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Jabil's Global Commodity Intelligence Archive

Global Commodity Intelligence

Q1 2025 | JANUARY - MARCH

DISTRIBUTION

The global supply chain has stabilized, with lead times reducing or holding steady for most commodities and experiencing minimal fluctuations.
Certain product groups, such as military-grade or mature technology products, remain severely constrained, with no short-to-mid-term improvement expected.
Some passive component manufacturers are cautioning about a potential supply tightening in the coming quarters, prompting requests for longer forecast submissions. Key distributors in this space are taking positions to mitigate potential risks.

The distribution market plateaued in Q4 2024, with revenues stabilizing from the earlier downtrend and no significant rise forecasted in the near term.
Larger players have tightened expenditures and costs, anticipating a "correction" period with significant demand recovery in the second half of 2025.
Distributors are identifying growth opportunities in certain sectors, with AI emerging as the primary focus industry.
Inventory levels are healthier compared to two quarters ago.
Book-to-bill ratios have improved, with some distributors exceeding 1:1, while most remain slightly below.
Stable lead times are offering greater flexibility in the supply chain.
Distributor sentiment remains positive, with demand holding steady in target growth segments such as automotive, medical, and AI data centers, which are expected to drive demand.

REGIONAL VARIANTS

REVENUE & BOOK TO BILL

Overall, Distributors’ revenues are stabilizing. Asia is leading on the recovery with the Americas closely following. Europe is still behind on Revenue given that inventory has not been flushed out. (Asia is usually the indicator for the global outlook in the coming months.)
Book-to-bill ratios overall have increased for distributors, hovering just below 1 overall. Europe is still lagging behind the other 2 regions of Asia and the Americas with recovery expected mid 2025.
Europe continues to lag, with inventory concerns persisting.

DEMAND OUTLOOK

Distributors are projecting a conservative outlook in the near term, with orders primarily consisting of short-to-lead-time POs as customers remain risk-averse, focusing on immediate needs and avoiding long-term commitments.
Stability has improved as distributors report fewer push-outs and cancellations.
There is a strong focus on new design activity, with projects and next-generation product upgrades driving increased design and engineering efforts. This is expected to fuel higher demand levels once these initiatives reach mass production.
Demand is forecasted to increase in the second half of 2025.

INVENTORY

Inventory figures have stabilized overall, with most of the excess cleared. Europe remains a short-term concern but is expected to reach stability in the coming months.
Manufacturers are pressing distributors to take on inventory, creating challenges in maintaining the right balance and mix.
Distributors are increasingly tasked with alleviating customers' inventory pressures, shifting away from a conservative inventory stance, and reinforcing their foundational value in the supply chain.

Pricing for commodity items continues to trend downward, particularly in regions like China. However, rising costs for raw materials and labor are limiting the potential for further significant price reductions.
Memory prices are on the rise, driven by capacity cuts implemented by major players in the sector over the last several quarters.

MARGIN TRENDS

Margins for distributors have stabilized but remain below optimal levels due to stronger competition, geopolitical conflicts, reduced opportunistic purchases by customers, and a slowdown in general price increases.
To maintain profitability, larger distributors are shifting their focus toward increasing market share.
Softer current demand has led manufacturers to lower prices on commodity items and offer deals to sustain revenues, creating opportunities for distributors to capitalize and improve their position.

The distribution market is experiencing an increase in book-to-bill ratios, relieving some pressure.
Distributors remain optimistic about the longer-term outlook, particularly for growth in certain markets.
In the short term, efforts are focused on maintaining revenues by shipping available inventory, despite limited visibility into long-term demand.
The primary focus for distributors is on-demand creation and cost management, both in product pricing and operational expenditures.