Buyers Should Monitor Supply as Electronic Component Demand Remains Uneven

Global sales of electronic components continued to rise in October despite declines in the memory and passive segment, according to the latest reading of the Commodity IQ Demand Index.

The index in October stood at 100.4, just slightly above the baseline level of 100, indicating a marginal rise in demand. However, the index has also been declining in recent months, reflecting a deceleration in the rate of sales growth.

Demand Remains Mixed Across Component Categories

These mixed results reflect the differing fortunes of the three major component categories: actives, passives and memory. Active component demand continued to rise, with the Commodity IQ Demand Index reading 102.4 in October.

However, passives demand decreased, with the index at 97.2, marking the second consecutive month of decline. The memory demand index also showed decreasing demand, registering 95.3 in October. This negative reading ended two straight months of memory demand growth.

The October memory demand decline comes at a time when suppliers, including market leader Samsung, have reported that the downturn has reached the bottom. Excess inventory issues have largely been resolved, with the Commodity IQ Inventory Index showing declines in memory stockpiles throughout the year.

And although demand remains weak for major application markets for memory, including PCs and smartphones, the steep declines experienced earlier in 2023 have slowed.

Potential Shifts on The Horizon

Memory and passives demand could pick up in Q4 as sales ramp up in advance of the Chinese New Year, in February. The peak electronics sales season traditionally took place in Q3, in advance of Christmas. However, since 2016, Q4 has accounted for the largest share of annual semiconductor revenue, according to WSTS data.

Significantly, Asia-Pacific was the only worldwide region in October where the Commodity IQ Demand Index for all components did not show a decline in sales for October. The Asia-Pacific demand index came in slightly higher than the baseline. In contrast, the EMEA and Americas regions experienced declines.

China’s continued weak economic results potentially could diminish electronics demand growth in Q4. However, if history is a guide, the final two months of the year should bring further increases in global electronics demand as peak season rolls on.

Under these circumstances, buyers should monitor supply as demand continues to rise and inventories persist in falling.