Front End | Electronic Components Supply Network “And onward into 2023…”
It’s intrinsic to the role of a UK manufacturer authorised distributor of electronic components to maintain strong working relationships with both their OEM customers and their suppliers. At this time of year however members of the Electronic Components Supply Network (ecsn) expand these relationships to also embrace their internal and external teams and peer groups in the annual bid to arrive at the association’s Market Forecast for the coming year. Forecasting reasonably accurately twelve months ahead is always a challenge and with the current, ongoing disruptions in the global economy, has been particularly difficult this year. In this article the association’s chairman, Adam Fletcher, reveals the key data points that ecsn members take into consideration when compiling their Forecast and shares their thinking with the industry in the expectation (and hope) of providing additional industry insight to assist organisations with their planning processes
2023 – the likely outcome The industry consultation process starts in October each year by establishing the outcome for the current year, which the ecsn Leadership Group compiles from its members’ returns and by canvasing the prevailing industry sentiment. They believe that the end-of-year outcome for 2022 is likely to show ‘Billings’ (Sales Revenue) growth of 18 per cent compared to 2021, a stronger performance than members predicted at this time last year. This exponential growth has been driven higher primarily by the collective need of OEMs to maximise their output in the face of continuing concerns about component availability, which together with heightened geopolitical tensions resulting from Russia’s invasion of Ukraine, the escalating US / China trade war and ongoing international and domestic logistics delays, have encouraged customers to maintain their inflated in-house inventory and order backlogs.
Despite the super outcome for the UK / Ireland electronic components markets in 2022 it remains a fact that the performance of component manufacturers around the world has at times fallen pitifully short. Much of their failure is due to them having little or no influence over the activities of their numerous sub-distributors, EMS and OEM customers in Asia, particularly in China where their products apparently simply disappear. ecsn members believe that components manufacturers must establish the authority to autonomously manage their global inventory, particularly in Asia and exercise effective control over when, where and to whom their product is shipped. A key part of this has to be the ability to re-direct a shipment when necessary, in order to address real customer demand, rather
12 December/January 2023 Components in Electronics
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than the “phantom” demand often created by organisations cynically seeking to exploit failures in the market.
UK / Ireland electronic components market forecast 2023
The market conditions in 2019, 2020, 2021 and 2022 were far from normal due to the COVID-19 global pandemic but ecsn members believe that some “normality” can be expected to return to the market in 2023: The problem however is determining exactly what the “new normal” will be in a global economy dealing with a war in Europe while still recovering from the aftershocks of a global pandemic, such as double digit inflation, huge hypes in the cost of energy, and a cost of borrowing
that has returned to pre-bank crisis levels. That said, returns from ecsn members show that the UK Distributor Total Available Market (TAM) will have grown by about 18 per cent in 2022, higher than predicted in December 2021. The blue bars in the graphic shows the actual change in ‘Billings’ growth or decline by quarter from Q1’17 to Q3’22. The purple bar is our members’ estimate of Q4’22 and the subsequent purple, red and green bars shows the range of the forecast.
Global demand has remained higher than predicted despite the slowdown in China triggered by a cooling in the global market for handsets and PCs. Product shortages, extended lead-times, exchange rate fluctuation, rising raw material and labour
costs have led to price rises higher than anticipated. That said, the Forecast released by ecsn in December 2022 predicts that the UK & Ireland electronic components market will continue its modest growth in the first half of 2023, returning ‘Billings’ growth of between 0 per cent-to-6.3 per cent, with a mid-point of around 3.5 per cent. For 2H’23 the consensus opinion is that ‘Billings’ will slow modestly in the range (4 per cent)-to-3 per cent to give an outcome for the full year in the range (2 per cent)-to-4.9 per cent over 2022, with mid point growth of 2.8 per cent.
Authorised distributor backlogs remain high
Customer order backlog levels reported by
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