January 2025 collection of news summaries, survey results, and channel market insights on Interconnect, Passives & Electromechanical Components from Edgewater Research.
Downtick to 1Q25 IT Datacom Expectations, Mixed Datapoints in Other Markets
What’s Changed/What’s New?
1. Green shoots seen in 4Q order trends in some markets, particularly in Dec. Improvement seen in disti orders (Americas and Asia) tied to some inventory replenishment as well as from Telco, Traditional IT and Broadband.
2. 1Q industry outlooks noted as sub-seasonal at down LSD-MSD Q/Q on extended shutdowns in China (CNY) and Europe (1st week of Jan). 2025 industry forecasts seen as little changed at LSD-MSD growth with expectations for muted 1H and stronger 2H recovery.
3. Auto demand seen as challenging through most of 2025; IP&E demand projected flat to up MSD on China growth, muted West.
4. 1Q forecasts IT infrastructure trimmed on volume shifting into 2Q due to some AI projects ramp up delays.
Top 4 Channel Comments:
• Our orders to connector suppliers are up double digits compared to the run rate in 1H24. We made the decision to invest in inventory after we reached record low in dollar terms in mid-2024.
• For the first time in over two years, we are seeing signs of improvement since late September. Bookings have shown a gradual but consistent uptick, with our core interconnect business recording its first positive B2B in September. Notably, B2B was positive in three of the last four months of the year.
• We see 90% probability of new EV incentives in Germany, based on projections for the likely coalition. Most parties recognize the importance of subsidies for the EV and renewable energy markets. The challenge lies in financing, but we anticipate incentives taking effect by April or May.
• Demand from core Industrials remains weak. Rockwell, Schneider, Honeywell, Emerson and Siemens bookings continue to trend flattish.
Other Key Takeaways:
5. Euro Auto demand projected down Y/Y in 1H on additional layoffs and capacity idling. Renewed optimism about Germany introducing EV incentives by April/May offering hope for a 2H demand recovery.
6. China Auto still strong with YE ramp-up driving 4Q upside. 2025 demand projected up, with PHEV demand outpacing BEVs.
7. Industrial still muted, particularly in Europe, though with pockets of demand/inventory improvement. Recovery still hoped for 2H.
8. TE seen as likely idling capacity that serves European Auto and Industrial customers in 1Q to prevent inventory buildup.
9. Connector suppliers are seen passing through normal (LSD) cost downs with direct customers to start 2025, while raising prices by LSD in distribution across some AD&M and Industrial product lines.
10. Amphenol’s backplane viewed as one of the bottlenecks hindering AI project ramp ups, due to signal integrity performance, intensified by supply challenges. Optimism remains for a resolution, though timing and required mitigation actions are unclear.
11. AI customers seen testing alternatives to cabled backplane with PCB seen as a candite for system’s backplane in 2026 and CPO/CPC potentially beyond that.
Conclusion:
IP&E fundamentals are showing early signs green shoots to start 2025, though demand indicators still vary significantly by end market and geography. Pockets of growth are emerging in Telco, traditional IT, and distribution POP, but demand in Industrial and Auto remains subdued. Visibility remains limited, but B2B trends are gradually moving into positive territory, and signs of inventory normalization are starting to emerge. Some AI project delays are shifting volume forecasts from 1Q to 2Q, though IT demand remains strong and expected to drive industry growth in 2025. Demand forecast for 2025 remains largely unchanged at up mid-single-digit Y/Y, with the sector nearing the end of its inventory-driven downcycle and likely transitioning to shipping at consumption levels by 2H25.
Full report available from: Dennis Reed, Sr. Research Analyst, Edgewater Research
