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Consumer electronics sector sees glimmer of recovery

  • Market: Metals
  • 05/05/23

The consumer electronics industry is eyeing a potential recovery, with global chip sales rising in March for the first time in almost a year, and several major manufacturers anticipating stronger demand for their products in the second half of 2023.

Revenue from chip sales totalled $39.83bn in March, up by 0.3pc compared with February, according to the Semiconductor Industry Association (SIA). Sales to Japan and the Americas remained under pressure in March, but uplift was registered in Europe, China and other parts of Asia-Pacific.

It marks the first month-on-month increase in global chip sales since May 2022, "providing optimism for a rebound in the months ahead", SIA president and chief executive John Neuffer said.

Such glimmers of upside are welcomed by many in the electronics industry and the metal markets that feed into it. Demand for consumer electronics has been in the doldrums for almost a year now, in part because of an inevitable cooling down after Covid-19 lockdowns drove up global demand for products such as laptops and smartphones, but also owing to macroeconomic headwinds that have impacted spending habits. Electronics manufacturers have also had to shoulder increased costs in the past year, amid higher energy prices and rising inflation rates, as well as supply chain challenges for certain components.

The first quarter of 2023 has remained challenging. Despite the slight uptick in March, total revenue from chip sales fell to $119.5bn in the first quarter — down on the year by 21.3pc and a decline of 8.7pc from the fourth quarter, according to the SIA.

After many months of sluggish demand, several chip makers have recently been cutting production, including South Korea's Samsung Electronics. The firm's semiconductor division last week posted a 4.58 trillion won ($3.48bn) operating loss for January-March. It noted lower overall demand amid the global economic slowdown and reduced customer spending, as well as some inventory adjustments by server customers for DRAM chips.

But Samsung expects semiconductor demand to gradually recover in the second half of 2023 "as customer inventory levels will have declined due to inventory adjustments occurring since the second half of last year". It also noted that opportunities to expand new customer orders will increase in the second half of the year, as its advances its next-generation technologies.

Several other electronics manufacturers point towards similar trends, working through a tough first half of the year but expecting higher demand in the second half. Taiwan's TSMC last month forecast that its second-quarter revenue will be down on the year by roughly 15pc because of macroeconomic challenges and high customer inventories, but conditions will then improve as inventories rebalance.

Meanwhile, US-based Sony expects to ship a record-high number of PlayStation 5 (PS5) games consoles this year, after the resolution of some supply chain issues. "Distribution inventories have also normalised, and we are now able to deliver PS5 to customers without waiting almost all over the world," the company said late last week. It remains to be seen when these suggestions of upside will translate into increased demand for minor metals.

For now, most electronic metal market participants remain cautious, particularly in western markets, which are always wary of getting caught short but are reluctant to overstock while consumption is still fairly slow.

Prices for hafnium have soared in recent months as the metal's constrained supply base gets pulled at by growing applications in both the electronics and super alloy industries. But the spot market for most electronic minor metals has remained quite quiet this year, outside China.


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