October 2024 collection of news summaries, survey results, and channel market insights on Interconnect, Passives & Electromechanical Components from Edgewater Research.
IT Datacom Outlook Robust Through 2025 While Recovery in Other Markets Remains Muted
What’s Changed/What’s New?
1. Order trends viewed as mixed with softness in Auto, stability in Industrial, and continued strength in IT datacom. 3Q aggregate B2B seen finishing flat to down Q/Q and near 1 globally.
2. IT datacom shipments still forecasted +20% 2H24/1H24 and +25% in CY25 despite renewed volatility in Nvidia/AI datapoints.
3. Auto reads remain softer on 2H production cuts in the West with pushouts of new programs creating additional headwinds in CY25.
China Auto demand noted better in Sept/Oct on YE production ramp-up.
Top 3 Channel Comments:
• Planning for a low single-digit demand growth in 2025 with growth being back-end weighted. The Industrial Automation market is not showing any signs of recovery. Customers continue to sit on inventory and provide no visibility. We don’t see it getting much worse from here but it’s also not getting better.
• TE and other suppliers are talking about recently ramping down some connector capacity in Industrial. This tells us they don’t see a recovery near term. At the same time, if demand jumps, supply can become tight quickly.
• New programs in Auto are being pushed out/delayed while existing programs are being extended. We see that across most OEMs and tier 1 customers in N.A. Aptiv just extended an existing program through 2027, that was supposed to end with model year 2025 vehicles. Tier 1 Auto suppliers say this is driven by cost, demand, and elevated inventory of electronic components.
Other Key Takeaways:
4. Auto/Ind/Disti demand forecasted to remain muted through 1Q, with recovery expectations pushed out at least to 2Q.
5. Initial Nvidia NVL connector shipments noted in Oct, but some 4Q volume seen pushing out to 1Q on cooling/connectivity delays.
6. Connector/cable content in Nvidia Rubin racks noted as unlikely to crystallize before Feb/Mar. Risk to content from CPO/Optics viewed as modest with mix AEC/DAC seen as the most viable option offering fewer thermal, power, and manufacturing challenges.
7. Commercial transportation demand still muted. Appliances seen as stable with uptick in demand for high-end units in N.A.
8. TE/other suppliers seen temporarily reducing Industrial capacity, implying continued softness in NT outlook. Positive demand in warehouse automation and semi capital equipment (outside of N.A.) seen offset by continued inventory destocking and weak end demand in other sub-markets.
9. Aero demand seen moderating on lower Boeing production; Mil outlook also decelerating in 2H on program lumpiness/reduced funding.
10. Green shoots seen in connector orders from distis due to normalized inventory, but replenishment muted due to lack of POS recovery.
11. Consumer demand viewed as mixed with lackluster demand from PC and CE, stability in Appliances and seasonal Apple strength.
12. Initial aggregate 2025 forecast seen as conservative at LSD/MDS growth tied to muted Auto/Ind forecasts and strength in IT outlooks.
Conclusion:
IP&E fundamentals remain mixed through 3Q, with the outlook similarly mixed for the rest of the year. AI continues to be the workhorse for the industry, along with a more seasonal Consumer/Smartphone market, while an Industrial/Automotive recovery remains elusive.
Although visibility in IT datacom strength extends into 2025, the narrow market breath (Industrial/Auto/other) and some program delays in Auto temper our overall enthusiasm for 2025. We continue to see a path to recovery, but without broader markets/geographic support, we expect a choppy recovery in 2025.
Full report available from: Dennis Reed, Sr. Research Analyst, Edgewater Research