UK Electronic Components Markets Progress into 2019


Components in Electronics' Distributor Directory is an invaluable aid for electronic engineer- ing and procurement professionals needing to identify the numerous sources of supply for electronic components within the UK market. Now in its 26th edition Distributor Directory is compiled with the cooperation of the Electronic Components Supply Network, a member managed, not-for-profit, professional community: “Every year presents new opportunities for the wider UK industry to pursue but also introduces new challenges for ecsn members and the customers they serve to overcome," comments ecsn chairman Adam Fletcher. "Change is relentless and the only variable factor of change is its velocity. All the signs are that 2019 will be a year of fast paced change”


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n the electronic components supply network few organisations have access to all the resources they require to succeed alone in a highly competitive global market. Long term profitable collaboration between all players in industry is seen by many as the key to future success. It’s ecsn’s primary role to facilitate the wider communication and cooperation needed to improve overall market visibility and opportunity identification, whilst also reducing effort and cost by encouraging best industry practice.


Up and to the right The upturn in global economic growth and the increasing ubiquity of electronic systems in our daily lives has helped the UK Electronic Components Market to achieve ten consecutive quarters of growth. The growth period started in early 2016 but really accelerated during 2017 and has continued in each quarter of 2018. ecsn is forecasting that 15 quarters of continuous growth will be achieved by the end of 2019, a performance unseen since the association started collecting this data way back in 1984 (the blue bars in the graphic represent past performance, while the orange bars indicate ecsn members’ performance forecast and the predicted growth range). That said, it hasn’t been all ‘plain sailing’ for customers in the UK market and the “headwinds” that have slowed their progress are likely to continue into 2019, the major ones among which are:


The dreaded “B” word The uncertainty caused by the Brexit vote in the UK has made forecasting very difficult for many organisations. The uncertainty in the macro- economic environment since June 2016 is likely to remain at least for the next few years. Many manufacturer authorised distributors and their customers have felt the need to create an inventory buffer and have increased their stock holding by approximately six weeks of average consumption. Whilst this provides some reassurance it is likely to result in a higher than normal increase in Bookings (Net Sales Entered) and Billings (Net Sales Invoiced) in Q1’19. It will also cause a slowing of growth into Q2’19 as the inventory is consumed but will be followed by stronger than normal growth in Q3 and Q4’19. In any case I suspect that this buffer inventory may not be needed as all authorised distributors and larger OEMs are registered and approved as “Authorised Economic Operators” within the EU. This recognition enables them to move goods freely within Europe based on the ability of any governmental authority to audit their systems quickly and easily and I really don’t see this changing regardless of the Brexit outcome.


Exchange rates Following the Brexit vote the exchange rate between £Sterling and most currencies particularly the US$ and the € fell significantly and has remained well below historical rates. This made our domestically produced products very competitively priced in export markets and


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Adam Fletcher


precipitated a surge in demand for many UK manufactured goods and services. The flip side of this is that almost all electronic components are imported into the UK and as a result input pricing had to increase in line with the exchange rate movement. Most customers reluctantly absorbed the input price increase, soothed in many cases by the corresponding increase in export sales opportunities. However, what goes up almost always comes down and in the longer term there is likely to be an exchange rate correction, which will need to be managed carefully.


Global economics growth Global GDP growth has been in the range three per cent to 3.5 per cent since 2014 and is forecast by the OECD to continue at this level until at least 2020. The global electronic components market typically grows in the range two per cent to three per cent above GDP growth in normal market conditions, so a sustained period of growth now seems likely.


Consolidation


Over the past five years there has been an unprecedented increase in merger and acquisition activity by electronic components companies, particularly manufacturers of semiconductors, as they seek to access new advanced technologies and gain competitive advantage through increased scale of operations, which will allow them to successfully penetrate new markets. The potential longer-term benefits in this activity


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