Batteries remain a paramount concern for the global economy as EV sales boom, automotive supply chains localize, and governments incentivize the proliferation of renewable technologies. Pricing for lithium has been declining in 2023 as new supplies come on the market, and EV sales growth in China fell short of industry expectations. However, signs of price increases are appearing, and lithium may enter a shortage by 2025. For buyers, now is the time to lock in lithium supplies with the most favorable pricing terms.

NAND production capacity is expected to be further reduced in Q4 as manufacturers seek to stabilize pricing. Previous capacity reductions by the top suppliers will be felt in the year's second half. Nevertheless, additional contractions are anticipated on slower inventory depletion. For all memory devices, inventories through H1 were 37% higher year-on-year, and demand activities were down 21%. Spot market pricing for NAND flash wafers is rising because of recently increased wafer prices – meaning suppliers will be less flexible. Commodity and category teams should monitor spot NAND wafer and related NAND product spot pricing to determine if the upward trend will continue.

Global worker availability is generally tight. However, the situation is uniquely acute in the electronics field, where the worldwide drive to localize semiconductor production is spurring the establishment and expansion of multiple parallel supply chains – each requiring an army of qualified new workers. To meet this massive labor demand, the global chip industry is set to add 1 million employees by 2030. However, concerns are mounting over whether the U.S. and other economies will be able to produce enough talent to staff their semiconductor projects. Meanwhile, increasing labor issues in China are raising risk and fueling the electronics industry’s drive to seek alternative production locales.

Pricing surges that commenced in 2020 have diminished, with electronic component prices decreasing by 5% from Q1 to Q2 on average. Normalization is the watchword for the remainder of the year, as 76% of passive and 48% of semiconductor prices will be stable. Just 7% of all pricing dimensions (across all components and storage devices) are forecast to rise in H2, according to the Commodity IQ Price Index.

Volkswagen Group is changing how it procures electronic systems and components for longer-term supply assurance. In concert with its tier-one suppliers, Volkswagen is directing which components and suppliers will be used by its vendors. Full component transparency allows for better monitoring supply chain dimensions to mitigate risk. While many OEMs cannot establish direct manufacturer purchasing relationships for strategic component technologies like Volkswagen now does with NXP and Infineon, exact knowledge of component bills-of-materials in OEM sub-system suppliers should be the goal.

According to the Commodity IQ Demand Index, across active and passive components globally, sourcing actions are forecast to decrease by 5% in Q3 after slipping by 2% month-over-month in July, and in line with seasonal trends. Component manufacturers use the lackluster environment to hone product portfolios, focusing on newer, more profitable technologies and end markets with better demand visibility while establishing end-of-life (EOL) classifications for legacy products. Qualifying multiple suppliers and considering new market entrants along with second and third-tier suppliers is recommended to fill any gaps.

Signs that the client-side PC market is improving have become more apparent as bellwethers Intel and AMD reported their most recent earnings. For the Intel Client Computing Group, revenues, while down 12% year-on-year in its Q2, grew by 17% quarter-on-quarter. AMD client net revenues surged 35% from its Q1 to Q2 while the segment operating loss narrowed. Though MPUs may be canabalized by GPUs as AI demand takes hold, a bottom for the PC market could spell pricing challenges ahead in H1 2024.

Design activities in the global electronic component market increased for the third consecutive month on a year-over-year basis in July, indicating that design projects and component research efforts are continuing to expand.

As memory makers attempt to further institute price increases due to obstinately fragile demand, buyers should acknowledge and plan for increasing pricing in Q4 and beyond. NAND flash prices are expected to swell even though inventory pressures have improved, making producers seem poised to cut even more capacity. In-market feedback suggests some memory module producers are set to drive up pricing as memory chip prices inflate. Embedded and solid-state storage ASPs will inflate as a result. Procurement organizations have already begun building safety stocks at pricing lows. For all memory products, the Commodity IQ Price Index has climbed month-on-month in June and July, rising by 58% in July.

Pricing for lithium cobalt oxide (LCO) batteries – commonly employed in consumer electronics, mobile phones, and notebooks – continues to fall based on data from the Commodity IQ Global LCO Price Index. After experiencing a 41.5% drop through the first seven months of the year compared to 2022, LCO battery chemistries fell by 4.4% through the first half of August from the same period in July, presenting an opportunity for price-downs.