The Commodity IQ Lead Time Index declined again in July after dropping 8.5% month-over-month in June, indicating that average delivery time trends are now shifting from rising to falling. The index, encompassing electronic components analyzed in Commodity IQ, declined by 1% sequentially in July.
July represents the seventh consecutive month of sequential decline, putting the index just 2.6 points above the baseline level, which marks the border between increasing and decreasing lead times. After more than two years of increases, the pivot to decline brings welcome relief to buyers, delivering reduced costs, enhanced flexibility, and accelerated time to market.
Not All Lead Times are Equal
However, the timing of the shift has been delayed as lead times remain massively inflated for certain parts, including memory, converters, power circuits, amplifier circuits, MCUs and MPUs, and drivers and interfaces. While the index continues to decline, the rate of decrease has slowed.
A total of 69% of the electronic component commodities reached 12-month lows on the Commodity IQ Lead Time Index in July. While still an overwhelming majority, this total is down significantly from 92% in June. This trend may indicate that the overall lead time index will continue to retreat but at a slower pace.
Despite this, the trend remains favorable for buyers. The overall lead time index has been at a two-year low level for four consecutive months from April through July. Many component types are beginning to move toward normalized supply and demand conditions.
With conditions changing, possibly in August, buyers should challenge suppliers and EMS partner lead times to obtain better delivery terms than were available in the past.
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