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Extended lead times are the bane of buyers everywhere, slowing production ramps, lengthening time to market and reducing revenue. However, the marginal rise in lead times in November reported by the Electronic Components Industry Association (ECIA) may inflict only minor pain on buyers – while also signaling a significant improvement in the demand situation for electronic components.
ECIA Survey Results Point to a Minor Increase in Lead Times
A total of 25% of respondents to the ECIA member survey indicated that lead times fell in November, down from 39% in October. At the same time, 7% reported increasing lead times in November, up from 3% the month prior. The growing percentage of increased lead times and the declining share of decreasing lead times marks the end of an extended period of delivery-lag reductions chronicled by ECIA monthly surveys.
The Commodity IQ Lead Time Index for all components has been on a general decline throughout the year, falling monthly since July and the November reading represented a 30% plunge from January. The index fell below the baseline in September and remained there through November, indicating that lead times decreased during those months.
Looking Ahead to Q1 2024
Driven by the decline in October, lead times for commodities will slide into Q1 2024. A total of 57.8% of active components are set to have contracted lead times of 25 weeks or less in Q4, up from 41.1% in Q3. For passives, 71% of lead times will be 25 weeks or less, up from 67.9% in Q3.
As a result, the marginal November increases reported by the ECIA are unlikely to significantly impact overall Q4 lead times. Simultaneously, the shift in lead times is accompanying a rise in demand in Q4 from certain markets, including PCs and smartphones. This rise in demand has driven up lead times for critical components like NAND flash memory.
For buyers, the minor pain of slightly lengthening lead times will be the price paid for a return to demand growth for their companies’ products.
