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Kitron constantly monitors the electronics manufacturing industry to stay ahead of market trends and remain competitive. By leveraging future insights and market updates, we enhance our decision-making and strategic planning.
In this article, we present an overview of the Electronics Manufacturing Component market, reviewing significant past events and providing an outlook for the future.
Growth in the semiconductor industry
Last year, global semiconductor revenue declined roughly 9%. This decline follows two years of record growth, highlighting the cyclical nature of the semiconductor market.
However, the global semiconductor manufacturing industry appears to be nearing the end of a downcycle and is expected to begin its recovery in 2024. Major growth is predicted in the Americas and Asia Pacific regions, while marginal growth (0.5%) is predicted in Europe and a slight decline in Japan.
Semiconductor growth is driven by a huge increase in generative AI chips, AI-related applications from data centres to personal devices, ADAS (Advanced Driver-Assistance Systems) and infotainment, Aerospace/Defence, healthcare, and some handset/PC sectors growth. Meanwhile, the Industrial, Automotive, Connectivity, & Communications sectors are decreasing.
The global semiconductor industry posted double-digit sales increases year over year during each month of 2024, and worldwide sales in April increased month over month for the first time this year, indicating positive market momentum as we approach the middle of the year.
In 2025, the market expects single-digit growth in Europe, while global growth will be even higher.
Stable supply chain but historically short visibility
The industry continues to experience cyclical supply-and-demand challenges. After widespread allocation in recent years, the industry has now faced a period of extended inventory correction as the market is recovering.
These recent inventory corrections have resulted in the lack of longer-term ordering visibility, which presents challenges in forecasting demand, mainly for component manufacturers.
The semiconductor industry has invested heavily in the increase of capacity and the risk right now is that their present lead times are not typically represented of full productions cycles. Therefore, lead times can extend very rapidly when growth in global demand absorbs available inventory or when unforeseen interruptions to manufacturing processes occur.
Even though the current state of the supply chain appears to be relatively stable, we are still likely to face challenges and risks in the future, and that’s why it’s now important to look closely for signs of recovery.
Pricing overview
While availability is certainly much better, the component market is still very challenging, and almost all the other factors affecting prices are trending the wrong way.
Despite market conditions, price stability is expected in 2024, mainly due to inflation, interest rates, labour shortages, and freight costs caused by the Red Sea situation.
Discrete semiconductor pricing remains stable with some selected price adjustments while memory prices go up. In 2024 Q2, memory prices are expected to rise by 20% to 25%.
Interconnect, EMECH & PSU prices are stable, but some manufacturers are discussing price increases for the second half of 2024. Gold, silver and copper material prices have increased over the past 6 months.
PCB market update
The total PCB production has declined by 15% in 2023, but revenue is expected to increase by 6% this year. For quite some time, there has been an abundance of PCB capacity, primarily in China. There are many capacity constraints in Europe and the US, affected by the boom in the defence industry.
The same growth drivers as for the semiconductor market apply to the PCB market. The revenue for the top 20 PCB manufacturers in China increased by 18% in Q1 this year compared to Q4 of 2023. This is a clear signal that China is recovering, and it will affect both PCB prices and the component situation in the future.
Gold is at its highest peak in many years, and this will affect prices going forward. Also, there are many uncertainties regarding tariffs between China, the US, and Europe.
Outlook
2024 has become a year of “Global correction” after previous years’ crisis that led to global oversupply.
There are now signals that the component market is at the bottom and is about to recover. At the same time, we have historically short visibility.
It’s important to learn from the last couple of years and remember what can happen and how quickly things can change. The ones that act the smartest now will be the future winners in the game of long-term availability.
