By Bill Bradford, President, Flip Electronics
As 2023 draws to a close, speculation regarding the upcoming developments in the electronics industry supply chain is inevitable, and discerning observers have reason for optimism. Positive indicators include the emergence of new technologies, encouraging pricing trends, and lead-time projections. While challenges are anticipated, their impact is expected to be manageable.
Technologies such as artificial intelligence (AI) are developing in a way that will completely change the ways we work. Within the supply chain, AI applications including machine learning, natural language processing, and robotics, will streamline and automate processes, resulting in cost reduction, increased efficiency, and enhanced customer satisfaction.
For distributors, AI presents clear functionality in promptly addressing inquiries that meet predefined criteria, allowing human interventions to focus on more complex issues. In the coming year, efforts will be concentrated on aiding suppliers and customers in maintaining a competitive edge by furnishing comprehensive information on trends, inventory metrics, and supply chain dynamics — where AI will play a pivotal role.
AI stands out among the emerging technologies propelling growth in the semiconductor market. Innovations such as 5G, the Internet of Things (IoT), and AI contribute to operational efficiency necessitating substantial computing power. Similarly, original equipment manufacturers (OEMs) are expected to procure substantial quantities of semiconductor chips, setting the stage for a robust recovery in the semiconductor industry in 2024.
This recovery is anticipated due to the rectification of prolonged lead times and improved overall availability. The industry is diligently addressing the backlog of inventory, leading to stabilized prices and more manageable lead times. While pockets of chaos may persist, predictability is close to becoming the norm rather than the exception.
In parallel, despite a slowdown in automotive chip sales, the integration of an increasing number of chips per electronic vehicle (EV) is expected to drive up component sales. EV sales, encompassing battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs), are projected to reach 14.1 million units in 2023, reflecting a 34% growth compared to 2022. The automotive semiconductor market, estimated at approximately $38 billion in 2020, is forecasted to reach $114 billion by 2030, exhibiting a compound annual growth rate (CAGR) of 11.8%.
Later in the year, industrial demand is anticipated to rebound, compensating for lagging consumer chip sales and contributing to the overall resilience of the industry.
While expectations for 2024 are optimistic, challenges are inevitable. The semiconductor industry's growth may encounter obstacles as manufacturers strive to optimize their product mix. Initiatives to adopt advanced technologies by constructing new fabs in the U.S., Europe, and parts of Asia, coupled with industry consolidation trends, are likely to result in an increase in product discontinuance notices (PDNs) or end-of-life (EOL) notifications. Industries with products characterized by prolonged life cycles, including the industrial, medical, aerospace, and defense sectors, will need to prioritize design for manufacturability and cultivate strong relationships within the distribution chain to enhance resilience in the face of unforeseen challenges.
The industry is expected to experience increased influence from geopolitical shifts, with a significant emphasis on supply chain concerns. While unpredictable, such challenges are not insurmountable. Despite these complexities, 2024 exhibits the characteristics of a promising year. The combination of new technologies and a more navigable semiconductor landscape is anticipated to propel the industry forward.
Bill Bradford has over 30 years of experience in the electronic components industry, having led the global sales organizations for Freescale, ON Semiconductor, and Entropic Communications. He also served as President and CEO of Minco Technology Labs, a Hi-Rel die processing, assembly, test, and distribution company. He has led the Electronic Component Industry Association (ECIA) as president and CEO. He began his career in sales with Texas Instruments, followed by Cypress Semiconductor. Bill has a BSEE from Rose-Hulman Institute of Technology, a Master of Science in Management from the University of Alabama in Huntsville, and an Executive Doctorate in Business from Georgia State University, having conducted research in leadership and sales analytics. He is an ICF-certified executive coach and has been a mentor and catalyst for startups at Georgia Tech’s Advanced Technology and Design Center.
