Sourcing activities for standard logic devices fell in Q2 by 16% to finish the first half of the year 45% lower than 2022, according to the Commodity IQ Demand Index. Texas Instruments and Nexperia have reportedly been more aggressive than other suppliers on price reductions. Newer logic suppliers, including SG Micro and Wuxi I-CORE Electronics, are breaking into the market by offering competitive pricing. With weak pricing and the demand index tumbling below the baseline for the first time since December 2020, now is the time for procurement and commodity management teams to review and negotiate better pricing terms. 

Supplier flexibility is limited based on unforecasted demand and rapid market recovery, with average capacity utilizations (for general-purpose devices) as low as 60%. Additionally, the number of obsolete frequency control parts is increasing. Design and supply chain teams are advised to align to the latest manufacturer technology roadmaps while carefully monitoring mature device availability. 

Nearly 60% of at-volume inductor lead times were quoted below 12 weeks in Q3, the first instance since Q4 2019. With inventories 25% higher in H1 year-on-year, inductors are readily available, and yet pricing adjustments generally lag lead time improvements. Prices have stabilized as component manufacturers seek to deplete inventories at original cost levels to offset margin compression. Multi-layer chip inductor (MLCI) pricing is expected to remain flat into 2024

Prices are on the rise in Q3 for legacy products and specific circuit board indicators, light pipes, and optocouplers, due to increasing raw material costs. End-of-life notifications are also increasing, suggesting that buyers should reevaluate optoelectronic supply bases to mitigate risk. 

Despite power management IC (PMIC) channel inventories at twice the baseline and overall demand declining by 21.4% year-on-year, pricing has not fallen in line with lead times or demand and was up 1.7% year-on-year through H1. If its economy recovers as anticipated in H2 and beyond, China's increasing PMIC demand will lead to shortages in Q4 and into 2024. Risks can be mitigated with informed component selection, extended order booking, and supplier forecast sharing.

Depressed, high-volume consumer electronics and smartphone sensor demand revenue cannot be easily be replaced by manufacturers, so except for certain image sensors, significant tier-one price-downs are not likely outside of new, volume design-in projects in 2023. Consider alternative and dual sources, including Chinese manufacturers who are aggressively seeking new design-wins with shortened lead times and more competitive prices. 

Copper pricing has fallen by 9.3% through mid-July since January. Overall connector pricing fell by 19% year-on-year in H1 and connector demand slumped by 25.3% in the same period. The combination of the decline in metals pricing and the fall in demand is affording buyers with select opportunities to make long-range capacity bookings with favorable pricing terms before a possible rally in demand and prices later this year.

Even as the networking and communications chipset supply-demand imbalance has lessened, lead times from top manufacturers like Broadcom, Marvell, and Qualcomm remain extended beyond 40 weeks. With 62% of MPNs quoted over 36 weeks for Q3, at-volume chipset lead times showed less improvement than anticipated from the previous quarter. Taiwanese manufacturers MediaTek and Realtek are taking advantage of the situation, offering more attractive lead times, and should be considered.

The capacitor market has seen a slowdown in both sourcing and demand activity since 2022. Commodity IQ data indicates that elevated prices and lead times could continue throughout most of 2023 as well. Over the next decade, global capacitor demand is forecast to grow by about 6% annually.