EMS industry inventories are exploding

With component prices falling, high inventories in the EMS industry are becoming a massive problem. In view of a possible price drop, the situation could even worsen. But there is a solution.

The stocks of electronic components in the warehouses of the EMS industry have reached extremely high levels. It is noticeable that stocks are significantly higher, especially for the smaller EMS. High inventories are positive – if prices continue to rise.

What to do with the components when prices drop?

Meanwhile, according to in4ma, the majority of the industry has long understood that prices will fall and that the pace of price reductions will increase even more in 2023. That leads directly to § 253 HGB, also known as the lowest value principle: Stocks that are posted at the purchase price and are now cheaper to buy (replacement value) must be written down to the replacement value. Until the end of the year, companies can still try to get price lists from their distributors that prevent this depreciation – this will be over by 2023 at the latest.

Distributors also generally do not take back goods and are currently operating under the new NCNR conditions (non-cancellable, non-returnable). So a different solution is needed because stocks cannot remain at this level. The EMS Scout has expanded a virtual marketplace for electronic components, which will be activated on January 1st, 2023. Here, companies can list surplus components and offer them for sale. Setting up the components is free of charge. The marketplace is not planned as a permanent facility, but rather serves exclusively to support the EMS industry in reducing stocks of raw materials and supplies.