A look at the state of the electronic component industry

From major shortages to a current state of influx, Fusion Worldwide evaluates the state of the electronic component industry in its latest report. Following an in-depth look at the market, it has identified the following key themes:   

• The collective reaction to extreme shortages, record-high lead times, and significant pricing fluctuations that plagued 2022 are still salient. Consequently, overbuying was a significant factor for 2023, resulting in massive volumes of excess inventory in various sectors across the electronic component market.   
• Artificial intelligence continues to advance at a rapid pace. As it evolves, so does the technology that makes up its building. This technology – which is expected to reach $1.3 trillion in growth by 2032 – is a major driver in general market activity since it impacts many industries under our purview.   
• Palpable uneasiness between the U.S. and China continues, stemming from the initial tariffs targeting chipmaking and trade, dating back to 2018. Since then, we’ve witnessed a tit-for-tat of who will restrict whom or what next. This has become even more of a balancing act for the two powers as China tries to avoid a recession.  
• The ongoing conflicts in Israel and Ukraine pose many threats to the electronic component supply chain. Electronic devices require manufacturing, machinery, and expertise from across the globe. Not only does conflict threaten the continuity of these factors, it impacts investment and consumer confidence. 

While these over-arching themes colour our general outlook for 2024, we can also identify key data points, trends, and developments in the many segments that make up the broader market for semiconductors, chips, memory modules, and the like:   

• Aerospace & defense: we see a healthy funnel for components needed to support both aerospace and defense builds. Commercial airplanes, for example, are developing exponentially in terms of electrical complexity, which translates to reliable demand.  
• Automotive: automotive struggled to keep up with the global chip shortage, but they’re now back in the driver’s seat and enjoying a generally favourable long-term outlook. However, a few speed bumps along the way – including pricing volatility – must be navigated in route.   
• Contract manufacturers: contract Manufacturers will continue to be a mainstay of the industry conversation in 2024 and beyond. We can look to an increase in offshoring, especially in emerging countries, and increasingly positive changes in the regulatory landscape as primary drivers of expected growth.  
• Enterprise computing & servers: enterprise computing is at the forefront of our most exciting opportunities. The ever-growing need for data and compute will rely on this sector to reach their full potential. It is consequently uniquely positioned to dictate the terms of the wave that we’ll all be riding when it comes to AI, IoT, graphics, multimedia, telecommunications, and beyond.   
• Telecom & networking: AI, IoT, and Edge computing are, naturally, significant demand drivers for this sector. None are possible without telecom and networking. Overall, we feel that this high-margin space, which by its nature commands big investment, won’t experience any challenges in the long run.  
• Gaming: the sector experienced some high-profile obstacles in 2020 and 2021, but the industry has gotten back on track more recently.The #1 commodity for gaming has always been graphics cards and GPUs. But games are changing, and cloud gaming, virtual reality, augmented reality, and artificial intelligence are becoming increasingly popular, sparking demand for more advanced parts.   
• Healthcare: few healthcare centres can afford significant operational expenses every year, and when it’s time to replace equipment, they want a modest number of units.However, disruptive technology holds great implications for the field – will new applications change the paradigm? AI has huge potential, as does the increasing use of remote patient monitoring devices and digitised diagnostic equipment.    

Favourable forecasts and long runways across many sectors bode well for our general outlook, with federal legislation and disruptive technologies building positive momentum. However, multiple red flags cannot be ignored. In many ways, navigating 2024 and beyond will be a balancing act – especially when it comes to achieving resiliency in the face of mounting geopolitical and economic challenges. 

Enter Fusion Worldwide – always Out in Front of the latest developments, news, and trends in the electronic component industry – and our State of the Industry report, available now for download. This timely piece is a synthesis of market intelligence from Fusion Worldwide insiders, as well as market research highlights, earnings reports snippets and essential worldwide news – providing you with a roadmap as you journey through 2024. 

Download the report here.