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Industry reads tea leaves on China consumer market recovery, AI to remain top dog

Jay Liu; Samuel Howarth, DIGITIMES Asia 0

Credit: DIGITIMES

The 2024 AI hype train has steamed through exhibition halls and made an ostentious stop at the NVIDIA GTC conference.

Moving into the second quarter of 2024, AI is expected to remain the most important topic in the entire market. The overall consumer demand market and the early signals of growth or decline will serve as crucial indicators.

Most electronics supply chain operators say upstream component manufacturers should start stocking up in the latter half of the second quarter. Chip manufacturers will also ship some new products with lower customer inventory levels ahead of schedule, operators said.

Sales performance during China's 618 shopping festival will be the biggest indicator of the strength or weakness of the traditional peak season momentum in the second half of 2024. The current interest and order volume surrounding AI are very high, however, many supply chain operators say that AI-related applications and applications outside of AI are completely different worlds.

Operators that established connections with AI are set to enjoy bustling demand prospects, while those who fail to do so face significant challenges and uncertainties similar to those in 2023. Therefore, operators will pay close attention to market signals in the second quarter of 2024.

If the overall economy and consumer market fail to rebound or stabilize, products unrelated to AI may experience limited growth momentum in the latter half of 2024. Furthermore, the growth momentum of AI applications itself may also be suppressed.

Except for networking and industrial control supply chains with relatively obvious inventory reductions and uncertain demand beyond 2024, current major application products have returned to normal cyclical conditions after the inventory levels have recovered.

The second quarter of the year is the extension of the traditional off-season. However, it is not expected to witness unexpected effects typical of the upheavals of recent years.

Most electronics supply chain operators remain cautious and conservative about the second quarter. Operators say they are cautious about significant changes or growth in operations and are keeping an eye on economic and market dynamics in the latter half of the year.

China's 618 shopping festival remains a performance indicator. As China continues wrestling with economic challenges, global markets are watching to see how much consumer power can still be squeezed out.

Bulk consumer electronics products including smartphones, PCs, TVs, and other applications, may have to adjust their sales strategies for the traditional peak season after the sales results of 618 become clear. If China's consumer spending during 618 is strong, the momentum for the entire supply chain in the latter half of the year should reach the expected peak season levels.

If buying sentiment during 618 is weak, it could spell uncertainty for the momentum for the peak season in the latter half of the year.

A more direct indicator could be the level of stocking up for upstream components of new products. This is because many operators have stated that new products planned for introduction in 2023 will be delayed until 2024 for shipment.

With relatively low inventory levels of new products, the initiation of stockpiling is likely to begin earlier. The visibility of orders extended is also an important indicator.

The entire supply chain has faced high inventory pressures since 2022. The visibility of orders for many component manufacturers has been compressed to less than a quarter.

Recently, visibility has extended to over a quarter. If orders for the third and even fourth quarters can be seen from the second quarter onward things can be said to be looking up it will be a relatively optimistic signal.