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<\/figure>\n\n\n\nMemory: A Commodity to Watch in 2024 <\/h4>\n\n\n\n
The pricing dimensions for materials (including metals and batteries) and operations (including logistics and labor) will follow a similar pattern through Q4. Stable pricing for 80% of material dimensions and 58% for operations are projected. <\/p>\n\n\n\n
From a component perspective, the price and availability outlier for Q4 2023 is memory \u2013 specifically, NAND flash- in addition to DDR4, DDR5, and HBM (high-bandwidth memory) DRAM. DDR4 price flexibility is still available for hard orders, yet it will not last beyond Q2 2024. With DDR5 ready to dominate the market (with more than 25% PC penetration currently), both technologies will begin to see supply constraints in 2024, lasting into 2025. <\/p>\n\n\n\n
Memory content for Smartphones, automobiles, and both storage and AI data center applications is continuously increasing, with AI-related memory set for explosive growth into 2025. NAND flash, standard and mobile DDR DRAM, and HBM DRAM will be problematic for procurement organizations. <\/p>\n\n\n\n
Automotive Demand Decelerates<\/h4>\n\n\n\n
Demand trends also conform to the Goldilocks scenario, with sales increases in some areas like PCs and smartphones counterbalanced by declines or slowing growth in other applications like servers and automotive, preventing the electronic component market from overheating. <\/p>\n\n\n\n
Market watchers expect PC sales in Q4 to rebound from recent declines, with some forecasts pegging year-over-year growth in the low double-digits. Smartphone shipments are rising in Q4 as well, as demand increases from record-low levels, although the increase is likely to be tepid at best, and questions of sustained demand remain. <\/p>\n\n\n\n
Server shipments will decline in the mid-single-digit range in 2023, with a sequential decline expected in Q4. Moreover, signs have appeared that demand from the formerly red-hot automotive sector is beginning to cool. Automotive chip suppliers have indicated they are downwardly adjusting their capacity utilization to adjust to the slowdown. EV sales growth is falling short of industry expectations in late 2023, mitigating demand increases for the entire automotive market. <\/p>\n\n\n\n
Nevertheless, any abrupt and concentrated end-market demand increases will yield component availability issues. Some supply chain players are forecasting four-fold increases in AI-related business in H1 2024. HBM leader SK Hynix, in its fiscal Q3 2023 earnings call in late October, hinted that its capacity for HBM products is fully committed into 2025. The aerospace & defense segment is also viewed as very strong into H1 2024. <\/p>\n\n\n\n
These factors, combined with low production rates, initial recovery seen in smartphones, and the upward trend in the Commodity IQ Design Index, may lead to supply constraints beyond memory ICs in 2024. <\/p>\n\n\n\n
Sourcing Benefits Endure with Economic Conditions <\/h4>\n\n\n\n
Although signs of macroeconomic resilience have appeared this year and inflation rates have fallen, production and consumption generally remain below pre-pandemic levels. Global GDP is forecast to rise by 3.4% in 2023. However, the United States is the only example of a strong recovery among advanced economies. <\/p>\n\n\n\n
At the same time, the eurozone will continue to suffer from a slower-than-anticipated resurgence, according to the IMF. In short, the global economy needs to grow more quickly to cause significant increases in demand or pricing.<\/p>\n\n\n\n
With U.S. inflation cooling and unemployment lingering near record-low levels, the country\u2019s GDP is rising, beating economists\u2019 expectations. The combination of solid growth and moderating price increases indicates that the economy continues to expand without spurring renewed inflationary pressures.<\/p>\n\n\n\n
After disappointing economic revelations from China, the country’s 2023 growth outlook has diminished sharply. Yet, recent initiatives by the Chinese government to aid the country\u2019s troubled property market have prompted the IMF to raise the country\u2019s 2023 GDP outlook to 5.4%, up from 4.2% \u2013 representing a sharp increase from 3% growth in 2022 when China enacted stringent COVID-19 policies. China\u2019s economic growth, stifled mainly by the property sector crisis, is well below historical averages, indicating its moderately paced economic advancement won\u2019t trigger a sharp price increase.<\/p>\n\n\n\n
Economic realities, lagging demand in key end markets, and inhibited inventory digestion combine to extend the buyer\u2019s market for electronic components and adjacent commodities in the first half of 2024.<\/p>\n\n\n\n