DISTRIBUTION
double digit inflation, a huge increase in energy costs, and a cost of borrowing money that has returned to pre-Bank Crisis levels, whilst at the same time dealing with a war in Europe.” “The Distributor Total Available Market (TAM) will have grown in 2022 by about 18%, higher than we expected when we produced our forecast in December 2021. That said, product shortages, extended lead-times, exchange rate fluctuation, rising raw material costs and labour rates, have led to price rises higher than our members anticipated. Global demand has remained higher than we forecast and is still strong despite the slowdown in China as the handset and PC market cools”.
From the start of 2021 ecsn members saw ‘book-to-bill’ ratios rise to levels rarely, if ever seen in the electronic components supply network. Unprecedented ‘Bookings’ were driven not only by the extending lead-times but also by price increases: “The high ‘book-to-bill’ ratios carried on throughout the first half of 2022,” continued Dunford. “From the middle of the year the ratios for Passives and Electro- Mechanical products started to decline and headed towards unity in the summer months. Semiconductors, however, have continued to see a high B2B ratio throughout the third quarter. Our members are therefore confident that we will continue to see growth in the market for at least the first half of 2023. Looking further into the second half of the year is more difficult, however. Many uncertainties remain, especially in the light of predicted recession in the global economy, so we are forecasting for growth to slow at the end of the year”. Although the major industry analysts are forecasting that in electronic components markets and especially semiconductors, growth will decline and become negative in the global market in 2023, Dunford sees that decline being limited to the huge consumer electronics applications: “In the UK, and indeed in most of Europe the component market is driven primarily by the automotive, industrial and professional application areas. We expect projects, such as the roll out of 5G and faster data communications that are by nature longer term will remain strong, although there may be a slowing down in investment. Also, demand from the Military and Aerospace sector will for more obvious reasons, remain strong”.
Authorised Distributor Backlogs Remain High...
Customer order backlog levels reported by ecsn’s manufacturer authorised distributor members reached unprecedented heights in 2022, a trend that looks likely to slowly reverse in 2023 due to improving customer confidence and declining components manufacturer lead-times. In collaboration with their supply network partners the association
Digi-Key’s PDCe connects to the existing headquarters and original PDC via a Skybridge, which spans 100 meters and has a connected conveyor as well to deliver product and other items to both buildings
KNAPP, a specialist in warehouse logistics and automation, partnered with Digi-Key on the internal automation and operational equipment of the facility
is advising customers to gently “roll back the throttle” as their confidence increases in the supply of components and an uptick in their customers new orders: “Rapid changes by customers expose their organisation and their supply network to increased risk”, Fletcher said. He believes that change will happen as manufacturer lead-times inevitably decline but his members’ opinions about when this will happen and by how much, vary: “The consensus opinion held by ecsn members is that by mid-2023 lead-times will be stabilised at around an average of 12-to-16 weeks for most semiconductor and passive components, with interconnect and e-Mech components remaining in the 8-to-10 week lead-time. There will remain some ‘outliers’ on much longer lead-times across all components categories”. Fletcher remains concerned about availability: “I suspect that all electronic components will
8 DECEMBER/JANUARY 2023 | ELECTRONICS TODAY
remain on lead-times in the 6-to-16 week timescale for at least the next few years, so we are not going to see a return to virtually zero lead-times that characterised the first two decades of this century”.
The trajectory for the electronic components markets continues to be up and to the right. Despite the ‘difficult’ market conditions in 2022, which Fletcher believes will continue throughout 2023, he remains confident that even stronger underlying growth will return to global electronic components markets because there are so many competing applications driving it: “The roll-out of 5G handsets and infrastructure, cloud computing / high performance computing and automotive are the likely main ‘push’ applications. I expect industrial automation, medical aviation and military will run these sectors a close second in 2023”.
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