On its fiscal Q3 earnings call, Micron chief executive Sanjay Mehrotra stated that the company believes "the memory industry has passed its trough in revenue." Mehrotra’s comments confirm Supplyframe's determination in mid-May that market demand for memory is bottoming out, and demand indicators are pointing in a positive direction.
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Capacitor lead times fell by 7% sequentially in Q2 and were down by 10% year-over-year in H1. General-purpose, small case-size MLCCs, while readily available on lower demand, will become tight with abrupt demand increases. Most factory utilization rates average 60%, and capacity ramps would lag sharper demand. Additionally, channel inventory for all capacitor types was off by 19% for the first six months of the year compared to 2022.
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Excess capacity, lower material costs, and weakening PCB demand will continue to push prices down, with ASP declining substantially in H2, particularly for low-end conventional boards. Connector demand declined by 25% year-over-year for H1, and supplier book-to-bill ratios below 1:1 have translated into capacity utilization rates as low as 50%. With standard connector lead times now stable after dropping by 12% in Q2, conditions are ripe for price negotiations and cost savings. |
According to the SEMI Foundation, global talent shortages through 2025 number 935,000 for the semiconductor industry, with significant constraints across all regions. Geographic production shifts, including re-shoring efforts and capacity expansions, are adding increased urgency and personnel demand. The shortfalls have created an intensely competitive market for production workers and engineers, with labor rates continuing to increase markedly.
Global electronics design activity rose to a two-year high in May, an expected rise in demand during the second half of 2023, according to the Supplyframe Commodity IQ Design Index. Design actions rose by 14% from April and 10% year-over-year in May. As a result, the Commodity IQ Design Index increased to one and half times the baseline in May, the highest reading since 2020. The return to positive month-on-month growth in May reverses five consecutive months of declining design intent.
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Considerable DRAM and NAND capacity reductions from leading makers will shift both commodities into undersupply by the end of 2023, yielding double-digit percentage ASP increases. Supply constraints will persist through most of 2024 and potentially into 2025, as memory manufacturers carefully ramp supply. |
Many mature-node (> 65nm) discrete capacity expansions will not come online before 2025, with some ramping as late as 2027. The Commodity IQ Design Index for diodes rose on average by 6% sequentially in Q2 and by 5% year-over-year. Transistors experienced an increase in design activities of 7% in Q2. For Q4 2022, the quarterly index growth for diodes and transistors was 9% and 11%, respectively. Teams should plan for constrained supply as demand returns.
The pending August suspension of tin mining in Myanmar will pressure global supply, and propel prices higher in the short to medium term. Myanmar is the third-largest tin concentrate miner, accounting for about 10% of the global supply. Shanghai Metals Market refined tin pricing for July 6 was up over 10% versus June 6. In the same timeframe, lead-based solder bar and lead-free solder pricing rose by 11% per metric ton. Combined with Indonesia's potential export ban of refined tin, a buy-as-needed strategy is necessary until trends become more solidified.
AI model training and deployment can easily require thousands of GPUs, fueling the need for power supply units (PSUs) that in turn require two or more times the number of ICs and passives. Power supply makers and EMS providers indicate that PSU demand has increased. Currently, power MOSFETs are of chief concern. The Commodity IQ Lead Time Index for power MOSFETs in June was over two times the baseline and the At-Volume Lead Time Trend for transistors in Q3 points to 45% of MPNs with lead times of 36 weeks or more. Long-term agreements are strongly encouraged for new product introductions that feature MOSFET. Alternate manufacturer qualification, extended order bookings, and sharing 52-week-plus forecasts with suppliers are also advised.
The prospect of increasing demand for artificial intelligence (AI) inference servers, robust automotive and factory automation markets, expanding use cases for edge processing, and with FPGAs as key data center components – the programmable logic market is poised to prosper. Supplyframe projects the AI cloud and enterprise data center market alone for FPGAs could drive 50% year-on-year growth in 2024.