Front End I Electronic Components Supply Network
Grexit and the global electronic components markets…
Market sectors Whilst globally the aerospace, automotive and defence market sectors continue to grow much in line with expectations, the growth in the industrial sector continues to disappoint in what was expected to be a year of stronger progress. The industrial segment was forecast to grow in low double digits in 2015 and whilst there is not yet any hard data, anecdotal evidence suggests that it is at probably half this rate. Despite historically low interest rates and declining productivity (where people rather than capital equipment is deployed) many industrialists’ confidence levels have not yet reached the ‘tipping point’ where large infrastructure investments are signed off and implemented. Consumer spending on electronic
“Greece’s possible exit from the EU and the Euro (Grexit) has been a key topic at many of the electronic industry discussions I’ve taken part in recently, suggesting a more widespread concern in our industry than generally believed,” writes ecsn chairman, Adam Fletcher. In this article Fletcher provides some personal comments and observations on the Greek financial crisis and discusses its likely impact on the global electronic components market as we move into the second half of the year
A
llowed a Pythonesque moment we can envisage John Cleese or another member of the Monty Python team asking, “what have the Greeks ever done for us in electronic components markets?” The answer is that the most important Greek contributions were probably made many generations ago by mathematicians such as Thales - who provided the basis for logical structure and determined the need for proof in calculations, and Pythagoras - who led a group of intellectuals known as Pythagoreans to theorise musical harmony and number theory and developed the ubiquitous tables still used by students the world over. Today the Greek economy boasts a strong technological design community. Greek engineers have and are developing advanced software for CAE, automation and robotic applications and, less well known, are at the forefront of analogue semiconductor design.
8 July/August 2015
Nello Sevastopolis is probably the most notable Greek electronics industry guru of recent times. Although Sevastopolis owes much of his further education to the US university system, he was born and raised in Greece. The family of revolutionary switched capacitor filters he designed - ranging from the humble MF10 to the sophisticated LTC1064 (a DC accurate low pass quad core filter) - are widely recognised as the standard industry building blocks and have been adopted in huge volumes by global telecom and datacom companies, which belies their complexity and the vast intelligence that was required to produce them. I’m not alone in being somewhat sceptical about the outcome of Grexit discussions between the EU and Greek government ministers. I suspect that the outcome has been determined for a long while and what is currently being reported in the media is merely cynical
Components in Electronics
governmental ‘conditioning’ of the wider population to accept the inevitable outcome. At risk of getting shot down in flames by events over the next few weeks I predict that Greece will remain in the EU. However, some of the country’s capital loans and much of the outstanding interest will be dramatically reduced and repayments will be spread over a couple of decades, leading to an orderly transition to a third currency. But we shall see…
Impact on the electronic components market The market for electronic components in Greece is very small. In European terms it’s less than a few percentage points of revenue and in global terms it’s negligible. The Greek market for electronic systems is much more significant in terms of revenue but is still a pin-prick on the global scale. So why are the influencers in our industry so concerned? I suspect it is because they are incorrectly blaming the current slow economic growth in Europe on the ‘turmoil’ in Greece. This is a misconception. The underlying problem is the hangover and increasing debt levels occasioned by the global financial crash of 2007/08. Sure, the country’s financial mismanagement has had some impact on stock and capital- markets exposed to its debt, but in truth it’s had little direct impact on electronic components markets. However, it is a fact that the pace of growth in electronic components markets around the world is at the lower end of the expectations of many influential observers.
products is also slowing. To judge by the fierce discounting applied to them in most markets there is little appetite for the latest curved screen smart HD TVs and audio equipment. Smartphones - which have driven the electronic components market for the last few years - are notably lacking in the compelling new features that encourage consumers to trade-up. Most people today cite failing built-in battery technology in their 12 to 18 month old product as the primary reason for changing to the latest generation smartphone.
Global electronic components market forecasts I forecast that as we move into the second half of 2015 the global markets for electronic components will continue to grow but towards the lower end of the predictions - probably in the range of 5% to 8% for the year. This is significantly faster growth than in many other sectors of the global economy but feels ‘pedestrian’ in a market which was previously accustomed to achieving annual double digit growth. The Chinese electronic components market currently reflects the lower growth but will move to its seasonal peak in Q3 as orders are placed for the Christmas and New Year periods. Q3 statistics always provide the most meaningful indication into the underlying outcome for the Chinese electronic components market. As I stated earlier, I currently believe that a Grexit is unlikely and any impact the crisis has on the electronic components markets will be marginal at worst. I further predict that UK-based organisations will see only modest changes in current exchange rates for the Pound against the US Dollar and the Euro. However, like all economic forecasts all that can be said with absolute certainty is that I will be either lucky or wrong!
www.ecsn-uk.org www.cieonline.co.uk
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