tries to identify and report the ‘known knowns’. We do our best to ignore the ‘unknown unknowns’ but this year we will all have to contend with a great many of these: Brexit, the Trump Effect, European elections, the va- garies of the Chinese economy, con- flict in the Middle East, etc. All of these are likely to influence the elec- tronic components market but we be- lieve they will only have a limited impact in 2017.


Principal among the ‘known, knowns’ are: That global economic growth is likely to be less than two per cent, a figure lower than historical rates; that commodity prices are likely to remain subdued; that inflation will remain low but is likely to increase; and further currency exchange rate fluctuations are inevitable. Organisa- tions across the UK and Ireland electronic components supply net- work cannot influence any of these ‘known knowns’ or ‘unknown unknowns’, so we have to take the pragmatic approach. We must focus on satisfying the needs of our customers whilst being prepared to embrace all opportunities and challenges as they occur. The continued slower than historic average growth in China (the largest market for electronic components) has resulted in the supply network having above average inventory levels. Combined with manufacturer lead-times for electronic components at the lower end of the normal range this indicates that customers can expect avail- ability of electronic components to continue to be good in 2017. We have experienced an unprecedented increase in merger and acquisition activity primarily among manufacturers of electronic com- ponents but also with some Manufacturer Authorised Distributors in 2016. This consolidation, the subsequent product rationalisation and re-alignment of Manufacturer Authorised Distributors will play out over 2017 and into 2018 and as a result, Systems Integrators may experience some disruption in component availability. However, ecsn members are well versed in managing situations like this when they occur and the expectation is that they will continue to do so. The volatility of £Sterling against the € and US$ has been - and is likely to continue to be - a mixed blessing for UK based Systems Inte- grators. It’s likely that ‘input pricing’, the unit price of electronic components will rise as the pound deflates but on the upside, this makes the ‘end sell pricing’ of equipment to customers in export markets much more attractive. The consolidated statistical results from ecsn members for the 2H’16 suggest that many UK based Sys- tems Integrators have seen a significant and welcome boost to their export revenues. It’s likely that the diversity of applications for elec- tronic systems will continue to expand and returns submitted by ecsn members confirm that customer design activity remains strong, al- though the time-to-market for new systems has been extending to- wards the upper ranges of the normal 12-to-18-month design cycle. The UK and Ireland electronic components markets are driven by primarily the ‘industrial market sector’ which has still not fully recov- ered from their decline following the 2008 Financial Markets Crisis. Accordingly, ecsn's forecast for the UK and Ireland electronic compo- nents market 2017 is that sales revenue growth will be in the range 0.8 per cent to 4.3 per cent with a mid-point of 2.5 per cent (see Figure 1).


Many commentators believe that new industrial applications of the Internet of Things (IoT) will be a significant growth area within


vii


Figure 1: Components Market Sales (£m)


the Industrial sector, but as many IoT products are high volume, low cost products these are likely to be manufactured in Asia, I’m not convinced of this. Further, all IoT products will need to meet interna- tionally agreed security standards to ensure the system and opera- tion integrity, which leads me to suggest that the European market is more likely to benefit from the integration of multiple IoT solutions and sensors within more complex systems.


Mobile phones There is an ongoing debate about whether cellular mobile phones will continue as the global driver of growth in the electronic com- ponents market. My personal opinion is that whilst CMP will re- main a huge market it is likely to be eclipsed in both volume and value by the phased transition to ‘connected vehicles’. Fully au- tonomous vehicles are probably further away than is generally ac- knowledged but the massive increase in electronic systems both within vehicles and the roadside infrastructure needed to enable this development must be viewed as a super opportunity for UK / Ireland based Systems Integrators. Assuming there are no major economic shocks from further ‘un- known, unknowns’ ecsn expects that the recovery cycle in the global electronic components markets will continue, with much stronger, consistent growth likely for the rest of this decade. Good, open and honest communication of your organisation's needs and activities with partners both up and down the supply net- work costs virtually nothing. I urge you and your organisation to ex- plore ways to engage and contribute positively throughout the electronic components supply network. I'm convinced that effective collaboration can only enhance the performance of our industry, our organisations and the wider economic environment.


www.ecsn-uk.org


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