Supplyframe Commodity IQ endorses the view that the U.S. economy will enter a moderate recession in the second half of 2023, while China will attain respectable growth. However, market events and seasonal factors indicate that electronics demand will recover during the last six months of the year. For electronics buyers who have seen refreshingly favorable pricing and lead-time trends in the first half of 2023, the shift in market conditions is projected to change the purchasing environment.
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Channel inventories surged by 54% in Q1 2023 versus Q1 2022, improving sensor availability and lead times. However demand is projected to bounce back in Q1 2024 and Chinese suppliers are starting to increase pricing, especially for legacy products. We recommend buyers multi-source devices.
DRAM pricing is starting to bottom out and will increase starting in Q3 as previous capacity reductions are implemented. With demand strong and supply tight for DDR5 & NOR, DRAM average selling prices will climb by single-digit percentages in Q4. Expect a more marked increase in H1 2024.
Pricing was off by 15% year-on-year in Q1 as suppliers became more aggressive to maintain or gain market share. Potential cost reductions are more prevalent on smaller-sized crystals and most tier-one and two manufacturers have or will end-of-life larger package sizes. Now is a good time to quote and recognize some reductions.
Despite magnetics (filters, inductors, and transformers) inventories increasing by an average of 6% from Q4 2022 through Q1, and transformer inventory jumping 14% from April to May – suppliers are holding their price points.
Chinese cobalt sulfate pricing dropped to $4,938 per metric ton in late May, the lowest value since December 2015. Cobalt costs, in part, have led to the 44% decline in the Commodity IQ LCO Battery Index from January to mid-June. Lithium cobalt oxide (LCO) batteries are prized for their ability to delivery power for relatively long periods under low loads and are common to smartphones, laptops, and other small electronic devices.
China’s chip imports are plunging more quickly than domestic semiconductor production is increasing, illustrating the challenges that worldwide buyers will face in the coming years. Regional electronics markets are shifting their focus away from globalization, and embracing localized supply chains.
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To limit additional inventory growth as the electronics industry seeks supply-demand balance, many component manufacturers are reducing production output for applications other than automotive and industrial. Buyers are advised to monitor channel inventories, despite the current environment of low book-to-bill ratios, to avoid availability issues.
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The shortage of SiC power MOSFETs will continue through mid-2024 based on Commodity IQ analytics and analysis. Asia-Pacific sourcing activities for power MOSFETS are projected to increase to twice the Commodity IQ Demand Index in July, nearly a 20% jump from April.
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Channel inventory 'dumping' for general-purpose resistors and ceramic capacitors are depressing prices as consumer and mobile application demand softness endures. Procurement teams are advised to take advantage of the intense MLCC price competition among Taiwanese manufacturers, and between Korean, Taiwanese, Japanese, and U.S. suppliers.
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