Supplyframe reveals new analytics showing significant progress in the global electronics supply chain in 2024, with inventory levels normalizing and supply-demand balance across most commodities amid muted demand. Memory and storage are the exceptions. DRAM and NAND Flash memory prices are swelling. And high-bandwidth memory (HBM) DRAM – on which GPUs from AMD and NVIDIA rely – faces severe shortages.
Nearly three-quarters of electronic component pricing dimensions will be stable, flexible, or declining for H2 2024. When memory and storage devices are excluded, just 6% of H2 2024 pricing is set to rise or be inflexible. On the supply side, 2024 is poised to conclude with 52% of component lead times contracting with limited or no constraints. When memory and storage are dropped from the equation, lead time contraction dramatically improves, rocketing to 90%.
“Supplyframe Commodity IQ points to increasingly stable market dynamics overall,” says Supplyframe CEO and founder Steve Flagg. “But, for procurement teams, the return to a more balanced supply and demand environment in the second half of 2024 and into 2025 has both benefits and drawbacks. As inflation moderates and major central banks pivot from lowering inflation to promoting economic growth, procurement will generally enjoy more favorable pricing and other supply conditions. However, buyers are also experiencing some price increases, less pricing flexibility, and supply constraints for solid-state storage, memory, and other select components.”
Key Takeaways:
- Across all memory types, the Commodity IQ Price Index averaged 2.5 times the index baseline through the first eight months of 2024, climbing 56% above the same period in 2023. This growth is primarily attributed to the rising prices for DRAM – particularly the HBM DRAM required for data center accelerator chips, including GPUs from AMD and NVIDIA.
- Supplyframe Commodity IQ indicates that during Q3, most semiconductors experienced lead time reductions, and apart from memory ICs, just 2% of semiconductor price dimensions rose. Passive component and interconnect trends are even more positive, with 83% of lead time metrics showing declines and half of all prices characterized as falling or flexible. Excluding memory and solid-state storage devices, H2 2024 is forecast to have more improvements from a buy-side perspective. More than 90% of pricing dimensions will indicate price stability, decreases, or flexibility and 99% of lead times will decline or stabilize with some constraints.
- Signaling contraction, the Commodity IQ Demand Index for all electronic components has remained below the index baseline for five consecutive months and was down 23% year-over-year for August. Demand growth returned sequentially in July across all regions. However, it was short-lived for Asia-Pacific and the EMEA region, falling 6% and 23% in August. The forecast for a Q3 index decline is wide-ranging, affecting nearly all component categories, including analog and digital semiconductors, passives, and interconnects. Moreover, sourcing actions for all but three commodities experienced sequential monthly declines in August.
