Why Electronics Should be Optimistic for 2025

Some pundits are a bit lukewarm in making predictions for the electronics industry for the coming year. Moderate growth at best some say. However, my stance is more bullish. 2025 is going to be a good year—and 2026 will bring our industry unmatched success. The industry has learned some lessons about the need for resilience and diversification. New technologies such as artificial intelligence are pushing things forward both in terms of supply chain technology and technology trends.  Stable markets are likely to stay stable and high-growth markets will do better than we expect.

It’s been a tough couple of years—and we’ve been saying we have hit bottom forever. Now, though, we’ve finally found the bottom and things are looking up.  Generally, I think the analysts with predictions of 10 percent growth across the industry are on target for 2025. Further, that growth will gain momentum as the year continues. 2026 is going to finally be the blockbuster year that we’ve been wanting.

We’ve seen business activity rise above current thresholds of a year ago in terms of month-on-month growth rates. General sales activity is rising as demand picks up and manufacturers work through their inventory.  We are seeing it in the quarterly reports from electronics players who are public, and we’ve been hearing it in conversations with our partners. The whisper is becoming a hum in the general industry.  That’s not even considering the growth of artificial intelligence  memory and GPUs —a sector that has only a few players and that has been incredibly active recently, and likely to get more so.  In that sector, growth is very robust which helps raise the overall industry growth rate to around 15 percent.  Meanwhile, the legacy space has enjoyed a steadier situation since the customers it serves, primarily industrial, aerospace, defense and medical for example, are less volatile.

Now that we are past the uncertainty of the presidential election, things are going to settle down. No matter which side of the aisle you are on, not knowing the outcome was the biggest hurdle to making plans. Now, we have a sense of where things are going and we can start planning for the future.

Another positive sign is the Federal Reserve’s (Fed’s) Federal Open Market Committee’s (FOMC) has cut rates consistently, and may be cutting rates again in the near future. In November, a 0.25 percent cut in the federal funds target rate was made, following a 0.50 percent in September. These are promising signs following the rate hikes of 2022 and earlier in 2023. This lower cost of capital should space more capital spending into industrial and other key market segments.

In terms of slicing the pie geographically, North America and Asia are on track to capture growth in this next cycle. Although tariffs, potentially stiff ones, are on the horizon, China will continue to invest in the electronics industry in an effort to capture leadership in the space. Europe, however, has a less hopeful scenario as the market will likely remain flat in the coming year.  As a country, the investment in 5G technology has created a glut of installed capacity.  6G is still on the horizon. We expect that it will take time to burn off the excess capacity and return to growth.

In short, 2025 is going to be good but 2026 is going to be even better.  This will be the year to continue to focus on resilience and partnerships in order to be poised for the opportunities to come.

To read the article on EPSNews, click here: https://epsnews.com/2024/12/04/why-electronics-should-be-optimistic-for-2025/