Supplyframe Commodity IQ Report

The data shows an electronics supply chain that is in transition, with uneven changes for end markets and components. 

But while electronic component availability is improving and prices are stabilising across many categories, Supplyframe Commodity IQ indicates global supply chain issues, extended lead times, geopolitical uncertainty, elevated logistics and labour costs will remain problematic for the electronics ecosystem and specific end markets into the first half of 2023.

“The electronic component supply chain is improving slowly and unevenly,” said Supplyframe CEO and founder Steve Flagg. “The multi-tier electronics supply chain exists within a complicated and volatile environment in which ever-evolving, unforeseen events continue to impact capacity, costs, lead times, and other considerations. Constraints and shortages are not over. And a rebalancing of inventories and component market corrections is in play.” 

Some parts are becoming more readily available, and memory prices are dropping

Decreasing lead times are a bright spot. Supplyframe forecasts 52% of all electronic component lead time dimensions to decline or stabilise in the third quarter – a significant improvement from the second quarter when 80% of lead times rose. 

Lead times of ceramic capacitors improved markedly quarter-on-quarter, and electrolytic capacitor availability is on track to stabilise in the first quarter of 2023. Printed circuit boards lead times are poised to decline by the end of the year. And NAND flash availability is improving, positively impacting the lead times of solid-state drives (SSDs). 

Commodity IQ analysis indicates that less than half of all electronic component pricing dimensions for direct commodities in the third quarter will increase, down from 74% in the second quarter. 

Memory devices are in price equalisation mode, with decreases for at-volume, contracted purchases. Blended DRAM average selling prices are on the decline. 

“As things become more opportunistic, now is the time for manufacturers to build resiliency,” added Flagg. “To do that, manufacturers of devices that rely on electronics components need to use new forms of intelligence to inform the decisions they make during new product design that could affect their downstream product lifecycles.” 

Demand is declining in some areas but remains robust in others

Demand activity across active and passive components and memory and storage devices declined from the first quarter to the second quarter, except for programmable logic devices, which experienced a 9% increase, according to the Commodity IQ Demand Index.  

Softening consumer demand, particularly in China, and economic concerns are the main culprits, with quarter-on-quarter sourcing contracting by 7% and 11% from May to June.

Capacitor and resistor demand shrunk by 12%, driven by order push-outs and cancellations as customers waited for long-lead-time semiconductors. Other passive components suffered a similar fate, contracting by single-digit percentages.  

Global demand was down 11% month-on-month in June versus historical 4% increases. For the EMEA region, June electronic component demand activity was 14% lower than May and is down 17% year-on-year.

Germany, France, Italy, and the United Kingdom experienced the largest decreases. Top declining components in EMEA year-on-year include capacitors at -29% and amplifiers at -23%. 

Meanwhile, global memory demand dipped 6% from the first to the second quarter. It’s forecast to decrease again in the third quarter by 2%, according to Commodity IQ analytics.

Server DRAM demand is robust, but contracting demand in PCs, laptops, and smartphones is impacting DRAM pricing.

Supplyframe has identified evidence of PC OEMs reducing their H2 DRAM at-volume forecasts by up to 30% or more beginning in the second quarter. These oversupply indications for consumer devices are profound and have led component suppliers to limit their production and decrease their prices. Top memory suppliers SK Hynix and Micron are reassessing capacity investments for 2023, and leading foundry TSMC is reducing its expansion spending by as much as 9%.

“Sharp declines in PC and smartphone component demand are concerning, but we don’t expect an oversupply of semiconductors, as demand in such sectors as automotive, industrial, and medical remains robust,” said Richard Barnett, Chief Marketing Officer at Supplyframe. 

New forms of intelligence to guide decision-makers

In the second quarter of this year, Supplyframe implemented enhancements to Commodity IQ, including monthly pricing and forward-looking analysis and pricing forecasts for essential raw and precious metals, and went beyond factory lead times with real-world, at-volume lead time trends based on purchases.

Additionally, the design and demand indicators in Commodity IQ were improved by providing monthly views with three-month forecasts.  

New, augmented insights and alerts are available this quarter and user-configurable for targeted commodities. New materials and operations commodities have been added to help industry professionals gain more visibility of market conditions and impacts on core commodities, including Contingent Labour and Transportation & Logistics.

Materials commodities have been expanded to analyse raw and precious metals, solder, and resins. And quarter-on-quarter forecasts for pricing and lead times have been added based on real-world, at-volume purchases of electronic components at the commodity level.