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Electronic Components Market

The 2 Best Practices to Make Value of Your Overstock Electronic Components

Thursday, September 29, 2022

The electronics industry faces historically high inventory levels – their warehouses and stores are busting at the seams. And weakened consumer demand and over-stockpiling by manufacturers are to blame.

For instance, Taiwan Semiconductor Manufacturing Corporation (TSMC) has warned that its customers might now draw on chip reserves they stockpiled last year rather than place new orders. SK Hynix, another leading chipmaker, has also expressed concern about softening demand for consumer electronics heading into 2023.

According to reports, Samsung has 50 million unsold smartphones in its inventory, representing roughly 18% of the total units the company hopes to ship this year. In normal circumstances, the inventory level would be around 10%. 

In the U.S, Intel is expecting its second-quarter earnings to take a hit due to customers working through stockpiled inventory instead of ordering new chips. 

Demand for electronics is softening faster than manufacturers expected, leading companies to clear out their stockpiles. The electronic components shortage is effectively over. Companies sitting on so much inventory right now are looking for ways to offload excess component stock and free up capital. 

Electronic components: How to deal with overstocks 

Bad Practices: Scraping Components as Waste

One way to deal with surplus stock is to hold excess electronic components for months or even years, hoping for another surge in demand. But such occasions are few and far between due to the fast-evolving nature of the electronics industry. 

If the components don’t sell in time – sometimes it takes months or years to liquidate - they may become a waste quickly. In the end, companies usually cut their losses and discard the components in landfills. 

The disposal of e-waste in the surroundings harms the environment. For instance, lead is a neurotoxin found in approximately 2-4 kilograms of old television sets and cathode ray tube (CRT) monitors. If not disposed of or recycled properly, it may leak into the earth's surface, making the soil in that terrain infertile.

In addition, a huge volume of electronics waste is illegally exported to poorer countries, where recycling is cheap. Transportation of e-waste negatively impacts the environment and individuals involved in the transport due to the disposal of hazardous chemicals, such as lead.

Intermediary Practices:

B2B Marketplaces

B2B marketplaces have gained momentum among component manufacturers during the electronic components crisis. Marketplaces offers manufacturers a wider market to sell surplus stocks without restrictions. 

Nevertheless, transparency is a major issue with B2B marketplaces. There are no mechanisms to figure out who is selling on the marketplace. Pricing is not necessarily transparent and may be inflated at times. Also, if an OEM decides to sell its inventory on this marketplace, it cannot choose who it sells or doesn’t sell to. This, therefore, opens an avenue for your competitors to buy your components. 

Sell to Brokers

Independent distributors or brokers usually provide a ready market for excess inventory, but brokerage comes at a cost. Brokers purchase unused inventories at a very low price, so you likely won’t see any profits with this method. Furthermore, OEMs have no visibility into the broker’s supply chain, which increases the risk of your components being counterfeited (black top and make copy) and sold in the secondary market. 

This mean that brokers can sell your components to whom they want, including competitors, and they make a huge margin that OEMs and EMS could have made.

Resell to Manufacturers

Some manufacturers allow you to simply sell the excess stock back to them, though at a discount. If the component has not become obsolete due to the rate of technological development, it’s worth considering this option. 

Best Practices:

Recycling Components

With the circular economy, OEMs and EMS can emphasise recycling instead of allowing the incineration or disposal of surplus components into landfills. Formal recycling involves disassembling the electronics, separating and categorising the contents by material, and cleaning them. Components are then shredded and sorted using advanced technologies to retrieve valuable materials. Retrieved parts can then be refurbished or recycled, giving them a second life in a circular supply chain.

By extending the lifecycle of electronic components through re-use in other applications, manufacturers can greatly minimise the environmental impact of their products. Recycling also saves you money since you don’t have to place orders for new components in the short term.

Join a Peer to Peer Transaction Platform

A peer-to-peer transaction platform is a unique form of B2B platform in that it utilises the business community as partners to enhance connectivity between each other. It is a platform that brings together buyers and sellers in the electronic components market to trade components and also collaborate and share information. 

As an OEM or EMS provider, you can use a P2P transaction platform like AIRENC to offload slow-moving inventory, overstock items, or obsolete components quickly and securely. You will find buyers interested in your excess stock and are ready to offer you components in return or buy your overstocks at a great price.

Below are some of the best features of a peer-to-peer transaction platform:

  • The community members set the prices at which they want to sell and buy components. The prices are therefore decorrelated from the market, completely cutting out intermediaries who tend to take advantage of an emergency to manipulate prices.
  • Members of a community platform are carefully vetted, guaranteeing the integrity of the products (components) sold on the platform and preventing counterfeiting.
  • The members of the community platform are known, which improves transparency and allows buyers to shop with confidence and sellers to capitalise on their brand image.
  • Members of a community platform can also choose who they sell to and prevent their components from ending up with their competitors.
  • Each transaction is carefully evaluated from both the buyer's and the seller’s end. Not only does this enhance transparency, but it also encourages each member to play the game.

Dealing with excess inventory presents a significant issue for OEMs. Beyond the balance sheet and the impact of having working capital tied up in excess stock, there are significant other challenges and costs associated with managing surplus stock, such as warehousing, insurance, and storage.

AIRENC’s P2P transaction platform approach enables OEMs and EMS to buy, sell and price that inventory in a discreet, efficient and sustainable way. It also handles the back end as well by automating the posting, sale, and shipment of unsold inventory while offering immediate payment to sellers.

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