By Jonathan Cassell
A combination of rising sales volume and increased penetration of AI features in smartphones is expected to drive up demand for wireless semiconductors during the second half of 2024, producing more challenging supply-chain conditions for buyers.
Following a slight decline in 2023, global smartphone shipments are set to rise marginally in 2024, with market watchers predicting an increase in the mid-single-digit percentages for the year. While this represents just tepid growth, the rise in 2024 is set to bring an end to a three-year period of consecutive contractions for the smartphone market. Moreover, the rising share of generative AI-equipped models is driving up semiconductor content in these devices, further propelling chip demand and driving up smartphone ASPs.
Conditions in the wireless semiconductor business are undergoing a rapid shift in 2024. After declining in the 15% range in 2023, global wireless semiconductor market revenue is set to rebound by a similar magnitude in 2024, representing an approximately 30 percentage point swing to the positive for the year. Much of this growth in demand is transpiring in the second half of the year, in keeping with normal patterns for the electronics supply chain.
Generative AI-equipped smartphones are expected to account for nearly 20% of the total market in 2025, representing more than 230 million units, according to market watchers. This fast rise in AI penetration represents breakneck growth for a new mobile feature.
The market’s transformation is already starting to impact demand trends in the electronics supply chain. The Commodity IQ Demand Index in July reflected the current reality, showing double-digit increases for critical components employed in smartphones and other wireless applications.
Amplifier circuit sourcing actions surged by 18% in July compared to June, the third-highest rate of increase of all components tracked by Commodity IQ. RF and microwave sourcing rose 17% in July – the fourth fastest-growing segment. Crystal/resonator demand rose by 14%, while oscillators increased by 13%.
While demand for amplifiers and crystals/resonators remains depressed compared to the 2020 baseline, oscillators are approaching the breakeven point, and RF and microwave devices even rose above the baseline for the month.
For buyers, the impact of rising demand will be felt in terms of lengthening delivery lags, with The Commodity IQ Lead Time Indexes for amplifiers, crystals/resonators, oscillators, and RF and microwave devices all expected to remain above the 2020 baseline at least through the end of the year.
Under the current circumstances, buyers should seek to enter long-term agreements to lock in pricing and supply terms before conditions worsen further.
Jonathan Cassell is the lead analyst for Commodity IQ.