By Jonathan Cassell
The industrial market is experiencing a slight acceleration in growth in 2024 as reshoring initiatives, technological advances and the continued global economic expansion drive increased manufacturing activity.
However, amid a slowdown in the automotive segment, the marginal manufacturing increase isn’t generating a major surge in demand that could make purchasing conditions more challenging for buyers.
Last year represented a low point for global industrial growth, with a less than 2% expansion due to reduced demand, high interest rates and manufacturing weakness in Europe. This year is set to see an increase in the growth rate, with a rise of nearly 3%, according to one market watcher.
Evidence of the acceleration is mounting, as the J.P. Morgan Global PMI Composite Index rose to 53.7 in May, up from 52.4 in April. A reading of 50 and above indicates growth. Manufacturing increased at the fastest pace in 29 months.
Reshoring is driving manufacturing growth in the U.S. and other nations as companies move to reduce dependence on China. Construction of manufacturing facilities in the U.S. is proceeding at the fastest pace in decades, with construction spending on manufacturing increased 62% in September 2023 compared to a year earlier, according to the Conference Board.
Meanwhile, manufacturers are increasing their investments in digital tools, such as digital twins and blockchain technology, to improve efficiency and productivity.
The accelerated expansion is translating into renewed growth for the industrial semiconductor market. Global industrial semiconductor market revenue is set to rise in the 2.5% range in 2024, compared to an approximately 6% decline in 2023, according to another market watcher.
This growth will likely transpire in the second half of 2024, as demand for analog and microcontroller (MCU) chips commonly used in industrial applications is presently weak. Sales of all types of analog chips are currently falling, with the Commodity IQ Demand Index below the baseline level for power, signal, converter and filter devices. MCU demand is also in decline.
Many semiconductors used in industrial applications also are suitable for the automotive market, where demand growth has slackened. As a result, the decline in automotive demand growth has helped decrease demand for these chips.
For buyers, this means that the rise in industrial demand will not bring a commensurate surge in component sales, and won’t spur increased pricing and availability concerns in 2024. As a result, the increase in industrial demand in the second half is unlikely to result in a significant change in purchasing conditions in 2024.