Through the COVID-19 pandemic, the electronics market was on a straight upward trajectory as distant work brought on PC demand to surge whereas corporations stepped up efforts to develop next-generation electronics for autonomous and electrical autos, 5G, and IoT techniques. However in 2022 that trajectory slowed, as waning PC demand had repercussions for makers of processors and reminiscence. To date, these weaknesses are anticipated to hold onto 2023.
The electronics trade has lengthy had a historical past of sturdy cycles adopted by main slumps. One solely has to recollect the dot.com growth within the late Nineteen Nineties, with rising costs and main part shortages adopted by a number of years of bloated inventories and sinking costs. However the present malaise within the electronics trade has to date not affected all suppliers equally. There are nonetheless lengthy lead instances and shortages for elements utilized in next-generation electronics. This concern has in flip triggered main modifications in engineering design cycles, with engineers now more likely to spec a part based mostly on their availability slightly than elements akin to efficiency and worth, to satisfy stringent time-to-market necessities.
In the newest quarter, earnings outcomes confirmed that corporations closely invested within the processor market, akin to Intel and AMD, have been closely affected by the latest market droop. However different electronics corporations, together with distributors, proceed to have worthwhile quarters. However even corporations which have continued to carry out properly at the moment are expressing solely cautious optimism for in any case the primary few months of 2023.
Declining Income
A latest market report from Omdia seems to bear out this apprehension. Based on Omdia’s Semiconductor Aggressive Panorama Instrument, third-quarter semiconductor income was $147 billion, which was down 7% from $158 billion the earlier quarter.
“The decline available in the market has not been uniform,” Cliff Leimbach, Senior Analysis Analyst at Omdia, was quoted as saying within the report “Totally different elements of the market are driving the weak spot at completely different instances. 2Q22’s decline was pushed by a weakened PC market, with Intel declining 17%. The latest decline is because of weak spot within the reminiscence market. Reminiscence income is down 27% quarter on quarter (QoQ) as knowledge heart, PC, and cell demand declined together with stock changes from prospects.”
Between the second and third quarters, probably the most vital income drops occurred amongst reminiscence maker akin to Samsung, Hynix, and Micro, based on Omdia (see desk beneath).
Waning demand for PCs and smartphones have hit reminiscence suppliers akin to Hynix, Samsung, and Micron arduous in 2022.
The downturn hitting elements and semiconductors is prone to proceed for at the least the primary half of subsequent 12 months, mentioned Michael Yang, analyst for Omdia. “We’re in all probability not but on the backside.” Yang mentioned. “There can be an extra of provide and slowing demand for the subsequent three to 6 months, till macroeconomic circumstances work themselves by way of.”
Yang added that whereas areas akin to AI and automotive are driving demand for digital elements, the majority of functions nonetheless lie in shopper electronics, smartphones, and knowledge facilities, making it extra essential that demand recovers in these keys areas if the trade is to emerge from its present droop.
Shows Additionally Affected
The weakening market circumstances within the electronics trade have additionally hit the show sector, which boomed in the course of the COVID-19 pandemic as many shoppers additionally upgraded their TVs as a result of they spent extra time at house.
In a latest report by market analysis agency DSCC (Show Provide Chain Consultants), panel suppliers at the moment are delaying additional fab investments due to weak show market circumstances, specific in LCDs (liquid crystal shows), the place LCD TV panel costs have reached marginal price ranges. DSCC added that weak market circumstances have additionally unfold to OLED (natural light-emitting diode) shows, the place oversupply circumstances have additionally materialized and the place many show producers have boosted investments.
The near-term outlook for shows isn’t good. For 2023, DSCC forecasts capital expenditures by show producers attain $4.4 billion, down a whopping 63% from roughly $ 12.0 billion in 2022. OLED spending is anticipated to fall 60% in 2023 with LCD spending down 67%. The one upshot is that OLEDs will proceed to outpace LCDs going ahead as extra shows undertake that expertise, based on DSCC.
DSCC initiatives capital spending on shows to say no considerably in 2023. The long-term shift from liquid crystal shows (LCDs) to natural light-emitting diode (OLED) shows will proceed.
Dealing With Part Shortages
One long-lasting impact of the electronics trade growth cycle over the previous few years have been scarcity of many elements, significantly for brand new designs. These shortages have pressured design engineers to change design practices, together with extending design cycles, taking a look at alternate elements, and haven’t any selection however to pay larger costs.
The state of affairs, whereas nonetheless not resolved, has improved, based on a latest survey of design engineers by digital elements distributor Avnet. In a latest survey of 1,600 engineers, Avnet discovered that 41% mentioned the state of affairs has stabilized or improved in comparison with a 12 months in the past. About 79% of the survey respondents mentioned that part availability is a larger concern than present market circumstances. “Engineers say we have to design extra with elements which might be obtainable,” mentioned Peggy Carrieres, Vice President of World Gross sales Enablement and Provider Improvement at Avnet, in a latest interview with DesignNews.
The survey famous that areas the place part shortages stay most acute embrace programmable and logic gadgets, MCUs, and analog elements, with improved availability in areas akin to passives, interconnects, and wi-fi and RF elements.
Engineering design practices proceed to alter as a consequence of these shortages. Based on the survey, when most well-liked elements aren’t obtainable, corporations proceed to make use of a spread of techniques, together with using drop-in replacements (25%), pin-to-pin replacements (25%) and board redesigns (25%). As well as, 25% of the respondents mentioned they’re now designing in customary, permitted elements from a number of suppliers each time doable, and testing and qualifying a number of elements that meet necessities early within the design course of (22%). One other 14% are growing a extra versatile product structure.
There’s additionally extra cooperation and teamwork in part sourcing. “Engineers and procurement specialists are working extra carefully collectively,” mentioned Avnet’s Carrieres. Strategic collaborations with companions akin to distributors and producers are more and more widespread, as are cross-functional groups of engineers and procurement specialists.
Omdia’s Michael Yang agreed that in the long term, getting the electronics provide chain to work extra effectively can be key to navigating trade growth and bust cycles. “Now we have to make sure our provide chain is aligned and supported. Getting every thing to work itself out takes time.”
Spencer Chin is a Senior Editor for Design Information overlaying the electronics beat. He has a few years of expertise overlaying developments in elements, semiconductors, subsystems, energy, and different sides of electronics from each a enterprise/supply-chain and expertise perspective. He may be reached at [email protected]
