DISTRIBUTION FEATURE
CAUTION RESTRAINS THE Electronic Components Market
Adam Fletcher, Chairman of the electronic components supply network (ecsn) delivers a brief overview of his members’ consolidated Q1’14 statistics for the UK and international electronic components markets. The numbers indicate that the UK electronic components market is not improving as quickly as some other sectors of the UK economy or as anecdotal evidence from his members would appear to suggest
A
s we emerge from recession the overall economic situation in the UK has
improved significantly and probably faster than was forecast by many eminent organisations just twelve short months ago. My informal discussions with a wide range of ecsn members who engage directly with customers on a daily basis confirm an overall aura of optimism and a confidence that Q1 would see a change in industry fortunes. Back in November last year ecsn
members forecast that the UK electronic components market would grow in the range 2 to 5 percent in the first quarter of 2014. This forecast proved to be fairly accurate, with the latest statistics arriving at the lower boundary of guidance with a 2 percent growth in Billings (Orders Shipped) in the period. Viewed in isolation this is a reasonable outcome but this rate of growth is lower than that achieved in other sectors of the UK economy such as construction, aerospace, automobiles, military and even retail. ONS (Office of National Statistics)
figures confirmed that overall manufacturing growth was 3.5 percent in Q1’14. Analysis of the ONS data suggests that the largest contributors to growth in the period were rubber and plastic products, transport and food. In fact the manufacture of computer, electronic and optical products declined slightly. It’s wise to view a single period of ONS data with some scepticism, as this august body has a nasty habit of revising them, however their trend data is a valuable guide. What is evidently clear is that manufacturing still needs to recover very significantly just to achieve pre- 2008 recession levels.
Eastern European countries as a result of “re-shoring” (manufacture transferring back to Europe from Asia) where material purchases are often made by German-based subsidiaries. The US situation is surprisingly similar to Europe - low growth and improvement expectations that are not being demonstrated by the market statistics. There are however many more concrete examples of US based multinationals “re- shoring” from Asia to the Americas, primarily Mexico and Brazil, a process known as “on-shoring”. It remains difficult to gain timely accurate
statistical information for the Chinese electronic components market due to the high level of inter-company trading within it. However current information indicates that the electronic components market in China grew in the range 3 to 5 percent in Q1 ’14, well below historic growth rates expectations. It must be said however that peak manufacturing activity for the Western Christmas and Chinese New Year markets does not occur until early Q3 each year. Global electronic component markets
Figure 1:
Adam Fletcher, Chairman of ecsn
Historically Q1 has always been the
period of strongest growth in Western electronic components markets but these economies do not have appeared to have recovered sufficiently to reflect normal seasonal patterns. In Europe the results for France, Italy and
the Nordic countries are very similar to our own. Germany however remains the electronic components market economic powerhouse of Europe and continues to drive growth at rates twice as fast as those of other European markets for the same time periods. This is helped by growth in
remain positive into the second half of 2014 but components manufacturers are waiting to see increased stability before making further investment in production capacity. Manufacturer authorised distributors are seeking similar reassurance before making speculative investments in inventory in the expectation of higher growth. The manufacturing lead-times for most
electronic components remain low - averagely in the four to eight week range - but there is evidence that they are beginning to transition slightly towards the higher end of this range. In-house inventories are low and Systems Integrators are generally placing short-term order cover, although there is a trend towards increasing order cover for some key components, particularly memory products. Overall I’m confident that the optimism
felt by ecsn members about the prospects for their customers and UK electronics businesses in general is not misplaced. Sometimes it just takes a quarter or so for the results to flow through to the statistics.
ecsn
www.ecsn-uk.org 01763 274748
/ ELECTRONICS
Enter 200 ELECTRONICS | SEPTEMBER 2014 9
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