While all regions experienced less sourcing action in June, some countries fared better than others in the last six months as measured by their compounded monthly growth rate (CMGR) over the same period, including increases of 3% in the United States, 4 in Germany, and 7% in Singapore. In these countries over the same period, demand expanded for both interconnects and passives by 5%, optoelectronics by 3%, and circuit protection devices by 4%. No electronic component commodities in any region (Americas, APAC, and EMEA) had a declining CMGR for the past six months of more than 3%.

During the past two years, the enormous buildup of excess inventory has been prevalent in the electronics component market. However, the latest signs from the Commodity IQ Inventory Index and the marketplace reveal that the inventory dragon may have been unequivocally slain

The Commodity IQ Price Index for MPUs and MCUs will remain above the index baseline, indicating rising prices, into H1 2025. High-end MPU and automotive microcontroller upward pricing will persist as makers attempt to preserve profit margins and defocus on legacy devices. Additionally, compute upgrade cycles are showing signs of life into H2 2024, and 8—and 16-bit MCU production will stagnate as automakers and other customers transition to 32-bit MCUs, leading to supply constraints and price pressure.

Engineering activities for connectors remain robust. The Commodity IQ Design Index for connectors in Q2 will be down 6% sequentially but still over one and half times above the index baseline, suggesting demand growth will reemerge in the second half.

The Commodity IQ Demand Index for transistors declined by 10% sequentially in April and 5% in May, falling 20% below the index baseline, indicating weakening sales. Yet inventories contracted sequentially in four of the last six months, causing the Commodity IQ Lead Time Index to expand in four of those same six months, while the price index grew on average by 7% in the same timeframe. 

Pricing for analog ICs continues to be down in no small part due to Texas Instruments' agressive pricing strategies to achieve larger share and more design wins – with new volume business priced as much as 20% lower, and existing order reductions being more modest. 

For the automotive industry, the good news in 2024 is that the severe semiconductor shortage is mainly in the rear-view mirror. The bad news is that the engine of automotive sales growth in recent years – EVs – is experiencing a decelerating expansion, contributing to a slowdown in overall car demand growth in 2024.

Wage growth has ebbed after historical increases globally – though some regions and countries continue to see expanding wages. In North America, the combination of still-high interest rates and slowing inflation is helping to mitigate increases in the U.S. and Canada. And yet, Mexico’s manufacturing wages increased to $4.30 per hour in February, up from $4.10 per hour in January, far above the recent historical average. Labor cost growth slowed in Germany, France, and Spain, while expenses in Italy were flat; nevertheless, unrelenting inflation and labor shortages have pushed upward European labor rates. According to multiple sources, hourly manufacturing rates across Western and Eastern European countries will inflate by an average of 8% year-on-year.

Price increases are appearing for low-margin and legacy products like headers and receptacles, but overall connector pricing, according to the Commodity IQ Price Index, remains depressed, with a 13% year-on-year decline in April. Sales will be generally slow across most market segments in H1, with customers adjusting their strategies as they try to deplete inventory. Most buyers expect demand to improve during H2. 

In its fiscal Q1 earnings call recently, Inventec projected expansion for all products, including demand-challenged smart devices and notebook computers. Counting partly on the calendar H2 resumption of expenditures from key cloud services providers. General-purpose servers are indeed seeing demand upticks in the form of upgraded CPUs from Intel and AMD. The original design manufacturer expects most server growth for AI servers, suggesting that its AI-server revenue 2024 will more than double. Inventec also indicates an upswing in AI-enabled PCs in the second half of 2024. This commentary from the leading ODM puts further upward pressure on already short GPUs and memory devices.