Electronics supply chain professionals are advised to monitor IC channel and manufacturer inventories and lead times as the capacity expansion emphasis yields to not-seen-in-decade capital investment reductions this fiscal year by top foundries and chipmakers. The likes of GlobalFoundries, Micron, Intel, SK Hynix, and TSMC have decreased investment budgets, fearing the lethargic Chinese economy and oversupply in some semiconductor processes, such as 10 and 14-nanometer nodes, which produce processors, SoCs, and FPGAs. 

Taiwan-based manufacturers of general-purpose MLCCs – like YAGEO, Darfon, and Walsin – are competing intensely for market share and sales growth in H1 2024. Likewise, Taiwanese and Korean makers are emerging as formidable contenders to the more established Japanese and U.S. producers of automotive-grade ceramic capacitors. On a three-month moving average basis, the Commodity IQ Price Index for all capacitor types was up 5.6% year-over-year through the first eight months of 2023. These rivalries result in shorter lead times, improved supply flexibility, and more favorable pricing.

The Commodity IQ Design Index rose for the fourth consecutive month in August, with global growth driven by a surge in U.S. processor design activity as companies develop new chips to keep pace in the generative AI race.

Using a three-month rolling average, global activity in August for all components tracked by the Commodity IQ Design Index increased by 12% compared to August 2023. 

Batteries remain a paramount concern for the global economy as EV sales boom, automotive supply chains localize, and governments incentivize the proliferation of renewable technologies. Pricing for lithium has been declining in 2023 as new supplies come on the market, and EV sales growth in China fell short of industry expectations. However, signs of price increases are appearing, and lithium may enter a shortage by 2025. For buyers, now is the time to lock in lithium supplies with the most favorable pricing terms.

NAND production capacity is expected to be further reduced in Q4 as manufacturers seek to stabilize pricing. Previous capacity reductions by the top suppliers will be felt in the year's second half. Nevertheless, additional contractions are anticipated on slower inventory depletion. For all memory devices, inventories through H1 were 37% higher year-on-year, and demand activities were down 21%. Spot market pricing for NAND flash wafers is rising because of recently increased wafer prices – meaning suppliers will be less flexible. Commodity and category teams should monitor spot NAND wafer and related NAND product spot pricing to determine if the upward trend will continue.

Global worker availability is generally tight. However, the situation is uniquely acute in the electronics field, where the worldwide drive to localize semiconductor production is spurring the establishment and expansion of multiple parallel supply chains – each requiring an army of qualified new workers. To meet this massive labor demand, the global chip industry is set to add 1 million employees by 2030. However, concerns are mounting over whether the U.S. and other economies will be able to produce enough talent to staff their semiconductor projects. Meanwhile, increasing labor issues in China are raising risk and fueling the electronics industry’s drive to seek alternative production locales.

Pricing surges that commenced in 2020 have diminished, with electronic component prices decreasing by 5% from Q1 to Q2 on average. Normalization is the watchword for the remainder of the year, as 76% of passive and 48% of semiconductor prices will be stable. Just 7% of all pricing dimensions (across all components and storage devices) are forecast to rise in H2, according to the Commodity IQ Price Index.

Volkswagen Group is changing how it procures electronic systems and components for longer-term supply assurance. In concert with its tier-one suppliers, Volkswagen is directing which components and suppliers will be used by its vendors. Full component transparency allows for better monitoring supply chain dimensions to mitigate risk. While many OEMs cannot establish direct manufacturer purchasing relationships for strategic component technologies like Volkswagen now does with NXP and Infineon, exact knowledge of component bills-of-materials in OEM sub-system suppliers should be the goal.