I recently spoke with Richard Barnett, Chief Marketing Officer at Supplyframe, about the evolving landscape of consumer electronics and the supply chain challenges shaping the industry.
As consumer spending during the holiday season is set to reach $240 billion, with electronics accounting for a significant share, Barnett discusses the drivers behind this growth, the impact of geopolitical events, and the importance of embracing technologies like AI to improve resilience.
He also reflects on the lessons learned from the pandemic, the need for dynamic procurement strategies, and what lies ahead for 2025 in an industry that must balance cost, risk, and sustainability.
Consumer spending over the Christmas period
Consumers are expected to spend around $240 billion this holiday season, with electronics accounting for over half of this total.
The primary drivers of sales remain consistent with previous years, focusing on high-volume items such as mobile phones, laptops, and TVs. Barnett noted that these categories are showing signs of recovery, with smartphone sales growing by 5% and some laptop categories benefiting from AI-driven features. However, he highlighted significant challenges in the broader electronics market, particularly in the business segment. “Enterprise computing is down 15-20% year-over-year, depending on the segment,” he explained, noting that most growth in enterprise comes from data centre demand rather than consumer sales.
Barnett observed a lack of groundbreaking new product releases, attributing this to delays caused by the pandemic. “We haven’t seen the mix of disruptive, next-gen product offerings that would drive significant shifts in the market,” he said, pointing to a 23% decline in innovative product launches compared to last year. Many consumer electronics categories, such as home automation and connected devices, are saturated, with manufacturers introducing incremental updates rather than major innovations. “There’s been a lot of digitising things for no reason, like putting Wi-Fi on devices with very low interaction rates,” he added.
One of the biggest drivers for future growth, Barnett suggested, could come from the housing market, as new home construction and move-ins often lead to increased demand for larger items like TVs and appliances. However, he noted that this market has been flat in 2023 compared to 2021, when it drove a significant refresh cycle. Combined with inflation, high interest rates, and tight consumer credit, this has created a cautious spending environment. “Disposable income is tight, and uncertainty around cost inflation and tariffs poses additional headwinds,” he remarked.
Barnett did express optimism about the role of AI in driving the next wave of consumer electronics innovation. “AI could reimagine experiences tied to hardware,” he said, pointing to Apple’s advancements as an example. However, he tempered expectations, noting that delays in R&D have slowed the launch of truly disruptive products. “Many manufacturers are still catching up on two to three years of delayed next-gen R&D,” he explained. The upcoming CES event, he suggested, will be a key indicator of whether the industry is ready to deliver breakthrough innovations.
The impact of geopolitical events on the market
The landscape is marked by significant uncertainty, particularly concerning proposed tariff policies and broader trade renegotiations.
Barnett noted the potential introduction of a 10% across-the-board tariff on all Chinese trade, alongside a 25% tariff on Canadian and Mexican trade as part of a renegotiation of the USMCA agreement. These measures, coupled with existing tariffs and industrial policies from both the Trump and Biden administrations, such as the CHIPS Act, are likely to have profound effects on the industry. “These tariffs will impact both the supply and demand sides of the market,” Barnett explained. On the demand side, he warned that costs will likely be passed directly to consumers, with around 80% of tariffs translating into higher prices in consumer-facing industries. This, in turn, could slow consumer spending across key markets, including automotive and consumer durables.
On the supply side, Barnett highlighted the industry’s slow progress in mitigating risks exposed by the pandemic, particularly in terms of supply chain diversification. While some strides have been made with the ‘China Plus One’ strategy – diversifying manufacturing to locations such as Mexico or Eastern Europe – he pointed out that the complexity of electronics supply chains presents significant challenges. “With 600 million parts and 27,000 suppliers, the entanglement around multiple tiers of supply is profound,” he said. He warned that broad-based tariffs on Chinese trade would impact nearly every player in the electronics industry, whether at the tier-one or tier-two supplier level.
Barnett also addressed the restrictions on advanced semiconductor exports to China, such as sub-26 nanometre chips, which have primarily affected companies like NVIDIA and Micron. While these firms have managed to find alternative demand and absorb short-term costs, a broader expansion of tariffs would have far-reaching consequences, affecting downstream markets that rely on digitised product portfolios. “In markets where a 10-20% price increase is extremely sensitive, the impact will be felt more acutely,” he explained.
Another key concern is the shift from a constrained supply environment to one of cost competition. “Two to three years ago, it was about limited supply and price spikes; now, it’s a cost-competitive market,” Barnett observed. He cautioned that expanded tariffs could disrupt this balance, with the impact being particularly severe in the passive components market. “While active components often benefit from long-term agreements and allocated capacity, passives will see broad-range impacts, given their high exposure to Chinese production,” he said.
