Eurodis @1.07 oversold!!

and another :

Units Up, Next Comes Recovery
By Bernard Levine -- 25/11/2002
Electronic News


With component unit demand up, can recovery be far behind? That question is being asked across the electronics industry these days as vendors and distributors prepare for the next up-cycle.

Component unit volumes have been on the upswing for months, but pricing continues to get battered. The hope is that surging units will soon translate into higher average selling prices (ASPs) and bring the slump to an end. But until prices cooperate, no one can do anything but wait.

"Volumes are going up, but prices are going down," said Felix Zandman, chairman and CEO of Vishay Intertechnology, a leading producer of passive components and discrete semiconductors.

"All the signs are recovery is around the corner, but it still could take a while to reach that corner," said George Perris of the Sierra Marketing Group research house.


Pricing remains the culprit. "Demand is up in semiconductors and passives by close to double versus 18 months ago, but pricing is off 75 [percent] to 80 percent from two years ago," said Ben Schwartz, VP of strategic marketing at distributor Jaco Electronics. "That's why we are in such a deep decline. The good news is something will come along eventually to get this back on track, it's just a matter of time. Heightened demand will force prices to start to rise again—increased demand from a whole host of technologies such as set-top boxes, DVDs and phones."

Just how soon will prices rise? "It's a question of supply and demand," said Sierra Marketing's Perris. "Increase in unit demand, once it becomes on par with supply or exceeds it, will then push prices and margins up. True recovery will be based on an increase in margins."

But all that still might take a while, he said, noting there is still excess inventory in the market.

"There might be $2 billion or more in excess semiconductors still floating out there globally," he noted. "I don't know if anyone really knows how much. All that must be flushed out before there is recovery."

It can't happen soon enough, and there are encouraging signs. "There has been a steady unit trend upward in the past few months, but it has been masked by declining [average selling prices]," said Clarke Walser, principal at Walser & Associates. "But that is a frequent characteristic of the beginning of an upturn in this industry."

It might be hard to recognize, however. "We never forecast downturns or upturns correctly," said Roy Vallee, chairman and CEO of distribution leader Avnet Inc. "We are too optimistic on a downturn and too pessimistic on an upturn. By the time we go out of calendar '03, I would not be surprised if there were growth forecasts for '04 saying the overall industry including distribution would grow over 25 percent."

But how about 2003? "We are looking for a small recovery next year," said Don Bell, president of distributor Bell Microproducts. "Two years into a downturn, the challenge to every company is to execute their business plan. I think 2003 will be somewhat better, a minor recovery year."

Other distributors also expect improvement. "I do expect business to pick up," said Bruce Goldberg, president of All American Semiconductor. "Consumer and business have gone too long without purchasing new technology. There is large pent-up demand."

The worst is over, added Craig Conrad, senior VP of sales and marketing at TTI, who sees some signs that prices are starting to stabilize. "We think next year will be a growth year," he said, although cautioning that a major war or other outside impacts could intervene.

"This year, we continue to bump along at some historic lows and see little improvement in distributor profitability," said Robin Gray, executive VP of the National Electronic Distributors Association (NEDA). "But we see shipment volume has been increasing which has been a real positive sign people are buying. The profits aren't there because prices haven't risen."

But hopefully soon they will.