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Jabil's Global Commodity Intelligence Archive
Q4 2024 | OCTOBER - DECEMBER
Jabil's Global Commodity Intelligence Archive
Q4 2024 | OCTOBER - DECEMBER
DISTRIBUTION
MARKET OVERVIEW
The distribution market has stabilized as 2024 comes to an end. Although the downtrend in revenues has leveled off, with some sectors experiencing slight upticks, overall revenue for most distributors remains flat. There's a consensus that significant market recovery is delayed until 2025. However, optimism is high for a more robust performance in the latter half of 2024. Distributors note healthier inventory levels compared to two quarters ago and an improvement in book-to-bill ratios, some exceeding 1.0. Lead times have also stabilized, enhancing supply chain flexibility. Distributors remain positive, focusing on growth sectors such as automotive, medical, and AI data centers to drive future demand.
Revenue & Book to Bill
- Overall, Distributors’ revenues are stabilizing. Asia continues to be soft but looks to have bottomed out, which is positive. (Asia is usually the leading indicator for the global outlook in the coming months.)
- Book-to-bill ratios have increased or flattened overall, which is a positive sign
SUPPLY
- Global supply chains have stabilized. Lead times are reducing or holding steady for most commodities.
- Some product groups continue to be severely constrained (e.g., specific MCUs, military-grade, or older technology products), and there’s no sign of alleviation for the short-mid-term.
- Some Semiconductor manufacturers are cautioning against a tightening of supply in the coming quarters and are requesting more extended forecast coverage.
Margin Trends
- Distributors are seeing their margins stabilize – they faced headwinds from more robust competition, geopolitical conflicts, less opportunistic purchases from customers, and a slowdown of general price increases. With the current softer demand, manufacturers are lowering prices, allowing distributors to capitalize and regain some margin.
MARKET DYNAMICS
- Short lead time orders are dropping in from customers given reduced lead time.
- Distributors are no longer seeing as many pushouts & cancellations signaling stability.
- There is a continued focus on new design activity. Many new projects/upgrades to the next generation of products result in an increased effort in design & engineering. This further fuels the optimism for demand to return to a higher level when these projects and models go into mass production.
Inventory
- Inventory levels have stabilized overall as most of the excess material has been bled off with current inventories at more “normalized” levels.
- With manufacturers trying to keep sales numbers up, they are pressuring distributors to take more material.
PRICE
- While prices continue to decrease for certain commodity items, particularly in regions such as China, overall reductions are constrained by rising raw materials, freight, and labor costs, preventing prices from returning to pre-pandemic levels.
- Memory prices have been on the rise due to capacity reductions by significant players in recent months, affecting supply and pricing dynamics.
SUMMARY
The distribution market is experiencing a book-to-bills increase, which gives some relief for the remainder of the year. They are optimistic about the longer-term forecasts and expectations of specific growth markets. At present, distributors are trying to push revenues up, shipping out what they can. Visibility to long-term demand is not strong yet, but indicators suggest there are reasons to be positive on the horizon. Distributors are currently focused on demand creation and cost – both on the product side and expenditures.
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