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Material Market Update – Q1-2023

Electronic Components: Market Sales & Forecasts

In Figure 1, Semiconductor sales confirm that sales have turned a corner, and the industry is now in a negative growth period.  Memory has performed worst on an annualised basis down 38.3% on 2021 levels (see figure 2), with Logic and Analog both showing growth albeit much reduced.

With global events affecting Macroeconomic factors It is expected that this slump will last for 3 to 4 quarters, before the next growth period which is anticipated in 2024.  The current market slump will create a surplus supply scenario.  However, it is likely to be limited to the Memory and Micro markets, with Analog and Logic only expected to return to pre-pandemic stock levels by around Q3-2023.

It is expected that the next wave of growth will create another period of constrained supply across most, if not all markets.

Electronic Components: Wafer Fab Update

In 2022 semiconductor capex spending increased over 20% to just below US$200 billion resulting in a record high of 33 new semiconductor Fabs starting construction in 2022.  With a further 28 more Fabs expected to start in 2023 additional capacity will certainly be available within the next 1-5 years.

The investments have been spurred on by incentives from the US Chips and Science Act and the European Chips Act.  This record Fab expansion has also meant it has also meant is has been a record year for equipment manufacturers, despite restrictions imposed on them to stop exports to China.

Whilst it is good news that the extra capacity will start to come online, there is a note of caution.  Many of the new fabs will be built to produce newer technologies.  There is seemingly very little interest in increasing capacity to support legacy items.

Additionally, with a downturn in semiconductor forecasts for 2023 – it is widely expected that some expansion plans will be paused during Q1 and Q2 of 2023 delaying some of the excess capacity from positively impacting the supply chain scenario.

Electronic Components: Supply Projection

Foundry Utilisation rates in global wafer fabs continue to decline and are projected to pass through the 85% barrier, which is regarded as the point as which we move from normal supply to moderate or severe surplus.

2023 offers some hope that the constraints seen in the supply chain since Q2-2020 are lifting, and it is anticipated that there will be a severe surplus stock scenario on certain commodities, with Memory and Micro best positioned to benefit.  Analog and Logic supply will however remain tight.

Electronic Components: Pricing and Lead Time Trends

In our last update, we reported that during 2022 pricing had trended upwards in almost all commodities.  Market updates from our key suppliers show that pricing trends are starting to level off, however this softening is not expected to lead to price reductions in 2023.  In fact, due to macroeconomic factors a high level of volatility still exists today, and pricing could change at any moment.

To secure the best pricing place orders as early as possible, and where program funding is available it is recommended to drive inventory into stock at the earliest opportunity.

Allocation still exists for some manufacturers and/or technology types, so we advise customers to provide the clearest visibility of program nature and special contractual exceptions which can be applied.

In general lead times are starting to improve but remain very high in comparison to pre pandemic levels.

Electronic Components: Pricing and Lead Time Trends (continued)



Printed Circuit Board Update

The downward trend in demand for semiconductors has had a knock-on effect to the PCB market.  The softening reported in Q4-2022 report continues to present itself.

The slowdown in consumer electronics continues to drive a very competitive market.  This slowdown is expected to reduce the demand for raw materials, however demand is still seen as greater than supply.

During 2022 exponential rises in energy costs only served to negate the reduction in some raw material costs, but with global inflation levelling off, costs have started to stabilise somewhat. 

Material lead times continue to be stable, with most material available in 15 to 20 working days.  All PCB suppliers, recommend forecasting demand for raw materials to ensure programs can continue to ride any market volatility.  Whilst flex materials remain a concern, lead times continue to be stable but are extended.

Manufacturing Lead Time will vary from site to site.  Depending on the complexity of design typical lead times remain anything from 4 – 11 weeks.

Metalwork Update

During 2022 nearly all metals reduced in price.  In this report we focus on Aluminium, Copper, Gold, Steel and Tin.  Rising energy costs balanced off any potential savings resulting a stabilised pricing scenario for the market.

During Q4-2022 nearly all metal markets turned a corner, and pricing has risen since.  Copper, Gold, Steel and Tin have seen the greatest increases, which is expected to impact pricing during 2023.

Material availability remains stable.