We’re entering the initial throes of a rapidly growing chip glut. Product demand has deteriorated, and the inflationary prices affecting everything from raw materials to shipping costs have escalated average selling prices. With consumers not purchasing finished products, OEMs have six months' worth of stockpiles that are steadily increasing.
Early last year, TSMC warned its clients not to double order or buffer stockpiles. This came despite the shortage lasting long into the summer and early Q3 of 2022. Early alarm bells were starting to ring as market forecasts dipped. Lead times also dropped.
The shortage was ending, and it was happening faster than previously assumed.
The invasion of Ukraine by Russia had a butterfly effect across the world’s supply chains. The price of gasoline increased, thereby raising shipping costs. As shipping costs climbed, so did average selling prices of components and raw materials such as neon gas.
With inflationary prices rising and consumer demand dropping in response, excess stock began to pile up in Q4 2022. That’s going to increase, despite production cuts by original component manufacturers throughout late 2022 and continuing through early 2023, as orders placed long before the demand dropped begin to arrive.
There are options for manufacturers to manage excess stock before it becomes a hindrance. Though, due to the circumstances around the pandemic, many of these options may not be readily available. Asking for a refund, trading with other manufacturers, and using new products are limited options, and some aren’t considered–asking for a refund is one of them.
The easiest and most cost-effective way would be for these manufacturers to sell on a global marketplace. It is far easier for sellers and buyers to purchase excess stock. If there’s a concern over who would buy excess stock on a worldwide marketplace when original components produced by a manufacturer are available, there shouldn’t be.
Buying excess stock comes with many benefits that make it an attractive alternative to standard stock—especially considering the market’s current standing.
1. Discounted Price
Over the last several years, all we’ve seen is rising costs. Price trends for components have increased almost every quarter as supply chain disruptions, demand, and inflation affect it. Buying component stock at a higher selling price means offsetting cost. Many aren’t interested in paying the difference.
Excess stock instantly comes at a discount, even though it was never used in a product. The component stock is like any other stock received from a franchised line distributor, so there’s no reason to question the lower price.
By buying excess stock alone, buyers enjoy helping sellers get rid of excess stock and having to pay less for components that may be out of stock or at a higher price than usual.
2. Vetted Components
Experts often vet the components to confirm quality and condition when you buy excess stock through a global marketplace. That is a far better option than sourcing components through the gray market, which are usually counterfeit parts from either old, recycled, or failed components.
Buyers can confidently buy excess stock, knowing they’ll get the real thing.
3. Three Year Warranty
Discounted prices and vetted components help, but many buyers want certainty when buying excess stock. If a final product is required to function for some time, the components going in should be able to perform exceptionally for as long as necessary. Once off the production line and shipped out, components begin to deteriorate.
Some OEMs have facilities to store stock, but some do not. If not properly stored, components will begin degrading, and the likelihood of failure rises. To decrease this risk, experts vet components to confirm condition and quality.
That’s not an added expense. A global marketplace, Sourcengine, offers warranties on any parts sold through it. That’s another layer of security for buyers.
Buying on Sourcengine Gives You All 3 and More
Sourcengine is one of the largest global digital marketplaces for electronic components and is now selling excess component stock for those who desperately need these sought-after parts. While some manufacturers have wound up with more than they can manage, others still need help to get their hands on what they can. The shortage is not entirely over and won’t be for everyone for some time.
With high costs for chips from high ASPs, buying components at a discounted price makes all the difference. Not only does buying them cheaper save on costs for OEMs, but it can lead to competitive pricing in a current economy where high costs are chasing consumers away. And, if the components fail, they can be replaced if done so during Sourcengine’s 3-year warranty.
As companies continue to cut production, it is far less likely for there to be excess options over the coming year. Now is the best time to take advantage of the possibility of buying excess stock while it is still fresh and abundant. While prices are still extremely high, getting these discounts now gives you a better competitive advantage over other industry players.