Design for resilience
Barnett highlighted the importance of adopting emerging tools and platforms to enhance organisational resilience, particularly in the context of global supply chain challenges. He emphasised the concept of ‘design for resilience’, which aims to bridge the traditional silos between engineering, procurement, and supply chain teams.
Barnett explained that many global manufacturers, spanning industries such as aerospace, defence, high-tech automotive, and medical devices, share a common problem: teams work in isolation and make decisions without a unified view of supply chain risks. For example, engineering teams may design a product optimised for performance but inadvertently introduce single-source supply risks in high-risk markets. These issues often surface later in the product lifecycle, leading to costly rework and inefficiencies. “A lot of companies went through significant pain during the pandemic but haven’t fully addressed the root causes of these problems,” he said.
To address these challenges, Barnett advocated for an ‘outside-in’ approach, which combines real-time intelligence on supply chain factors such as lead times, pricing, inventory, and geopolitical risks. This information is integrated into a single source of truth accessible across teams. “The goal is to ensure that design engineers, product review teams, finance, and commercial teams are all working with the same view of risk, cost, and supply chain context,” Barnett explained. This collaborative approach is enabled by digital threads that tie together all aspects of a product’s lifecycle, ensuring that decisions are made with a full understanding of global supply chain dynamics.
Emerging technologies like AI and large language models (LLMs) will be key in improving resilience. These tools can process vast datasets, uncover patterns, and predict trends, helping organisations anticipate and address potential issues before they arise.
However, he acknowledged the challenges of working with AI models that are often ‘black boxes’, offering little transparency into how decisions are made. “If we can build models that are more explainable and designed for collaboration, rather than simply being better mousetraps, we’ll make significant progress,” he noted.
Despite the promise of AI, Barnett cautioned that the industry is still in its early stages when it comes to applying these innovations end-to-end in supply chains. Nonetheless, he expressed optimism that continued advancements in AI and scenario-based planning would drive meaningful improvements in supply chain resilience and decision-making.
Looking ahead to 2025
The industry is emerging from a cyclical phase marked by post-pandemic inventory misalignment and capacity realignments. While progress has been made in adjusting to future demand, underlying issues remain.
Barnett described the current state of the market as a ‘false calm’, with prices normalised and companies focused on cost-cutting. Excess inventory from the pandemic period is still being consumed, which has taken longer than expected due to weaker-than-anticipated demand. However, he warned that this stability is temporary. “By the second half of next year, we’ll start seeing price increases, inventory shortages, and more spot buying across most key commodity groups,” he said.
One area already facing constraints is hyperscale computing. Barnett noted the rapid growth of AI-driven data centres as a major driver of demand for high-bandwidth memory, flash storage, and solid-state drives. “These components are seeing price increases and availability challenges as they attach into new data centre designs,” he explained. This trend reflects the strain on supply chains supporting next-generation computing infrastructure.
In the broader market, passives – a category that has generally been stable – are expected to face growing constraints, particularly in the automotive sector. Barnett highlighted the challenges faced by legacy internal combustion engine (ICE) platforms, which continue to depend on analog ICs and sensors. These components, he explained, are often low-cost and low-volume, leading to lower prioritisation in capacity planning. “We’re likely to see pandemic-era constraints return to these automotive value chains,” he cautioned.
Despite the current stability, Barnett predicted that the industry is entering a transitional phase that will bring renewed challenges. “While the market feels stable now, this is unlikely to persist through the end of next year,” he concluded. Organisations will need to remain vigilant and proactive in managing their supply chains to navigate the pressures ahead.
Offering his advice for procurement professionals, Barnett first highlighted the need for companies to dynamically align their procurement strategies with shifting market conditions. “Understanding the scope of your spend – whether at the level of new product bills of materials or at a commodity level – and dynamically anticipating market changes is a significant opportunity,” he explained. Many organisations, he observed, still operate in a reactive mode, addressing spot buys during shortages or conducting periodic sourcing events without accounting for the fast-changing market environment. “If you’re going to market for a big chunk of your spend just once a year, you’re likely to get it wrong – either over, under, or mistimed,” he warned. Agility and market timing, he stressed, are crucial for staying ahead.
The second piece of advice focused on shifting the role of procurement from purely cost management to a broader value-adding function. Barnett acknowledged that most procurement teams operate under a “cost management straightjacket,” where their success is measured primarily by annual cost reductions. However, he argued that procurement has an opportunity to deliver more strategic value by balancing cost, risk, and sustainability impacts. “Procurement professionals need to be empowered with a balanced portfolio of objectives that goes beyond cost-cutting,” he said.
He pointed to the importance of leveraging external intelligence to inform decisions, such as identifying opportunities for cost reduction, mitigating risks like single-source supply dependency, and improving alignment on sustainability goals. “Procurement can lead the way in reducing exposure to risks and improving visibility into sustainability impacts, creating value not just in terms of cost but also resilience and environmental impact,” Barnett added.
