A session held at the Electronics Life Cycle and Supply Chain Summit provided attendees with a deep dive into how the electronic components market was performing, with a focus on industries including automotive, AI, smartphones and electric vehicles (EVs).
Dennis Reed, Senior Research Analyst, Technology at Edgewater Research hosted the session and shared some of the market research company’s insights and expertise as they continually tracked the performance of markets.
The overall messaging of the session was that we weren’t quite where we wanted to be when it came to the performance of the electronic components market – which could be partly attributed to the over-shipping of components in recent years, and companies subsequently having to burn components that weren’t sold. In this year alone, for example, $30 billion of inventory was burned due to out-shipping.
“Our good friends at WSTS raised their forecast for this year – I’m not arguing whether it’s right or wrong – but what I would tell you is it’s not a recovery that is raising all ships right now,” Reed explained. “Right now the market is being driven by two product sectors: one is high bandwidth memory, benefiting the memory suppliers, and two is the Nvidia-driven recovery.”
Analysing different markets growth
Reed ran the audience through the different markets, digging into the data and explaining the reasons behind figures. The PC market, for example, reached 330 million units sold per year at its peak, which Reed explained was due to Covid.
“We saw across the business landscape that companies sent [their] employees home, replaced their desktops with notebooks and the like.”
Since reaching its peak of 330 million, figures showed that approximately 255 million units would be sold this year, and 256 million units are forecast for 2025.
Later on in the session Reed referred to the “Nvidia AI halo”, in which he showed that AI units had quadrupled in number in 2023, but this could be attributed to the dominance and the innovation of Nvidia in this market.
“A rising tide raises the Nvidia ship, a rising tide doesn’t raise everybody else,” Reed said.
Thanks to primarily Nvidia’s work, AI server units ‘quadrupled’: “They went from about 50,000 units in 2022 to north of 250,000, 300,000 units in 2023,” said Reed. “However, what we are seeing with AI is [that] investment dollars are finite … Customers are looking at how they can allocate their capital expenditures across the data centre potential.”
Reed said a common question he was asked, in relation to AI, is what “inning” we are currently in – to borrow a baseball analogy. “We’re building an industry from scratch,” he said. “We’re probably in the seventh inning … At some point the industry will have to move towards monetisation… creating tangible programs and applications that drive sales growth to justify the spend.”
Looking at the smartphone market, the 5G penetration is growing: 5G only units sold were 19 million in 2019, and 802 million in 2024. Reed referred to the smartphone market as reaching its “maturation phase”, where smartphones aren’t expected to be a key driver of overall growth.
EVs, which have been cropping up in the news for perhaps all the wrong reasons – where car manufacturers have shut down EV production, citing costs and lagging market demand – is currently being driven by demand in China, according to Reed, and Western suppliers of EV components are struggling.
“We saw a significant pull back in the EV marketplace with roughly 20% to 30% of all EV programmes cancelled or delayed into next year and beyond,” he noted.
Reed’s main advice for the industry going forward was to take note of inventory – as he saw it being responsible for delaying some projects – to align with partners who can make sense of data sets, and to ground stakeholders in the reality of the market.
