4 challenges the electronics market is facing today
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Despite significant growth in the global semiconductor market in the last two years, the electronics market is expected to drop nearly 4 percent in 2023.
Many challenges, widely exacerbated by COVID-19, have carried far beyond 2020 and are still impacting the industry today. Between a potential global recession and the ongoing semiconductor shortage, we will continue to see new hurdles in the market. Read on to uncover 4 challenges the electronics market will face this year.
Global supply chain challenges slow down the electronics marketThe electronics market is not exempt from the global supply chain challenges industries have faced around the world. Now, many companies are prioritizing regional sourcing, often at higher prices, to secure the products they need.
The key challenge with a regional sourcing approach for the electronics market is that while many delays are estimated to be about four months, making a manufacturer switch could take more than a year due to the lead times, product complexity, and design. So, in 2023, as more and more consider regionalisation, the shift will be a long-term solution, with perhaps short-term turbulence to get there.
Fluctuations in demand make it difficult to predict production needsIn 2020, COVID-19 sent production, and the world, to a screeching halt, resulting in an almost instant drop in demand. This hit industries like automotive hard, with sales dropping 80 percent in Europe, 70 percent in China and nearly 50 percent in the United States. This spun semiconductor manufacturing onto its head, stopping production and creating a global crisis as demand slowly picked back up again later that year.
Since the initial crisis almost 3 years ago, the electronics market has not fully recovered to meet today’s demand. And now, with talks of a recession, the industry stands to face, yet again, a familiar problem: growing inventory and shrinking demand.
Potential recessions around the globe will make people more conservativeResearchers are predicting a global recession, with more than a third of the world economy contracting and a 25 percent chance of GDP growth by less than 2 percent in 2023.
Knowing this, consumers will cut back on big-ticket purchases and be more conservative with spending in 2023. The challenge is that while an “inventory correction,” has happened in the past to support the electronics market in such circumstances, a global recession will make it more difficult for the industry to bounce back as quickly as it has in the past.
Semiconductor production continues to be a challengeTo avoid the risks posed by geopolitical issues and build a more resilient electronics market that is not as susceptible to supply chain chaos, countries around the world are looking to expand their semiconductor manufacturing. But surprisingly enough, the predicted growth will be in Japan, U.S. and Europe. Experts predict a 7.5 percent decline in most of APAC, including China, where nearly 30 percent of the world’s semiconductors are currently produced.
But until the new fabs are built and running at full capacity, the world will still struggle to manufacture semiconductors to the fluctuating demand and market needs.
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