Growth this year will be driven by second-half performance.

The ECST survey results disappointed for the second month in a row, with the overall component index falling 13.4 points in June, falling below the 100-point mark to 98.9. The combined declines of more than 25 points in May and June wiped out all the upward momentum achieved since the beginning of January. Survey respondents again expect a rebound in July, with the outlook improving by 13 points to 111.9. However, confidence in this outlook is also shaky after two consecutive months of major forecast misses.

01 Semiconductor Sector

All three sectors fell sharply, with the semiconductor sector falling the most, down 16.2 points in June and nearly 35 points in May and June combined. The electromechanical sub-index fell 15.1 points in June, resulting in an overall decline of more than 25 points in the past two months. In contrast, the passive components index fell relatively less, down 8.7 points in June and 15.5 points in May and June. Market sentiment for the first half of 2024 has basically reset to the level at the beginning of the year.

In the ECST quarterly survey released last month, people still have hope for 2024. The survey showed that 53% of respondents expected economic growth in the third quarter, and 18% expected economic growth between 3% and 5%. Among the three product categories, the most optimistic about growth in the third quarter was electromechanical/connectors, with 61% expecting growth and 24% believing that growth would exceed 3%. The June ECST results and the third quarter outlook results reinforce the expectation going into 2024 that growth this year will be driven by performance in the second half of the year.

02 What about other manufacturers?

Manufacturers' confidence index continues to remain strong relative to the rest of the population, with June scores close to 110 despite double-digit declines. Manufacturers' and dealers' index results are below the 100 threshold at 97.3 and 93.2, respectively. Both manufacturers and dealers expect a strong rebound in July, with scores rising to 120.9 and 117.9, respectively. In contrast, manufacturers' representatives are more pessimistic about July, with scores falling further to 93.6. The July outlook will bring relative expectations among the three groups back to more normal levels over the past year.

Despite a significant decline in the overall end market index score, the index score remained above 100 in June at 103.1. The results were mixed across the segments, with half of them maintaining scores above 100: avionics/military/aerospace, industrial electronics, computers, and medical electronics. In the July outlook, scores for automotive electronics and consumer electronics are expected to be at or above 100. Scores for telecommunications networks and mobile phones hover below 100. As the market continues to battle economic headwinds, an air of uncertainty once again pervades the electronics and electronic components industry. Perhaps the key question is whether the advances made in the technology space will be enough to support improvements in the electronics market despite the troubling economic environment.

Overall, ECST's reported delivery time status remained largely unchanged between May and June. The only significant difference was in semiconductors, where the number of respondents reporting a drop in lead times fell from 17% in May to 7% in June. This change in the semiconductor sector may be due to the surge in demand for DRAM and NAND flash memory. Nonetheless, reports of stable delivery times still dominate, as the share of respondents reporting stable delivery times increased from 80% in May to 86% in June.

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