H2 2024 Will Be a Mixed Market, Breeding Both Optimism and Doubt

The electronics supply chain continues to face semiconductor demand doldrums and elevated inventories, which will linger into the second half of 2024.

Otherwise, largely positive developments such as steadily normalizing interconnect and passive inventories and sales momentum are anticipated.

Hills, Valleys, and Plateaus

Supplyframe Commodity IQ reveals demand activities for all components spiked by 18% from February to March, after falling below the Commodity IQ Demand Index in November 2023.

Interconnects and passives led the demand charge in Q1, with 85% of the commodities experiencing greater than 10% demand increases on average. Less than half of semiconductor commodities were flat or trending upward for the same period, rising on average by 5%.

The Commodity IQ demand forecast for Q2 across all electronic components will completely erase the 4.3% average sequential growth for Q1. H1 is anticipated to close flat, with less than 7% of semiconductor, passive, and interconnect devices set to experience growth through Q2.

AI Becomes the New EV

Electric vehicles (EVs) used to be considered one of the hottest opportunities for semiconductor and end-user demand. But EV end demand continues to stagnate.

Nearly 30% of new EV projects in North America remain on hold, and Chinese EV demand got off to a slow start for 2024, though plug-in hybrids and pure EVs sales were up 33% year-on-year for March, according to the China Passenger Car Association, as buyers benefited from stiff price competition.

Meanwhile, growth opportunities related to AI abound. Multiple market researchers report that leading U.S. hyperscalers are each anticipated to increase capital spending by double-digit percentages in 2024, driven largely by AI-related data center applications. Hyperscaler Microsoft recently indicated that it will invest $2.9 billion in data centers in Japan.

The shortages of high-bandwidth memory (HBM) needed to support the GPUs at the heart of AI processing, and the widely reported growth of Nvidia in the space, bolster the forecast for AI.

Demand Overall Appears Muted

In-market feedback and Commodity IQ analysis suggest select end markets like aerospace & defense and medical are experiencing regular if fragile demand growth into H2.

Ultimately, analytics and qualitative analysis mark 2024 to be a year of muted demand, further delayed recovery, and normalization while 2025 is positioned as the year of growth.