Deep declines in offered capacity across multiple ocean trade lanes, especially Asia-to-North-Europe, transiting the Suez Canal are resulting from ongoing attacks on commercial vessels by Houthi rebels in Yemen. Capacity shortages for Asian exports to Europe are more than likely in the coming weeks. As ocean freight is re-routed around the Cape of Good Hope, thousands of nautical miles are added to journeys, increasing transit times by over a week. Due to drought, this routing is also particularly problematic as Far-East-to-North-America-East ocean freight pivoted to the Suez Canal from the Panama Canal. Though the disruptions pale compared to the ocean freight challenges during the pandemic, electronic component lead times and prices could be negatively impacted in the near and short-term. The Drewry Global Container Index has increased by 50% from mid-December to just over $3,000 per 40-foot container. 

Focusing mainly on multilayer chip capacitors, passive makers, including Yageo Vishay, are reducing passive component production, causing some large EMS providers to indicate the building of MLCC safety stocks ahead of potential shortages this year. Additionally, film capacitors are currently the most limited supply of all capacitors. The Commodity IQ Lead Times Index for capacitors rose 4% from November to December 2023. After dipping below the Commodity IQ Demand Index baseline in Q3 2023 (signaling declining sourcing activities), the capacitors' index is forecast to inflate each month of Q1, exceeding the baseline by the end of the calendar quarter.  

Lower consumer electronics demand has translated to excess inventories and better availability of low-voltage MOSFETs. Meanwhile, high-voltage MOSFETs from Infineon are out-of-stock, with its IPD and IPW-series showing May lead times at volume. From December 2023 through the first quarter, sourcing actions for all transistors are projected to climb by 43%, according to Commodity IQ Demand Index data.

The Sea of Japan earthquake that struck Japan’s Noto Peninsula on January 1st has forced the suspension of operations at multiple electronics production facilities, including a multilayer ceramic capacitor (MLCC) plant owned by Taiyo Yuden.

Texas Instruments' pricing strategy continues influencing other analog IC suppliers, driving prices downward and increasing price flexibility. Granting cost-downs on higher-volume commitments, peer suppliers Microchip, Infineon, NXP, and STMicroelectronics have become malleable. Still, inflated customer inventories are likely limiting customers' abilities to take full advantage of the situation. According to the Commodity IQ Price Index, analog power and analog signal device pricing was down sequentially in Q3 2023 by 13% and 9%, respectively. Meanwhile, channel and supplier inventories for analog ICs remain well over twice the Commodity IQ Inventory Index pre-pandemic baseline.

Assuming the global economy does not enter a significant recession, semiconductor demand will be reinvigorated in the first half of early 2024, but with still-limited inventory digestion, especially amongst component distributors and EMS providers, overall Q1 semiconductor demand is expected to be sub-seasonal and uneven across product types and end markets. Increases in some areas, like AI applications, are being counterbalanced by declines or slowing growth in other sectors like automotive and industrial.

As the end of the year approaches, the electronics market is nearing a finish line of its own, with the supply chain mainly resolving the lead time and pricing issues that have plagued buyers throughout most of the year. Moreover, the customary peak-season rise in component demand growth in the second half is becoming weaker than expected in 2023, affording further improvements in purchasing conditions.