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Electronics procurement professionals currently hold significant negotiation power, according to commodity data analyst Supplyframe. Factors like falling lead times, ample inventory, uneven demand, and declining prices are contributing to this favorable environment.
Supplyframe predicts that this “buyer’s market” is likely to persist well into 2024. However, they also caution that challenges may emerge as end-market demand increases, including low supplier capacity utilization, constrained supply, demand shifts, inventory fluctuations, geographical changes, and legacy component issues.
Strategic Supply Chain Management
John Ward, Supplyframe’s senior director of Commodity IQ, advises buyers to stay vigilant and not solely rely on historical data or supplier information. He emphasizes the importance of understanding the broader market dynamics and being strategic in supply chain management. Depressed demand has led to higher inventories, particularly for semiconductors, as manufacturers reduced factory capacity utilization due to an oversupply of components.
Ward suggests that now is an opportune time for buyers to secure volume contracts and benefit from market conditions before supplies potentially tighten again in the latter half of 2024. While Supplyframe anticipates lead times to continue falling, they caution that trade sanctions and geopolitical tensions could complicate matters. Additionally, commodity restrictions, such as those on graphite for batteries, could pose challenges in the future.
Looking into 2024
Overall, Supplyframe expects price and supply normalization to continue into early 2024, but they highlight that supply-demand imbalances will persist. The consumer electronics demand is currently at its peak, but the recovery may be weaker than expected due to slower inventory declines and economic growth concerns in China. This scenario is likely to maintain favorable conditions for electronics buyers.
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