Connector Price Tracker Rally

Connecor demand was unexpectiddly strong in the first half of 2006, with unit shipment raised by 3 to 5 percent. Asian contract pricing for a common connector type, the SKT DIMM 168 x 1 90D G NB3F TH, rose by about 6 percent from March to June this year. The market entry of Asian suppliers that compete on the basis of rock-bottom pricing forced a response from the tier-one suppliers, including Foxconn Electronics Inc., Molex Inc. and Tyco Electronics Corp. This brutal price competition has caused profit margins among the established suppliers to dwindle since 2003. Despite the recent price hikes, suppliers' profit margins are continuing to wane because of high costs for raw materials including copper, gold and plastic. Due to continued competitive pressure, connector suppliers are absorbing as much as 70 percent of their raw material costs. Lead times for connectors that comply with RoHS restrictions are two weeks longer that non-compliant parts. Connector suppliers are selling RoHS-compliant parts at a 5-10 percent premium compared to non-RoHS products. However, many leading suppliers- including AMP - are planning to convert production entirely to RoHS in the near future, which should help close the pricing gap. While the present price rally represents a major change in industry conditions, it is not destinated to last long; prices will revert to decline by the fourth quarter, and will contract in the first half of 2007, iSuppli predicts.