Thursday, February 22, 2024
spot_img
HomeGADGETSELECTRONICSThe Upside of a Slow Electronics Market: Buyers Have Leverage

The Upside of a Slow Electronics Market: Buyers Have Leverage

The COVI9-19 pandemic created a nightmarish situation in the electronics market, with most components in short supply at skyrocketing prices. That situation started changing two years ago as the pandemic eased, weakening demand and bloating inventories. By the fourth quarter of 2023, the balance of power shifted the electronics supply chain in favor of buyers, creating for the first time in years a favorable market for buyers.

That’s the news from Supplyframe, a supply-chain service. The company’s Commodity IQ Demand Index for semiconductors fell by 22.7% in 2023 compared to 2022, reflecting poor demand from critical end markets, including PCs, smartphones, and consumer electronics.

According to Supplyframe, the component demand index fell below the baseline to reach an average of 95.2, down from 109 in the first half. Logic, memory and analog signal devices led the decrease. Supplyframe said the below-the-baseline figure indicates that semiconductor demand declined during the second half despite a marginal sales rebound for some key end markets.

Higher Inventories, Falling Prices

About a year ago when the electronics industry was in the midst of a downturn, there were already some signs of part inventories easing and impending price drops. At that time, Supplyframe projected that inventories would ease throughout 2023 while prices fell.

Not only did those predictions come true, but the softening demand also produced, for the first time since before the pandemic, an inventory surplus.  Supplyframe’s Commodity IQ Inventory Index for semiconductors surged by 44.7% compared to 2022. According to Supplyframe, bulging inventories led to improved availability, as reflected in a 26.6% drop in the Commodity IQ Lead Time Index for semiconductors in 2023 compared to 2022.  Declines in demand for standard and programmable logic helped to fuel greater availability.

Consequently, component prices, which rose for much of 2023, also started declining toward the year’s end. Supplyframe’s Commodity IQ Price Index for semiconductors rose 26% in 2023 compared to 2022. However, with pricing trends typically lagging lead-time developments, the semiconductor price index eventually started decreasing in the fourth quarter, with a 17% sequential decline and a 22% year-on-year drop.

End-Market Demand Falls

The downturn that has hit the electronics industry was manifested in a worse than expected end-market demand, which further caused inventories to rise and lead times to dwindle.

Supplyframe noted that at the outset of 2023, market research firms projected the global semiconductor market revenue rising by 4% to 5%. However, by the end of 2023, forecasts were downgraded to an 11% to 12% drop for the year.

The industry downturn, while recently showing signs of ending, has still not appreciably lowered inventories of products such as memory, which were among the hardest hit sectors. Despite memory suppliers’ aggressive efforts to cut production rates and reduce stockpiles, inventories remained inflated at distributors throughout 2023. This inventory overhang contributed to favorable lead time conditions for buyers, according to Supplyframe.

The findings of Supplyframe appear to be in line with recent findings by Avnet that market conditions are beginning to return to normal. Avnet did note a few lingering shortages, though, of some analog parts and microcontrollers.

 

Post Disclaimer

The information provided in our posts or blogs are for educational and informative purposes only. We do not guarantee the accuracy, completeness or suitability of the information. We do not provide financial or investment advice. Readers should always seek professional advice before making any financial or investment decisions based on the information provided in our content. We will not be held responsible for any losses, damages or consequences that may arise from relying on the information provided in our content.

RELATED ARTICLES

Most Popular

Recent Comments

error: Content is protected !!