Commodity IQ Lead Time Index Update: Backlogs, Inventory Levels, and Lead Times Will Continue to Fall

Learn More About Commodity IQ

The Commodity IQ Lead Time Index took a notable plunge in June, sending a strong signal that the protracted phase of backlog increases is ending. The index’s June lead time reading of 103.42 was notable on a number of fronts. 

First, the June total was down 9% compared to May, marking the index’s largest sequential decline since November 2020. Second, the figure plunged 20% year-on-year, the biggest annual drop since at least the beginning of 2020. Third, the index fell to near the baseline level of 100, a key threshold that marks the difference between growth and decrease in stockpiles. 

The Current Commodity IQ Lead Time Index

The index in June stood just 3.4 points above the baseline, a remarkable reduction from a one and half times the baseline reading in January 2022. The index is on track to fall below the baseline in July, indicating further global lead time reductions are in store.

Moreover, the number at-volume contracted lead times below 36 weeks for all semiconductors excluding memory more than doubled in Q3 compared to Q1, with the just 10% of quoted MPNs having lead times in excess of 52 weeks. 

Massively extended lead times were a hallmark of the electronics shortage that commenced in 2021, with buyers routinely contending with delivery lags in excess of 52 weeks.

Relief on The Horizon?

As a result, the Commodity IQ  Lead Time Index has remained above the baseline since April 2021, marking an extended 27-month period of rising delivery lags. An end to the more than two-year phase of increasing lead times would deliver significant benefits to buyers, including enabling lower costs, greater flexibility and faster time to market.

However, a decline in the lead time also would signify a broader improvement in purchasing conditions, indicating that supply and demand are returning to a state of balance.  The return to equilibrium is likely to deliver improvements in other areas, with prices expected to decline as conditions normalize.

Elevate Your Intelligence

Download a sample commodity summary and see how Commodity IQ delivers the optimum balance of human and machine intelligence for the electronics supply chain.

Explore Supplyframe Solutions

2021

Commodity IQ

Drive your procurement strategy with predictive commodity forecasts.
IQ Insider Background

IQ Insider

Join IQ Insider to receive weekly, curated insights powered by Commodity IQ.

IQ Insider Bottom Banner (1)

Commodity IQ Calculator

Compare your last six months of component costs to market and contracted pricing.