Outlook for the Electronics Industry for 2024

Outlook for the electronics industry 2024 – a challenging year ahead (Published in EE Times)

The last few years in the electronics industry have been exceptional in many ways – a supply chain crisis throughout the industry, record lead times and backlogs for suppliers, and rather desperate customers. There’s little doubt that as we enter 2024, we are in the midst of the “rebound” from this state of affairs. 

See the published article in EE Times

Many customers now trying to push out orders, having over-committed in the harsh conditions of 2022/3, and in some cases mistaken a short-term surge for long-term demand. As a result, there is a lot of inventory in the system – at suppliers, with distributors, and sitting with customers and their contract manufacturers. New orders are inevitably somewhat scarce, with many customers having stocks or previously placed orders to meet their needs for several months ahead.

Question nearly anyone about “Book to Bill” ratios, and the result is likely to be an ugly grimace more than an answer, but the number for most is considerably less than one, meaning rapidly shrinking order books. 

Taking a step back, the broader economic situation remains somewhat “becalmed”, definitely in Europe, if perhaps less so in the United States. Several key sectors, such as the automotive industry, are struggling; partly because cars are high-cost capital items, but also due to European car makers’ challenges over the transition to electric vehicles. Political uncertainty hasn’t helped here either.

On the positive side, inflation is down, and seems largely under control, barring further geopolitical shocks. In the electronics industry in particular, price rises, which came thick and fast throughout 2022 and early 2023, have stopped dead in their tracks, and customers are notably more aggressive in their negotiations.

So a gloomy year ahead? I predict growth will be hard to come by in 2024. Some manufacturers were already reporting downgrades late in 2023. However, grill customers more closely on their actual production levels, and the picture is rather less severe. Many customers have been producing at a consistent rate throughout 2022 and 2023. The supply chain has been chaotic, but a lot of the turbulence we see relates to stocking and de-stocking effects.

Eventually the stocks and backlogs will clear. The question is when? Talking to customers and partners, the consensus view seems to be that the first six months of the year will remain tough, and towards the end of first half, there will be some electronic component manufacturers in a mild state of panic at the state of their order books. Nevertheless, the backlogs will eventually clear and there seems little evidence of a deep recession looming. Suppliers were overly optimistic in 2023, and the “de-stocking” phenomenon has persisted longer than most predicted, but it simply cannot go on forever. There’s even a risk of a “second wave” mini supply crisis in the second half of 2024 if customers become too complacent about lead times.

I predict therefore that in the second half of the year we will see a rebound in demand and new orders, after which the industry will revert to a more typical pattern of moderate lead times and slowly declining prices. A rebound from 12 month+ lead times was never going to be a smooth process. All the underlying growth factors for the electronic industry remain in place – the need for productivity improvements to counter declining working populations, the increasing role of electronic systems in industry, medicine and the consumer space and the clean energy transition.

So in summary, 2024 will be a “reset” year with largely flat revenues for many suppliers as the post-pandemic supply chain effects burn themselves out. In the second half of the year however, the traditional growth drivers – which have never gone away – will reassert themselves to drive the industry forward.


By: Dr Nick Wood, Director, Sales & Marketing, Insight SiP


Insight SiP
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