From Q1 2020 through Q1 2023, most segments of the electronics supply chain experienced historic changes in supply and demand. All segments witnessed an initial surge in demand followed by an oversupply and surplus inventory. The COVID-19 pandemic and subsequent market shift played significant roles in shaping these dynamics, requiring companies to be agile and adaptive to navigate the changing landscape. The end of this cycle is only now in sight.
The graphic below illustrates the heating up of demand in Q4 2020, which continued to increase through most of 2021 and, in some segments (mainly Foundry), all the way through Q3 2022. By the end of 2022, almost all segments had experienced a major correction that continued into Q1 2023, representing a supply-demand re-balancing and excess inventory depletion.
INCREASING DISCONNECTS ACROSS THE SUPPLY CHAIN
The current state of the electronics industry's supply chain presents an unusual scenario: it occurs very rarely that all segments simultaneously enter a period of substantial cooling. Prismark has analyzed its data, and the accompanying historical graphic vividly illustrates the last broad-based cooling down of the electronics industry supply chain. Not since the depths of the recession of 2008-2009 have we witnessed such a profound cooling-off period. While certain segments took longer to rebound, we began to witness a resurgence by Q4 of 2009 and widespread overheating of the supply chain by Q2 of 2010.
STATE OF THE ELECTRONICS INDUSTRY SUPPLY CHAIN (YoY GROWTH, QUARTERLY)
Prismark anticipates a recovery in most segments of the supply chain in the latter half of 2023, gradually gaining momentum throughout 2024, thanks to the positive impact of the bullwhip effect. The semiconductor segment is expected to return to growth in Q4 2023, followed by a strong rebound in 2024, with 11% growth forecasted. This is fueled by significant demand in AI and automotive electronics, although it may be partially dampened by weaker demand in the 3C sector.
We anticipate that most other segments will similarly return to growth, with the earliest recovery expected in Q4 2023 and the latest in Q2 2024. However, it is important to note that the recovery process might be gradual, and the focus on profitability will be placed on high-value-added products such as automotive, server, high-end mobile phones, and PCs.
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