Commodity pricing through Q4 2023 favors the buy-side, with nearly three-quarters of electronic component price dimensions either declining (48%) or stabilizing. The forecast for H1 2024 pricing shows just 4% of price dimensions on the rise and 72% in stable mode. The main price and availability outlier for Q4 2023 and 2024 is memory – specifically, NAND flash and DDR4, DDR5, and HBM (high-bandwidth memory) DRAM. Buyers should acknowledge and plan to increase memory pricing while ensuring the most advantageous price and delivery terms for most active and passive components, at least through H1 2024.

Ocean freight shippers are and have negotiated current and due-to-expire long-term agreements as spot rates remain significantly lower than long-term rates. Both spot and contract air cargo rates continue to fall from the highs of 2022, general cargo rates down globally by nearly 40% year-on-year through the first eight months of 2023, yet special rates (including high-tech) rose by 7%, according to WorldACD. Buyer's should move to secure long-term agreements before air rates likely rise in 2024, while noting that ocean freight rates – driven down by massive excess capacity this year – may artifically be inflated as lines employ blank sailings, schedule adjustments, ans slow steaming to constrain supply.

The EMS leader, Foxconn, restated its fiscal Q4 2023 sequential growth forecast, its peak season for the information and communications technology (ICT) sector, on its earnings call last week. Company guidance for parts of the ICT segment (particularly consumer electronics and smartphones) was "neutral" for 2024, with its primary growth driven by servers, especially cloud services and AI servers. This further bolsters the Commodity IQ guidance for consideration of persistent memory and solid-state storage price inflation through next year.

Global sales of electronic components continued to rise in October despite declines in the memory and passive segment, according to the latest reading of the Commodity IQ Demand Index. The index in October stood at 100.4, just slightly above the baseline level of 100, indicating a marginal rise in demand. However, the index has declined recently, reflecting a deceleration in the sales growth rate. 

Rising concerns over the Hamas-Israel war have caused investors to flock to the relative stability of precious metals, causing spot price increases for gold and silver since the Hamas attack on Israel on October 7. The spot price of gold inflated by 8% to $1,966 per troy ounce from early October to early November and is forecast to sequentially increase into H2 2024 to above $2,000 per troy ounce. Gold price rises will most impact connectors and PCBs, while silver will influence some MLCC and resistor pricing. Procurement professionals should continue to monitor precious metals pricing.

Crystal and oscillator minimum capacity utilization rates declined into Q4 from 85% to 70%, though utilization is over 90% for smaller-size and auto-grade products. Low capacities and production rates for frequency control devices limit flexibility to respond to sudden upsides in demand. Additionally, With an increasing number of products going obsolete due to maturity, profitability concerns, or unavailability of raw materials, supply chain professionals must design end products in alignment with the latest supplier technology roadmaps.

The demand index for resistors overall climbed 10.2% month-on-month in August, on potential constraints of MLCCs due to surging AI server demand. The Commodity IQ Inventory Index for resistors dropped by 22.7% sequentially through the first eight months of 2023 and some YAGEO resistors, including VT-series devices, are somewhat constrained with volume lead times stretching into H1 2024. It is advisable to consider non-automotive resistors for sourcing challenges, particularly as many manufacturers have shifted capacity to automotive applications and despite stable/flexible pricing and commitment concessions from suppliers.

Excess production capacity, lowered material costs, and continued soft demand has increased PCB maker willingness to provide price-downs in exchange for market share. Readily available, with 98% of contracted lead times in Q4 of 12 weeks or less, PCBs should be targets of aggressive price negotiations for parts with multiple sources.