In the second half of 2023, the surplus of electronic components will lead to price fluctuations
The decline in semiconductor demand this year is more severe than previously estimated. Compared to the previously expected single digit decline, the current decline is around two digits.
However, for buyers, the market is improving. According to Supplyframe, the delayed economic recovery means that the favorable situation for buyers will continue into the second quarter. But as inventory runs out in the third quarter and some end markets begin to rebound, the second half of the year may shift in favor of "sellers" (i.e. suppliers).
The global procurement activity of all products tracked by Supplyframe decreased by 20% in April 2023. All regions are affected. Source: Supplyframe Product IQ Demand Index
Unlike previous cycles of ups and downs, so far, excess inventory of components has not flooded the market, thereby lowering prices. Manufacturers are clearly retaining inventory in anticipation of future shortages. According to data from consumer analysis company Lytica, the overall price of electronic goods has been declining since April, entering the buyer's market.
Lytica founder, chairman, and chief technology officer Ken Bradley said, "In the past few weeks, we have seen a significant decrease in the prices of many components." "Our customers have also been providing feedback on the content displayed in our data, and we expect this trend to continue for some time."
How much excess is there?Perhaps it is possible to analyze the actual excess inventory in the supply chain from the financial reports released by electronic product manufacturers for the first half of 2023. Many companies' public data can be traced back to the end of 2022:
HP Enterprise's inventory for 2022 was $5.161 billion, an increase of 14.41% compared to 2021.
Intel's inventory increased to $13.224 billion in 2022, an increase of 22.72% compared to 2021.
AMD's inventory for 2022 was $3.771 billion, an increase of 92.89%.
As of January 31, 2023, NVIDIA inventory was $5.159 billion, an increase of 98.04% in 12 months,
NXP Semiconductor's inventory in 2022 was 1.782 billion US dollars, an increase of 49.87% compared to 2021.
According to Lytica's prediction, the surplus of electronic components will lead to price fluctuations. Bradley further explained that two factors contributed to this prediction. One is the cooling of demand, and the other is that manufacturers have made excessive purchases due to supply chain shortages& quot; As prices weaken, an increase in inventory is expected to lead to a decrease in consumer goods prices& quot; He said.
But the overall economic situation is causing concern for many analysts. The latest economic report from IPC shows that despite high inflation, significant interest rate hikes, and significant resistance from some high-profile bank failures, the US economy remained resilient in the first half of this year.