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.

According to the Freightos Baltic Global Container Index, ocean spot rates across key trade lanes have risen weekly from July 14 to date and are up 21%. Shippers taking advantage of depressed spot rates may be late in securing low-cost long-term contracts, providing additional reasoning for potential increased electronic component pricing upticks.

The smartphone market stall has wreaked havoc on MEMS demand. The uneven economic environment in China is hampering smartphone sales, yet recovery is afoot. Meanwhile, the MEMS supply base is naturally reluctant to lower prices as it sees demand returning into 2024. But new competition may limit options. Commodity teams are considering MEMS and overall sensor options now

Despite overall transistor demand decreasing markedly sequentially in Q2, constraints loom, and not just for automotive-grade parts. Multiple suppliers are strained, with the most affected products are SiC-based devices, IGBTs, and high-voltage MOSFETs, with lead times stretching beyond 52 weeks. As suppliers focus product portfolios and manufacturing investments on high-growth newer technologies, procurement and commodity teams should ensure alignment with key partner technology roadmaps and focus on supply assurance.

Lithium carbonate (FOB from South America) prices continue to slide, down on average by 12.6% thus far in August. Through the remainder of the month in China, cathode material production is anticipated to decrease, and lithium carbonate supply will rise. Downstream buyers should continue to press for lithium battery price concessions in the laptop segment. Meanwhile, lithium hydroxide pricing of Chinese origin tumbled similarly in the same timeframe.