of just 1.1% per month between February 2009 and January 2010, the problem is that the industry is already facing prices that have never been lower than at this time.

“Amid weak worldwide demand, there’s little opportunity for component suppliers to expand their market share or to gain incremental business,” said Eric Pratt, vice president at iSuppli. “Because of this, there’s really no incentive for suppliers to reduce pricing. This is especially true when many commodities have been experiencing constant price declines for such an extended period. Prices in many cases are already at rock bottom.”

According to iSuppli, products affected by this trend include:

printed circuit boards

This trend may not be a short term phenomenon, but may be here to stay: Even if demand for electronic components recovers, it is unlikely to bring renewed strength to pricing, and could lead to further declines.

“When the volume comes back, we may see component suppliers actively taking down prices again,” Pratt said. “After the downturn, every piece of demand will become a jump ball. The second there’s anything to be gained by cutting prices, suppliers will take action.”