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In the open market of electronic components, there are weeks when some components cannot be found even at higher prices, and other periods where there are really competitive offers as a result of seemingly endless price wars!
This market is increasingly similar to the stock market also with respect to the time between ups and downs. This is caused by factors that affect all kinds of mostly consumer products, so the pace of evolution from start-up through maturity and decline is very rapid.
Electronic component suppliers, especially EMSes (electronics manufacturing services companies) are fully aware of this fast pace and so they ‘rent out their production lines’ to their major customers to avoid the financial risk of opening new production sites.
When large customers start producing products in large quantities they absorb all the components on the market creating a shortage of stock, and components can only be found at very high prices – even if smaller customers have long-standing scheduled orders!
After serving their important ‘priority’ customers, sales collapse, which means that commitments made with component manufacturers are also cancelled. These companies then very quickly find themselves with full warehouses. In this situation, the market collapses and stock is available everywhere at ever decreasing prices. But can you trust the stock and prices quoted?
The parallel market also follows this dynamic, whereby companies promoting their excess stock on the various industry platforms frequently do not have the time to update the platforms. Very often, in fact, and quite intentionally, industry players (brokers) charge each other prior to fulfilling any requests. If the stock suddenly disappears, the following two situations may occur:
The broker retains the client’s advance payment as a ‘bonus’ for future purchases.
Less ‘reliable’ brokers will disappear immediately, together with the client’s prepayment and without delivering anything to the client.
A similar situation, with comparable scenarios involving the supplier/broker, can also occur regarding non-conforming goods.
The open market therefore can be a great opportunity but it should be approached with great prudence: a new supplier must provide references and it is equally important to check their references. Furthermore, if this new supplier requires payment in advance, it is always wiser to use a payment intermediary to protect yourself against fraud.
Ultimately, trading in the electronic component open market is complex and requires prompt action, but we nevertheless think that all parties can find satisfactory results, if they know what risks to mitigate
You should however exercise extreme caution when buying electronic components on the open market, especially when it seems to appear out of nowhere because, these days, many people present themselves as experts without having any knowledge of the market they are operating in.
If you would prefer to use a professional independent distributor to help you to navigate these risks, contact us with your requirements.
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The open market therefore can be a great opportunity but it should be approached with great prudence: a new supplier must provide references and it is equally important to check their references. Furthermore, if this new supplier requires payment in advance, it is always wiser to use a payment intermediary to protect yourself against fraud.
