Analysis Reveals August Rebound in Electronics Demand

August is shaping up to be a turning point in the trajectory of the global electronics industry, with industry reports bolstering Supplyframe’s expectation that the month will deliver a marked shift in demand levels.

The latest Commodity IQ Demand Index forecast for August indicates that sourcing actions for critical component categories are either rising or slowing at a decelerated pace compared to July. If the forecast bears out and this trend continues during the coming months, August will represent the onset of the customary second-half seasonal sales increase.

What This Means for Buyers

For buyers, the shift could bring more challenging purchasing conditions as pricing and availability catch up to demand trends. Multiple major component categories tracked by the Commodity IQ Demand Index are expected to undergo a significant shift from declines in July to increases in August, including:

• The microcontroller (MCU) and microprocessor (MPU) category, with a 21 percentage point swing to the positive.
• Programmable logic, with a 14 percentage-point upswing.
• Memory, with a 12-point rise.
• Capacitors, with a 7 percentage-point shift.
• Diodes, with a 6-point upswing

These increases are arriving during a critical juncture for the electronics supply chain. The second half of the year represents the peak electronics sales season, as OEMs and EMS firms ramp up component purchases to support production ramps for consumer products. Under normal circumstances in the supply chain, this period brings a rise in demand that results in rising prices and extended lead times for electronic components.

However, circumstances have been anything but normal in 2024 as the supply chain has contended with massively inflated inventories. While suppliers have made great progress in reducing excess stockpiles, inventory overhangs are lingering in the channel and among customers. This phenomenon has helped suppress demand and promoted more favorable conditions for buyers in 2024.

Industry Reports Confirm Commodity IQ Findings

New reports from industry associations suggest that the impact of the inventory overhang is alleviating. The electronics industry trade association IPC noted that its Demand Index rose by 3.3% in August, bringing an end to a four-month stretch of declines. IPC cited heightened order sentiment and decreased backlog among customers for driving the increase.

Meanwhile, the ECIA noted that its electronic component sales sentiment index rose by 4.5 points in July to reach an above-the-baseline score of 103.4. The ECIA stated that the July results represent a good sign for electronics demand as the market moves into the second half of the year.

For buyers, the arrival of more normalized supply and demand conditions in the second half will mean mounting procurement challenges, including rising prices and extended lead times. Under these circumstances, buyers should work closely with suppliers by providing accurate and up-to-date demand forecasts to enhance supply-chain visibility.