Front End I Electronic Components Supply Network
UK electronic components markets recovery to continue
The Electronic Components Supply Network (ecsn) recently released its 2017 forecast for the UK and Ireland electronic component market. Consolidated returns from the association's manufacturers’ authorised distributor (afdec) group indicate continued modest growth in 2017 and stronger consistent growth for the rest of this decade. ecsn chairman, Adam Fletcher cautions however that the recovery in the manufacturing sector of the economy will remain gradual and continue in-line with improvements in the macroeconomic environment
Adam Fletcher F
irst the best news: Figures yet to be finally audited by ecsn indicate that the UK/Ireland electronic components
market results for the current year (2016) are likely to come out beyond the higher end of the range of guidance the association provided in December last year. Growth was very much as we predicted for three calendar quarters of 2016 but the market surprised everyone by growing particularly strongly in the second quarter of the year: The five per cent growth we experienced in Q2 '16 means that final annual figures will show that the Distribution Market in the UK grew around three per cent in 2016, which contrasts favourably with the upper prediction of two per cent growth we announced a year ago.
‘Book to Bill’ ratio 2016 just above unity
The continued slow-down, particularly in the Asia Pacific market, combined with low interest rates has meant that the whole supply network is well stocked and manufacturers have ample production capacity. The resulting stable ‘Book to Bill’ ratio remained stubbornly just above unity for most of 2016. It's apparent that customers will continue to order only in line with their confirmed demand but good inventory availability and short lead
12 December 2016/January 2017
times means that the UK electronic components supply network continues to be well positioned to support its customers' requirements. The ‘Brexit Referendum’ has not (yet?) had the negative effects on the markets that many predicted. The 'pre' and 'post' Referendum effects have been different but both have so far been positive for the electronic components market. ecsn market analyst, Aubrey Dunford, admits that the result of the Referendum has increased uncertainty in the markets but the devaluation of £Sterling against the US$ and € has seen some increase in prices, which inflates the sales revenue: "More importantly, UK based electronic equipment manufacturers are seizing the opportunities created by the more competitive pricing of their goods in export markets," Dunford said.
2017 and beyond
ecsn's afdec members collectively predict that the UK and Ireland electronics market will grow in the range one per cent to four per cent with a mid-point forecast of 2.5 per cent in 2017. They foresee their share of the TAM (Total Available Market) in the UK rising to over 40 per cent next year and there is a general air of optimism about opportunities for even further growth. Joel Munday, Arrow's engineering and marketing director UK, Ireland, Benelux and Eastern Europe recognises that the UK continues to produce innovative designs with a good mixture of existing and new customers particularly focused in the wireless (IoT) and automotive (power and analogue) arenas. "It's too early to judge the impact of Brexit," Munday said, "but in the meantime Arrow is benefitting from continued supplier consolidation due to its global reach and comprehensive line card". The generally more optimistic outlook is
prompting Solid State Supplies Ltd to continue its capital investment in value added services and to significantly enhance its field sales force in order to service the anticipated market growth. That said, the company's managing director, John Macmichael expects to see the impact of price increases mandated by the falling
Components in Electronics
£Sterling to be largely eroded by the end of the year as the true impact of Brexit becomes clearer, but says "our outlook remains cautiously optimistic". Peter Hannon, managing director of
HARTING (UK) Ltd, is also reasonably optimistic about growth in 2017 but recognises that the unsettled market is having an impact on confidence and the timing of investment decisions. He sees no slowing down amongst the design community in the UK but insists that "business needs to be agile it it's going to cope efficiently with the ups and downs that look likely until the realities of Brexit becomes clearer". The trend towards ‘on-shoring’ is continuing as once again customers place speed to market above cost in the list of key differentiators. According to Chris O'Neill, Omron's senior sales manager, North Europe, export OEMs are currently reporting strong order books and pull- forward requests are common: "Completion of new designs and product releases are maybe three to four months later than originally anticipated but are still providing the same potential," said O'Neil. Although ecsn's afdec members remain confident of further growth in 2017 the outlook is somewhat blurred by a number of factors that simply cannot be predicted with any certainly. Key among these factors are: the stance likely to be adopted by the new administration in the USA; the outcome of the Brexit negotiations; elections in Europe and the continuing slow-down in Asia Pacific markets. That said, afdec/ecsn members believe that these issues are unlikely to affect the UK electronic components market in 2017, especially in the first half of the year.
New opportunities Developments in the ‘Internet of Things’ (IoT) sector are presenting many new opportunities for domestic organisations in the UK and Ireland electronic components markets, where authorised distributors serves all the major players. Variations of IoT will open new markets both within new and existing platforms and is expected to start to have a real impact on industry revenues by 2019. In particular, the transition toward increased automotive driver assistance and the 'connected' vehicle in general is gaining huge momentum and is predicted to be the likely global electronic components industry driver over the next five years. Fully autonomous vehicles are probably further away than is generally believed but in the shorter term, the build-out of the roadside infrastructure needed to facilitate these developments in major cities and trunk routes present a potentially huge opportunity for local electronics companies, always assuming that the required international standards can be agreed. ecsn members are benefitting from the frenetic activity in the IoT space: Graham
Maggs, Mouser vice president marketing EMEA, says his company is showing growth figures of nearly 20 per cent in the UK, thanks to rapid developments in Industry 4.0, Smart Home, the 'connected' car, remote medical diagnostics etc., but other sectors such as lighting, aerospace and defence and automotive are still healthy and remain important to Mouser: "Averaged across the region, our year-on-year sales are up by over 15 per cent, and customer count is even better – over 19 per cent, which points to a very healthy level of design activity," Maggs said.
Kevin Nicholls, general manager UK,
Ireland and South Africa agrees. He also sees the driver coming from developments in Industry 4.0. and expects 2017 to be another growth year for TTI despite the volatility within the UK market: "TTI will continue to invest in focus business sectors such as defence, aerospace and space, automotive and transportation - including electric vehicles - and Industrial," Nicholls said. To support the expected growth TTI has increased its dedicated specialist teams offering Nicholls says, "real market specific expertise and a focused strategy to support customers evolving requirements".
Aubrey Dunford
Continuing merger and acquisition activity All the indications are that the merger and acquisition activity we've seen in recent years in the electronic components markets is set to continue and consolidating these changes will be a challenge for all parties in the coming year and beyond. But assuming there are no major macroeconomic shocks, ecsn remains confident that the recovery cycle in the global electronic components markets will continue, prompting its market analyst, Aubrey Dunford to optimistically conclude, "we're looking forward to significantly stronger consistent growth in the rest of this decade".
www.ecsn-uk.org www.cieonline.co.uk
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