As the global metals supply chain continues rigorously managing and reducing inventory, Asian metal makers seek more volume commitments in H2 and 2024 by offering attractive pricing. Given sideways trending for tin, aluminum, copper, and most other raw metals – electronics commodity and procurement teams would do well to track spot pricing for sourcing activities. Uncertainty breeds caution as copper pricing has been moving laterally but in July was 12.3% higher on average than 2022.
Signs that the client-side PC market is improving have become more apparent as bellwethers Intel and AMD reported their most recent earnings. For the Intel Client Computing Group, revenues, while down 12% year-on-year in its Q2, grew by 17% quarter-on-quarter. AMD client net revenues surged 35% from its Q1 to Q2 while the segment operating loss narrowed. Though MPUs may be cannibalized by GPUs as AI demand takes hold, a bottom for the PC market could spell pricing challenges ahead in H1 2024.
Booming sales of AI servers are fueling a recovery in the memory market, with signs appearing of increased prices and the potential of reduced availability for high-end DRAM parts. SK Hynix became the latest semiconductor supplier to signal the start of recovery for the memory industry, driven by the demand for high-performance memory required for large-scale AI processing in data centers.
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.