Overview of electronics component market in 2023

Overview of electronics component market in 2023

The electronics components market has already seen some improvements in component availability in the forest half of 2023, however, there are still several complications, particularly high prices and long lead times, which can be rather disruptive to the manufacturing process if proper planning strategies are not implemented.
These and other issues, as well as recommendations for addressing them, are discussed in this article.

Electronics market general trends in 2023

Gartner, Inc., a leading US technology research firm, forecasts a 3.6% annual decline in the global electronics market in 2023, citing the reduction in memory component sales as the primary reason for the downward trend. It also expects that the shortage of certain components currently facing the industry will not recover next year.

Despite a possible drop in demand in the automotive and white goods industries, demand for chips used by these sectors is expected to remain high until at least the third quarter of 2023.

Supply challenges and their effects

In 2022, lead times for electronic components reached record levels. In fact, lead times grew during the first half of 2022 to such an extent that they surpassed a year. Fortunately, the market saw stabilisation in the lead time in the second half of 2022, but there is still no significant decline in lead times. In all likelihood, the situation will not change until the second half of 2023.

The industrial and automotive industries are suffering the most from component bottlenecks caused by component shortages.

The supply problems also impacted component prices, which surged in 2022. Passive components, transistors, and packaging materials saw the lowest price increase, which is still rather high as these goods are at least 20% more expensive. Meanwhile, the prices for active components increased the most, in some cases even doubling.

Unfortunately, prices are likely to rise in 2023, albeit at a slower rate than in the previous year.

These challenges make long-term planning and forecasting particularly crucial for managing component supply to ensure continuity of production. Securing long lead time and appropriate component allocation are especially recommended, as is exploring alternative sources for components and materials. Working with an experienced electronics manufacturing service provider (EMS) such as Assel is a complex solution for original equipment manufacturers (OEMs), who need assistance not only with production but also with efficient supply chain management.

Technological constraints and product redesign

The electronics design and manufacturing industry will continue to be impacted by the recent trend toward miniaturization of devices which requires specific components, manufacturing equipment, and skills. These areas need development and optimization, whereas OEMs may invest more in redesigning their existing products to keep pace with the trend.

There are several other areas where the industry will see design changes in 2023.

Significant modifications can happen to older technology chips used in industrial applications. Their technological limitations make them uneconomical for modern production, while the more leading-edge semiconductors are already available as a more profitable alternative to older technology.

For this reason, many component manufacturers might refrain from investing in these elements. It is possible that manufacturers will cease production and maintenance of current capacity as products reach the end of their lifecycle.

Keeping production up and running in 2023

Many challenges that electronics manufacturers faced in 2022 are unlikely to be resolved in 2023, despite some improvements. For this reason, it is especially important for original equipment manufacturers and electronics manufacturing service providers to explore alternative sourcing options. To learn more about an experienced EMS provider with effective supply chain management, visit asselems.com.