XTG’s president and TTI’s senior VP business development, Michael Knight, sets the scene for a supply chain rollercoaster ride culminating in a 2024 surge
Following the electronic component industry’s record-setting 2021, momentum going into 2022 was massive. Many component suppliers set fresh records in the first six months and a continuation of abnormally high book-to-bill ratios. However, in the second half of the year business pace became a bit erratic and exuberance turned into perturbation. News that GDP contracted again in the second quarter (putting the US economy in a technical recession), the Fed’s interest rate increases and predictions of inventory gluts have set the stage for flat-to-down revenue for 2023.
The coming year is going to be choppy but not down from 2022. Backlogs are strong, except for those concentrated in personal computers, office equipment and products overextended during the post-Covid recovery. Lead times for microcontrollers and analog and power semis are still impossibly long. Many manufacturers are sold out through 2023. Innovation and new product development are as peppy as ever. Makings of an up year are abundant.
That said, the supply chain is way out of balance and legions of lower-lead-time parts have been accumulating. Rising capital costs have added stress and order pushouts/cancelations are rising. I expect new order rates in 2023 will lag sales for at least a couple of quarters (probably starting Q4 2022), leading to proclamations the crash has arrived. I don’t think so. The book-to-bill ratios were not sustainable so a reset was inevitable.
My advice is stay calm, pay extra attention to cash, conserve strength and prepare for a surge late 2023 or early 2024.