Sourcengine’s Q3 Lead Time Report Takeaways to Prepare for Q4

Every quarter, Sourcengine utilizes real-time market data and robust resources to create a thorough lead time report for active and passive component markets. Sourcengine’s Lead Time Report features up-to-date information on the availability of a wide range of electronic components from a slew of chipmakers. This report is a summary that reviews the performance of lead time and price trends in the electronic components market over Q3 and how it will impact Q4.

Artificial intelligence (AI) has fueled demand across the DRAM and NAND flash markets with high orders for high-bandwidth memory (HBM), solid-state drives (SSDs), graphics processing units (GPUs), and advanced semiconductor packaging. This high demand has contributed to shortage-like conditions for some of the components or processes needed for AI technology. Many memory suppliers, such as SK Hynix, Samsung Electronics, and Micron Technology, have increased production capacity to combat these challenges.

Longer lead times and higher price trends are expected to continue through 2025 as AI is forecast to remain in high demand with the debut of AI smartphones and laptops.  

However, lead time and price trends have continued to stabilize due to flat customer demand. Excess electronic component inventory is still affecting many components and will do so in 4Q24.

At the beginning of the year, Edgewater Research reported that 2024 would be a transitional year for the electronic components market, from the significant downturn in 2023 to overall recovery in 2025. Artificial intelligence has prompted heightened demand in some areas but has not been a market savior, drawing the entire industry out of its slump. Recovery will only be possible with the continued efforts of excess mitigation and stringent control over production by suppliers.

The industry is stable right now, but things can change quickly. Looking at the pricing trends throughout Q3 reveals that most sectors have experienced stability during summer and are coming into Q4 with low lead times and average selling prices (ASPs). However, severe weather and labor incidents could muddy the industry’s calm waters.  

Q3 2024 Electronic Component Lead Time and Price Trend Takeaways

As we’ve seen throughout the year, the memory market, specifically HBM and SSD products, has seen the most constraints.  

Across the broader semiconductor and PEMCO markets, most continue to see stabilization, with some products trending down in lead time or price as availability increases.  

• Samsung Electronics and Micron Technology will increase prices across their DDR3, DDR4, and DDR5 products. Samsung’s recent decision to release reball DDR4 and DDR5 chips has caused concerns about more price drops across DRAM.  ‍
• Western Digital, Samsung, and Micron have been experiencing tight production capacity for their storage products, specifically its SSD, eMMC, and HDD parts. Pricing is high already and there will likely be further increases over Q4 and 1Q25. ‍
• MLCC high CV products will see lead times increase over Q4 compared to other MLCC type parts, which are forecast to remain stable. ‍
• Kemet/Yageo, Kyocera AVX, and Vishay are all seeing lead times rise for their Tantalum polymer capacitors, with Kemet/Yageo lead times already stretching far beyond the average at 18 - 47 weeks.
• Due to increased inventory levels, lead times for electromechanical products are trending down as their availability continues to rise.  

Overall, increased inventory has contributed to lead time stabilization across the semiconductor and PEMCO markets. Flat consumer demand has led to market conditions recovering more slowly than anticipated, with lead times dropping in select PEMCO products. Long-term demand is forecast to remain sporadic, but short-term requirements can receive the necessary support due to inventory availability.  

Inventory burn-down and economic headwinds are contributing to poor consumer demand. Still, as the industry enters the peak shopping season at the end of the year, there will be an increase in short-cycle buys.  

Quarter-Over-Quarter Comparison

When looking at what happened in Q3 to best prepare for Q4, several vital reasons why Q3 was mainly uneventful, but the last quarter of 2024 might be different, should be noted.

1. Excess electronic component inventory has kept inventory levels high enough that buyers do not need to order more stock to fill backlogs. Buyers that do need to procure stock have been procuring excess, which is often cheaper, to fill any backlogs that arise.
2. Consumer demand hasn’t yet returned from the slump in 2023, which has kept orders low.
3. Supply chain disruptions such as natural disasters, geopolitical instability, and market changes have been appropriately managed. For example, the Red Seas Crisis, which has been impacting the Suez Canal for most of the year, has been ongoing. Logistics companies have been able to find alternative routes to circumvent the canal without causing massive spikes in lead time or price.
4. Overall, DRAM has been weak. However, memory suppliers have been reducing production capacity to focus on HBM products, keeping supplies tight to prevent further inventory build-up.

Going into 4Q24, concerns are brewing regarding the DRAM market. Over Q3, DRAM experienced low ASPs due to the influx of reball DDR4 and DDR5 chips from decommissioned modules and aggressively increased production by Chinese memory suppliers competing with the top three memory makers. Suppliers have needed to cut prices due to high inventory pressures, along with a sell-off in the spot market.  

NAND Flash is seeing similar challenges, with waves of inventory reductions throughout Q3 contributing to a “decrement of prices,” says TrendForce. Excess inventory plagued NAND Flash and DRAM the heaviest in 2023 before AI brought some products out of their downward spiral. However, the overall spot market in both major memory sectors continues to face extensive pressure from excess inventory.

This has led some firms to develop a pessimistic view of the upcoming quarter and first half of 2025’s fiscal year. Stanley Morgan analysts specifically have begun warning buyers of an incoming “DRAM Winter,” in which the heavy focus on HBM will lead to an uncontrollable oversupply. With low prices, some have found Stanley Morgan’s report to be a worrying glimpse into the future.

However, many industry analysts, including TrendForce, argue that Stanley Morgan’s outlook is excessively pessimistic compared to current standings. Industry experts say that the HBM market is too full of “customized, client-approved products,” which makes oversupply far less likely.  

Similarly, Samsung and SK Hynix's capacity for HBM is wholly booked out through 2025, with TrendForce Senior Vice President Avril Wu commenting,

“While DRAM prices have been weak, the overall ASP is expected to rise in 2025. Pricing across different products may vary, but the increasing penetration of HBM should help stabilize the DRAM market over 2025.”

As raw material shortages and logistics challenges were mitigated, the PEMCO market saw lead times drop significantly over 1H24. Lead times and pricing remained stable over Q3 as customer demand remained low.  

That said, going into Q4, there might be challenges that could compound into a significant supply chain disruption.  

Within the last month, deadly typhoons in Southeast Asia mutilated dozens of ports, contributing to existing congestion from the Red Sea Crisis. Then the International Longshoremen’s Association (ILA) in the United States began striking across East and Gulf Coast ports on October 1st, 2024. Finally, Helene, a Category 4 hurricane, made landfall in the Southern U.S. last week, impacting the supply of highly pure quality quartz mined in Spruce Pine, the largest naturally occurring source of the mineral.

Should the ILA strike keep ports closed for even a week, this could lead to tremendous backlogs that could take four to six weeks to resolve. If companies expect demand to improve in early 1H25 and the ILA strikes persist for several weeks, orders should be made now to circumvent the worst of oncoming logistics delays. However, manufacturing might grind to a halt of Spruce Pine’s mining facilities have been severely damaged by Helene.

It will be essential for companies to keep an eye on how the situations in Southeast Asia and U.S. develop in the coming weeks. For more information and forecasts for embedded devices, advanced analog parts, and programmable logic components, check out Sourcengine’s Q3 2024 lead time report.