TTI MarketEye – Market Conditions Report: Q2’24
By Dennis Reed
In the second quarter of 2024, inventory reduction remained a priority across all market segments (customer, distribution, EMS, supplier), but progress was mixed. Publicly traded companies exited 1Q24 with inventory dollars up 2% Q/Q (down 4% Y/Y), and days on hand up 16% Q/Q (down 1% Y/Y). This increase was mainly driven by OEMs, whose inventory dollars and days on hand rose by 12% and 29% Q/Q, respectively, due to seasonality and AI deployment buildup. The mixed performance highlights persistently high inventory levels and uneven progress. Going forward, destocking is expected to stay a priority, with sub-segments like IP&E showing signs of normalization. The uneven inventory digestion, short lead times, and uncertain end demand are creating a mixed ordering environment. B2B ratios have slightly improved Q/Q but remain below 1x, with limited visibility into 2H24 across most end markets.
Demand by end market and geography remains mixed. Asia Pacific experienced a seasonal rebound in 2Q after a weaker first quarter. In China, Computer, Smartphone, and general Consumer Electronics are showing signs of improvement with seasonal increases in orders and shipments in 2Q. The Automotive sector is mixed and competitive, particularly in the Electric Vehicle (EV) market, where the price war among Auto OEMs is moving downstream to components, while the industrial market remained stagnant, with a disappointing recovery. The broader Asia Pacific region remained in a slow recovery, outperforming China. AI demand remained robust, showing continued upside. In 2Q24, signs of improvement were also seen in traditional server and storage markets. In the West, the Americas outperformed EMEA, but most end markets aside from Aerospace & Defense remained muted. Pockets of green shoots in the Industrial markets provided some confidence in a bottoming pattern, particularly for IP&E, where inventory levels are better than in semis. The Automotive market remained mixed, with EV weakness offset by improvements in Internal Combustion Engine (ICE) and hybrid demand. Fundamentals across geographies and end markets are mixed, with limited visibility and minimal backlogs for the rest of the year.
Halfway through 2024, it has become increasingly clear that this will be a transition year before growth returns in 2025. Inventory levels have started to normalize in areas like IP&E, but further destocking is needed in semiconductors, which will keep the overall growth rate muted for the remainder of the year. While the downturn has lasted longer than initially expected, long-term demand drivers such as automation and electrification remain firmly in place, and we see a return to a typical growth pattern in 2025 with at least mid-single digit growth in demand.
