From Automotive to Aerospace: 2023 Predictions For 9 Electronics Industries

At Supplyframe, we serve a number of industries across global electronics. From the automotive industry, to industrial equipment, medical devices, and more. As we head into 2023, we’re taking a look into each of these industries to predict what events and trends will drive them forward, and what challenges await.

1) The U.S. Government Restricts Chip Exports to China, a Move That Will Result in Heightened Global Tensions 

On October 7, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security announced new rules for semiconductor export controls that restrict China’s ability to acquire and develop advanced semiconductors that could be used for military applications. The ban targets smaller cutting-edge process node chips used in supercomputers and advanced semiconductor manufacturing equipment that Chinese semiconductor fabs require to remain competitive. 

The ban is focused on three types of semiconductors 

• Logic I.C.s with non-planar transistor architectures of 16nm, 14nm and smaller

• DRAM chips of 18nm half-pitch or less

• NAND flash memory chips with 128 layers or more

In an effort to counter U.S. trade exports and domestic manufacturing incentives for semiconductors, the Chinese government is developing a $143 billion support package for its domestic chipmakers; the money will be used to fund chip production and research activities.

Analysis from Supplyframe Commodity IQ expects the U.S. export controls on China will add further geopolitical uncertainty to a global electronics supply chain, including extended lead times for many semiconductors and higher contingent labor costs. The forecast for H1 2023 indicates that only 27% of semiconductor pricing across all major commodities will increase, compared with 76% in H1 2022.

2) Strong Consumer Demand for Eco-Friendly, Innovative, Feature-Rich appliances Will Clash Against Raw Material Prices 

Consumer demand for household appliances such as refrigerators, ovens, TVs, and vacuums is increasingly driven by innovative design, technological sophistication, and demand for low-power operation. When COVID-19 hit in early 2020, demand for appliances skyrocketed as people spent more time at home. 

The pandemic caused factory shutdowns making it hard for manufacturers to keep up with consumer demand. In addition, elevated raw materials prices, such as tin, forced manufacturers to raise prices and created a backlog in the appliance industry. Fluctuations in raw materials prices are expected to limit the growth of the global appliance market for the next few years.

3) Households Will Take a Break From Buying New Consumer Electronics 

Cyclicality is alive and well in the consumer electronics market. After two years of solid demand, the average consumer’s appetite is waning for laptops, mobile phones, TVs and other big-ticket items for the home. The reasons are primarily economic: rising interest rates, a volatile stock market, and the fear of a recession in 2023. 

Consequently, chip inventories are rising, and retailers are stuck with slow-moving appliances in their showrooms. It’s a dramatic about-turn from the early COVID-19 pandemic years of 2020 and 2021, when offices and factories were closed. Work-at-home became, and remains, the modus operandi for most corporations worldwide.

Translating these trends into demand for consumer electronics devices in 2023 brings good news for consumers. Those that have the money to buy a new high-end TV will find relatively lower prices in 2023 than they were a year ago. 

It’s a different story for consumer goods manufacturers and their chip suppliers. The market slowdown has triggered a wave of job cuts and capital spending cutbacks. Companies are trying to restore profitability that is being eroded by the slowdown and is expected to worsen in 2023. 

A case in point is Micron Technology. Chip inventory levels are “well above our target level,” according to Sanjay Mehrotra, Micron’s CEO. As a result, the company is expected to cut about 10% of its workforce.

Also, Apple is cutting back on mobile phone production. It plans to reduce its iPhone 14 production target in the first quarter of 2023 to 52 million units, down from an earlier forecast of 56 million.

4) Vehicle Sales Will Return to Growth in 2023 as The EV Market Begins to Take Off

• $3.8tr Global Car & Automobile Sales Market Size in 2023
• 1.7% Global Car & Automobile Sales Market Size Growth in 2023
• -1.1% Global Car & Automobile Sales Annualized Market Size Growth 2018–2022

The 2023 global auto market is forecast to be $3.8 trillion, a 1.7% annual growth rate from 2022, according to IBISWorld. S&P projects global new light vehicle sales will reach nearly 83.6 million units this year, a 5.6% year-over-year increase, according to S&P Global Mobility. 

These forecasts are welcome news for the auto industry after a five-year contraction of 1.1% between 2018 and 2022. The U.S. auto market follows a similar track. Auto sales in 2022 are estimated at 13.7 million, 0.9 million below the 14.6 million cars sold in 2020. 

Blame the contraction on the Covid-19 Pandemic. The past three years have seen more disruption to the U.S. car market than at any time since the production shutdowns of World War II. In contrast, 2023 may be a year of relative stability. 

A significant milestone in 2022 was the beginning of the steep part of the adoption curve for EVs. New sales in 2022 are expected to be equivalent to what was sold between 2017 and 2020. Plus, the used EV market is now established, with 300,000 transactions, driven by the Tesla Model 3.

One threat to auto sales in 2023 is rising interest rates, making auto loans and leases costlier. This could mean that buying a new car with lower interest rates would be more cost-effective than buying a 2 to 3-year-old one. That, and the possibility of a recession in the first half of the upcoming year is driving down demand, hence slackening prices.

Supply chain woes will ease a bit in 2023, and rising vehicle supply will mean less pressure on the prices of older used cars. In addition, new-vehicle markups and used-vehicle wholesale prices have eased since their peaks in the Spring of 2022. Falling prices are only just reaching retail, but inflation-stretched used car shoppers may find some relief in 2023. 

5) Headwinds Ahead For The Manufacturing Equipment Market in 2023

The global manufacturing sector is bracing for uncertain demand in 2023 as economic growth slows and B2B demand moderates. Also, rising energy costs are expected to impact demand for equipment.

