FEATURE DISTRIBUTION
ecsn 2021 Forecast: “Expect a few bumps ahead”
“Authorised Distributors on track to end 2020 with a return to low single digit growth”…says ecsn’s Chaiman, Adam Fletcher
E
lectronic Components Supply Network (ecsn) predicts that the UK & Ireland
electronic components market will be ‘flat’ in the first half of 2021 in the range (2%)-to-4%, with a mid-point decline of (0.5%). In its provisional guidance for the second half of the year the association predicts that Billings (Sales Revenues) will grow modestly to give an outcome for the full year in the range (0%)-to-6.5%, with a mid-point of 2.7% growth on the previous year. “2019 was a year of correction after
two years of exceptional growth in 2017 and 2018”, said Aubrey Dunford, ecsn Market Analyst. “Forecasting in the current conditions is particularly challenging. Our best view is that we will see a slow return to low single digit growth throughout 2021 and that the first half of 2021 will be more or less ‘flat’ compared to the first half of 2020. We’re hopeful that growth will increase into the second half of 2021 and the year will end showing Billings growth of around 2.7%,” Dunford continues. “As we enter into 2021 global demand
- driven particularly by China and Asia- Pac - is rising and that lead times are extending on some key ‘commodity’ electronic components. The ‘Book to Bill’ ratio was positive in Q1’20 but declined slightly in Q2’20 during the major part of the first lockdown before it slowly improved during Q3, and into the final quarter”.
COMPONENTS MARKET VISIBILITY REMAINS OPAQUE… The association’s chairman Adam Fletcher remains confident that the trajectory for the electronic components markets in the mid-term is up and to the right: “If we assume that the final outcome for 2020 will be a Billings (sales revenue) decline of (8%) when compared to the previous year, then the performance of the UK electronic components market and the wider electronic industry will have been fairly remarkable given the dreadful economic environment in which we are all currently operating”. Fletcher remains confident that
8 DECEMBER/JANUARY2021 | ELECTRONICS Figure 2:
DTAM growth by product group 2011- 2021
Figure 1.
Distributor share of TAM by product group 2011- 2021
stronger underlying growth will return but cautions that the odd ‘bump’ along the way will be inevitable: “I predicted that any growth is likely to adopt a hockey-stick shaped curve towards the end of 2020 and into 2021 and in my opinion this curve has now simply shifted by a further 12 to 18 months, due primarily to COVID-19 but also to the uncertainty over Brexit and the US/China Trade War, which is delaying the roll,-out of 5G, but is also a reflection of a weakness across many markets sectors - particularly civil aviation, which is likely to remain slow until 2023 - and automotive, which is only just beginning to return to growth. On the plus side, the Medical sector is experiencing strong growth along with the military/avionics and cloud computing/high performance computing sectors. The industrial sector is now also showing positive growth signs for 2021”. Fletcher is primary concerned about the
pattern of the return to growth across global electronic component markets. He believes that the shape of the growth is unlikely to change, but its magnitude could. And therein lies a potential
problem: “It’s very likely that the European, US and Japanese electronic components markets will all be following very similar trend lines into the second half of 2021, which means that the global demand for electronic components will not be countercyclical and all markets will experience an uptick in demand at the same time”, Fletcher said. “When the growth in demand driven by the roll out of 5G handsets and infrastructure, which is likely to occur at the same time, is factored in manufacturers’ output of electronic components will simply not be sufficient to meet global demand, which could make current lead-time extensions appear marginal. In a worst-case scenario manufacturer lead-time for most components might extend rapidly to well over 20 weeks. Even modest growth in 2021 might trigger a major supply problem in the global electronic components market”. Looking even further ahead, Fletcher is
confident that UK electronic components markets will continue to return to growth over the next few years but at a rate lower than the global average rather than at the top of the curve. He believes that stronger international economic growth, the impact of mega mergers and acquisitions and continued underinvestment in manufacturing capacity for complex electronic components will once again drive extended lead-times and shortages of some electronic components: “The pendulum of supply and demand continues to swing very erratically and will continue to cause a ‘stop-start’ effect on our industry”, Fletcher concluded. “Until the entire electronics industry starts to really collaborate effectively and share its business intelligence throughout the supply network, we will all be at risk from these extreme market oscillations. I’m certain that stability will return, in 2021 but we should expect a few bumps along the way…”
ecsn
www.ecsn-uk.org
/ ELECTRONICS
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