Electronics Component Buyers Hold Greatest Negotiation Power

The electronics supply chain will remain a buyers’ market into 2024. Here's why.

Connect World Adobe Stock 226073875
Connect world AdobeStock_226073875

New Commodity IQ data from Supplyframe indicates that procurement professionals are now enjoying a degree of negotiation power that they have not experienced in years due to an improved environment for the buy-side of the electronics supply chain.

“The electronics supply chain will remain a buyers’ market into 2024,” says Supplyframe CEO and founder Steve Flagg. “But given the uneven demand recovery across industry segments and electronics components, continuing macroeconomic volatility, and some raw material price increases, any swift uptick in component demand will threaten the ability of sourcing organizations to calibrate cost negotiation with continuity and assurance of supply.”

Key takeaways:

  • Just over half of all lead time dimensions, including solid-state storage devices, are declining in the third quarter of 2023.
  • Most lead times will continue to fall in the second half of this year.
  • The pricing surges that began in July 2020 have diminished. Data shows electronics component prices decreasing by 5% from Q1 to Q3 on average.
  • Month-on-month demand declines contracted in July globally and in the Asia-Pacific region. China (including Hong Kong) and Taiwan sourcing activity decreases month-on-month in July ebbed by almost one and five percentage points, respectively. Singapore reversed its May-June decline of 15% with a 26% rise month-on-month for July while Malaysia and Thailand also shifted to an increase in sourcing actions.
  • A recovery in demand for PCs and smartphones is expected in the third and fourth quarters of 2023, as consumer electronics demand enters its peak period ahead of the holiday shopping season.

“Macroeconomics and end-market impacts, volatile raw materials, the bullwhip effect of unrealistic component design and demand inputs, and mixed supply-demand situations within and across commodities create significant risk,” says Flagg. “But new forms of intelligence can help businesses in the electronics supply chain get ahead of risks associated with constrained supply, demand shifts, inventory fluctuations, geographic pivots, and legacy component issues. Commodity IQ aids electronics supply chain practitioners in knowing the unknowns.”