The beginning of this quarter’s earnings season has revealed a mixed outlook for the electronic component and supply chain sectors, as manufacturers encounter both strong growth drivers and notable headwinds. October’s earnings calls showed robust semiconductor demand, particularly in AI and data centers, where high-bandwidth memory and advanced nodes are fueling major investments from cloud providers, enterprises, and high-performance computing firms.
However, recovery expectations remain divided. Industry leaders like ASML, TSMC, and Amazon anticipate strong growth from AI, cloud infrastructure, automotive, and aerospace, while Texas Instruments and AMD express more caution, citing ongoing challenges in the industrial sector, automotive softness, and inventory adjustments.
The following industry breakdown explores sector-specific challenges and opportunities shaping today’s supply chain landscape.
AI and Data Center
Manufacturers in the AI and Data Center sectors report substantial growth driven by increasing demand for AI workloads, cloud infrastructure, and high-performance computing.
- Strong Demand for AI-related Components: AI workloads are significantly boosting demand across data centers, storage, processors, and networking equipment. AMD, Seagate, and Intel report notable growth in AI-driven infrastructure needs.
- High-Performance Computing Growth: AI developments are driving demand in data centers, memory, and storage, especially for high-bandwidth memory, SSDs, and specialized hardware. ASML, TSMC, and Seagate highlight growth in these areas due to the market activity stemming from the demand for generative AI and the need for components that can manage high-performance applications.
- Cloud & Generative AI Impact on Hardware Demand: Generative AI is fueling a surge in demand for specialized hardware, processors, and storage solutions. Amazon, Meta, and Seagate lead in cloud services and AI-focused infrastructure investments, indicating sustained growth in these sectors.
- Data Storage & Connectivity Needs: Cloud storage and AI-related data growth drive strong demand for high-capacity storage and high-speed connectivity. Seagate and MaxLinear reported rising demand for large-scale storage and advanced optical connectivity. Declines or slower growth are noted in legacy consumer storage and certain industrial markets, while broadband demand shows downward trends.
“Research suggests that longer form video content and personalization through AI technology can significantly enhance revenue generation opportunities for our customers. These trends bode well for mass-capacity HDDs, which are ideally suited for storing large and diverse data-intensive video content. HDDs comprise close to 90% of bites stored in public cloud environments, and we are confident that proportion will hold for the foreseeable future.”
– Dave Mosley, CEO, Seagate Technology Holdings
Automotive
Manufacturers in the automotive sector report a mixed landscape, with strong growth in electric vehicles (EVs) and advanced automotive technologies, especially in key markets like China, North America, and Europe. However, general automotive demand is varied headwinds from ongoing market recovery persist.
- Robust Demand in Electric Vehicles (EVs): EV demand is driving significant growth, with the strongest uptake in China. Key areas of demand include power semiconductors and advanced sensing technologies for EV components and autonomous features.
- Growth in Advanced Driver-Assistance Systems (ADAS): High-end EVs and ADAS technologies are experiencing rising demand in premium segments, particularly in North America, Europe, and Asia. Growth is supported by government incentives and increased consumer preference for sustainability and smart technology.
- Softening Demand for Traditional Internal Combustion Engine (ICE) Vehicles: Non-EV automotive demand is weakening, especially in North America and Europe, as noted by Onsemi, Allegro, and Flex. Shifting consumer preferences toward sustainability and economic pressures are impacting ICE vehicle sales.
- Production Challenges and Market Caution: Manufacturers are facing production and pricing challenges due to ongoing semiconductor shortages, supply chain disruptions, and inflationary costs. This has led to a cautious outlook for certain regions, with companies noting pressures on both production and pricing across automotive markets. Automakers Stellantis, Nissan Motor Co., and Volkswagen Audi have opted to lay off portions of their workforce and cut back on production due to the tough environment.
“Overall, I’m encouraged by the continued global demand for highly differentiated magnetic sensing and power semiconductor solutions across vehicle architectures and the significant progress made in rebalancing inventory in the channel. Chinese OEMs are hitting full stride with mid-20% growth in xEV production and a slew of new products and models at every price point.”
- Vineet Nargolwala, President and CEO, Allegro MicroSystems Inc
Consumer and Personal Computing
Manufacturers in the consumer and personal computing sectors report varied demand, with a strong interest in high-end consumer electronics but persistent challenges in mobile, PC, and traditional consumer markets.
- Weak Demand in Mobile & PC Markets: Recovery in mobile and PC sectors is slower than anticipated, impacting order volumes for semiconductor equipment and memory products. ASML and Samsung specifically note reduced demand in these markets.
- Mixed Consumer Electronics Demand: Demand is strong for premium consumer products, such as AI-powered wearables, next-gen smartphones, and advanced devices, particularly in North America and Asia. Traditional consumer electronics, including mid-tier smartphones and personal devices, show softer demand trends. Geopolitical and macroeconomic factors are influencing demand patterns in certain regions, leading to more cautious market outlooks.
- Inventory Challenges and Slower Growth in PC OEM Markets: High inventory levels and cautious consumer spending are leading to a decline in consumer electronics and PC OEM sales. Western Digital and Seagate have highlighted inventory issues and persistent demand weakness in these sectors.
“The PC market has some excess inventory, with those customers having restocked and not looking to replenish inventory. They're just building to demand at this point, same with smartphones; the consumer business has just been a little bit soft. So, you've got that dynamic. On the other side, you've got strong enterprise SSD demand. Now we expect, as we go through '25, we expect those smartphone and PC markets will recover as we go throughout the year and be stronger.”
– David Goeckeler, CEO, Western Digital Corporation
Industrial
Manufacturers in the industrial sector are facing mixed demand, with ongoing challenges in certain markets, particularly in Europe, and signs of recovery in others.
- Slowdown in Industrial Demand: Industrial markets are facing reduced demand, especially in Europe, with weak performance in factory automation and heavy equipment. Onsemi and STM have noted ongoing challenges in this area.
- Mixed Growth Across Sub-Sectors: Amphenol reports robust demand in alternative energy, medical, and rail transit, while factory automation, heavy equipment, and oil & gas remain weak. North America and Asia show strength, but European demand lags.
- Inventory Corrections and Cautious Optimism: Texas Instruments and Avnet highlight ongoing inventory corrections, with gradual recovery expected by 2025. MaxLinear and Avnet anticipate Q4 improvements, projecting modest growth in the new year.
- Sector-Specific Weakness and Long-Term Recovery: TE Connectivity and Avnet report sluggish demand in factory and building automation, especially in Europe, with full recovery anticipated in late 2025.
“Based on the industry sources we follow and the suppliers and customers I speak to regularly, global inventory levels across the supply chain are slowly improving, granted with pockets of oversupply in certain areas. That dynamic, coupled with current lead times, bodes well for improvement in our book-to-bill and the buildup of our backlog. These same industry sources are still projecting mid-to-high-single-digit growth rates on average, over the next three calendar years, with the highest growth rates in the primary end markets we serve: industrial, aerospace and defense, transportation and servers, and data center.”
- Phil Gallaher, CEO, Avnet, Inc
Mixed Outlooks Signal Strategic Shifts Ahead for 2025 Sourcing
The electronic component and supply chain sectors continue to navigate a complex landscape, where robust growth in AI infrastructure and EV technology contrasts with cautious outlooks in consumer and industrial markets. Each sector reflects unique pressures and opportunities that will shape the industry’s strategic direction. As earnings calls continue through November and December, ongoing analysis will be essential for determining optimal sourcing strategies for 2025.
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