MARKET FORECAST


In the electronics industry, every boom has been preceded by a bust


gives the distributor a very clear threemonth, ormore, look ahead on component demand. This look ahead suggests that backlog is real and that near termincoming order rateswill hold up.


What is fueling demand?


The other piece of the puzzle is endmarket demand. A reviewof sales of electronic equipment suppliers inmarket segments ranging frommedical tomilitary, and consumer to communications, also shows strong double digit growth rates throughQ1 2010. The analystswho forecast the endmarkets like semiconductor and automotive almost all see underlying demand holding together for at least the next couple of quarters. This is being driven by governmental stimulusmoneymaking itsway into the economy (especially in Asia), the on-going explosion of demand formobile broadband, and the aging of electronics based infrastructure though out theworld, ranging fromairplanes to data communications equipment.


So to lowinventories and strong


demand,we nowadd reduced component factory capacities andwe find ourselves in today’s environment where lead times on even commodity passive components are greater than six months. This has created amad scramble for parts. Is some of this scramble speculative? Probably. Is there some double ordering going on? Almost certainly, though probably not at a level that is significant, and less so in thewest than the east. But for now,what the channel is booking and shipping seems both real and relatively sustainable in the near term.


It is falling lead times thatwill cool off the


market for electronic components, not falling endmarket demand. Inmost of the product sets TTI distributes, the distributor anticipates that thismay happen sometime toward the end of this year. As the supply chain (including rawmaterials, which at themoment amajor cause of concern for tantalumcapacitors in particular) recalibrates tomore normal lead times, neworders on componentmanufacturerswill certainly slow, and push outs, and perhaps some cancelations,will occur. But distributor point-of-sale shouldn’t collapsewhichmeans that once recalibrated, the channel should find itself in amore sustainable growth pattern that,whilemuchmoremodest than the last sixmonths,will trend up- and-to-the-right through 2012.


anxiousmoments TTI'sMarket-Eye provides research


Will there bemomentswhere it seems things are starting to unravel again? You bet, just look at the stockmarket performance in past severalweeks. And the latest economic troubles in Europe could certainly be a newfly in the ointment. But given the resilience of our country and the nature of capitalism, coupledwith the steady proliferation of electronics throughout our lives, it does seem


reasonable to expect theworld to hang together in both the near and the long term.


In a feast-or-famine scenario, nomatter howgreat the feast, the With that said, the current rate of growth is clearly not sustainable


long term. But there is upside to be had for any component manufacturerwho can bringmore capacity on-line. Manywho have machine capacity but are constrained by headcount cutsmade last year are even nowstarting to hire. Once they have their newpeople trained, capacitieswill start to increase and lead times start to drop. For thosewhose capacity is constrained by their production equipment, even here there are a growing number of examples of componentmanufacturers starting to increase their cap ex in order to capture a larger piece of this hotmarket. The resulting new capacity fromthiswill take longer to get tomarket but itwill get here, and itwill further reduce lead times.


enjoyment is always tempered by the specter of the famine that preceded it. And the fact is that in the electronics industry, every boomhas been preceded by a bust. So a long period of slowbut steady growth should bewelcome to all after the pigging outwe’ve been doing since the end of last year.


Much of the data used in this article is derived fromresearch that


is publically available at TTI’sMarket-Eyewebsite,which can be accessed fromthe homepage atwww.ttiinc.com.


Michael Knight is vice president of corporate product management and suppliermarketing for specialty distributor TTI Inc., Ft.Worth, Texas.


www.ttiinc.com June 2010 | 33


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52