In 2022, the semiconductor equipment industry sold $108.5 billion worth of equipment, an increase of 5.9% over 2021, according to SEMI. However, those gains will reverse in 2023 as the global equipment market is forecast to contract by 16% to $91.2 billion before rebounding in 2024 to $107.2 billion, driven by both front-end and back-end segments.

Taking the long view, conditions in the equipment market over the next ten years are favorable. “Emerging applications in multiple markets have set expectations for significant semiconductor industry growth this decade, which will necessitate further investments to expand production capacity,” said Ajit Manocha, CEO of SEMI.

6) Medical Equipment Companies are Charting a Steady Growth Trajectory 

The global medical equipment market is forecast to grow at a steady CAGR of 3.7% through 2026. In 2019, the market reached $97.1 billion and is projected to grow to $125.6 million by 2026. Over the last two years, medical equipment manufacturers have focused on increasing efficiency, widening the distribution of care, lowering costs, sustainable sourcing, and building efficient supply chains. 

Equipment makers are focusing on building smart factories. Frontrunners are enhancing connectivity through the cloud, edge computing, and 5G. Leading manufacturers are also partnering across the value chain.

Ten global companies dominate the global medical equipment market. Some were founded in the 1800s:

1. Merck
2. Medtronic
3. Johnson and Johnson
4. Abbott Laboratories
5. Philips
6. GE Healthcare
7. BD
8. Stryker
9. Cardinal Health
10. Siemens Healthineers

Source: Top 10 medical equipment manufacturers

7) EMS Companies Will Focus on Investing in Next-Generation Technology and Talent

Demand for electronic manufacturing services is rising as OEMs seek to reduce their costs. Manufacturing products in-house requires building new facilities, carrying too much inventory, and managing factory maintenance. Outsourcing production allows OEMs to shift their investment dollars to bolster other vital services such as sales, marketing, and research and development. Communications and computing account for 56% of the global EMS market, according to

Recently, EMS companies have stepped up to automate their facilities by integrating digital services such as virtual reality (VR), the Internet of Things (IoT), and 3D printing that improve production efficiency and quality. In addition, EMS companies collaborate closely with Original Design Manufacturers (ODMs) and OEMs to enhance their performance. 

While employment levels are higher than during the 2008 Great Recession, the EMS sector remains significantly short of skilled workers. At the same time, they will be challenged by rising inflation and economic uncertainty in 2023. Consequently, they will compete for new talent that could dampen the industry’s growth in the coming years. 

8) A Tough Road in 2023 for OEMs, Component Suppliers and Distributors as Growth Fades

COVID-19, Russia’s invasion of Ukraine, rising global inflation rates and recession fears were significant sources of uncertainty in 2022, raising the prospect of slower economic growth in 2023. 

“Many believe a recession is a foregone conclusion in 2023,” said Shawn DuBravac, IPC’s chief economist. DuBravac is in that camp, as he expects a third of the world economy will be in recession in 2023. Global economic growth slipped from 6 percent in 2021 to about 3.2 percent in 2022. “Global growth is expected to slow further in 2023, clocking in at less than 2 percent,” he said.

U.S. industrial production fell 0.2 percent in November, the second straight month of decline. Despite the weak November results, production of consumer goods was up 1.8 percent in the past year and production of business equipment was up 5.7 percent. As a result, DuBravac expects U.S. production to stay in the slow lane, growing by a meager 0.3 percent in 2023.

The shift is broad-based as central banks continue to raise interest rates to curb inflation, and economies worldwide find themselves on the edge of recession. Moreover, the automotive sector and other sectors that rely on mature process nodes will be plagued by higher prices and longer lead times through most of 2023.

“The world has become an increasingly unpredictable place,” said Richard Barnett, Supplyframe’s chief marketing officer. On the bright side, Commodity IQ forecasts that only 27% of semiconductor pricing across all major commodities will increase in H1 2023, compared with 76% in H1 2022.

9) Technology and Geopolitical Tensions Will Continue to Drive Aerospace and Defense Innovation

The aerospace and defense technology industries are poised for a strong 2023. Despite ongoing geopolitical and supply chain challenges, new innovations offer promising opportunities. The supply chain has faced countless disruptions, most recently the Russian invasion of Ukraine. The conflict has jeopardized access to fuel as well as vital raw materials like titanium. In response, manufacturers in both the aerospace and defense sectors are working to diversify suppliers, promote visibility across the supply chain, and shift manufacturing to countries with more favorable trade policies. 

In the coming year, the global tensions will continue to affect the defense industry as governments around the world accordingly increase their defense budgets. Meanwhile, manufacturers are also exploring new technologies to optimize the manufacturing process, introduce groundbreaking innovations, and strive for sustainability. Businesses are undergoing digital transformations to create a more integrated, data-driven process from design through production, relying on Industry 4.0 tools like the cloud, big data, AI, ML, and IoT. 

The new frontier of the aerospace and defense industry is the development of electric vertical takeoff and landing (eVTOL), space exploration, and the introduction of supersonics and hypersonics. As with other industries, bolstered by government incentives and public pressure, sustainability is an emerging priority. Sustainable aviation fuels (SAFs), more environmentally-conscious aircraft designs, and new electric, hydrogen, and hybrid propulsion technologies suggest avenues for a more renewable future.

Over to You

The coming year will be filled with challenges and opportunities like any other. Our predictions in these industries come from a combination of data and insights, both of which are available to Supplyframe customers. To learn more, contact us today!