are obvious but in the short term it has created significant disruption in the market as the result of product range rationalisation and realignment of their authorised distribution channel. The CIE Distributor Directory reflects the changes known about on the date of publication, however users should be aware that the realignment process is likely to continue into 2019.


Components lead-times The combination of global growth, market consolidation and changing technology has made electronic components manufacturers reluctant to invest in new manufacturing capacity until they see evidence of real customer demand. Manufacturers of “proprietary” (single or dual sourced) components have a limited product range and are proactive investors in capacity and inventory to meet or exceed forecast customer demand and secure their revenue stream. As a result, the lead-times for these products tend to be shorter and less volatile and in 2018, was typically less than 10 weeks, a trend that is likely to continue into 2019. Occasionally manufacturing problems or inaccurate customer or market forecasting forces lead-times to extend but such events are carefully controlled and the status quo is usually quickly restored. At the other end of the scale “commodity” components are produced by many manufacturers who compete aggressively to supply their products within the market. The level of competition tends to keep both pricing and lead-times at manageable levels but when supply becomes unusually constrained for any reason prices will increase and will only return to normal levels as more capacity becomes available. In 2018 the lead-times for commodity products extended out to 16-to-20 weeks but started to decline towards the end of the year in a trend looks that looks set to continue into 1H’19 before extending out once more. The major supply problems in 2018 have been with a small number of “Merchant Market” commodity passive components, primarily legacy case sized MLCC and chip resistors, where lead-times have been extending since 2013. These components are produced in huge volumes by multiple manufacturers who simply place their products on the market at a price over which they little control. As the result of several years of market growth and manufacturers’ reluctance to increase manufacturing capacity for loss making legacy products the lead-times on these passive components extended beyond 26 weeks in 2018 and they are today effectively on allocation. We did see some improvement in availability of legacy case size MLCC and chip resistors in Q4’18 but they remain difficult to source, so lead-times are likely to extend again in 2019. However unpalatable it may be the best solution for customers could well be a re-design using readily available smaller case-sized products.


US / China – an escalating trade dispute On the 17th September ’18 the US Trade Representative (USTR) finalised a second round of tariffs to be imposed on some $200Bn of Chinese goods imported into the US. The initial import levy of 10 per cent imposed on 24th of September was due to rise to 25 per cent on 1st January 2019. In


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retaliation China announced new tariffs on $60Bn worth of US imports. At the time of writing the US has delayed the increase by 90 days to enable further discussion but President Trump has done absolutely nothing to ease the tension between the two countries by tweeting that he’s considering imposing tariffs on an additional $267Bn of Chinese imports in a yet-to-be-announced third phase of this spat. More recently the US Department of Commerce added Fujian Jinhua Integrated Circuit Company to the Entity List of the Export Administration Regulations, claiming “activities contrary to the national security interests of the US”. Jinhua has invested $5.3B in its new wafer fab but the company stands accused of violating patents and IP owned by Micron Technology. Without access to key US technology Fujian Jinhua and other Chinese component manufacturers will simply be unable to produce semiconductors. And to further ratchet up the pressure on China the US (along with several other countries) has banned the use of telecom equipment manufactured by Huawei Technologies within their domestic networks amid concerns about cyber security and alleged breaking of sanctions against Iran, all of which could have significant consequences for global electronic component markets in 2019.


Electronic components growth drivers into 2019 There are a number of drivers influencing Global demand in 2019, the most important of which will be the roll out of 5G mobile infrastructure and products. Demand for 5G handsets will top the wide range of new applications that this faster low-latency communications network will enable, including smart factories, sensors in smart cities and systems for the backhauling of all this new aggregated data. Electric or hydrogen powered vehicles, and in particular increased vehicle automation aids will continue to make the headlines in 2019 but practical applications for these technologies may take longer to predominate than is currently anticipated. Standards have yet to be agreed and international legislation is a long way from being finalised, all of which may prove to be significant hurdles.


Concluding thoughts I’m confident that UK electronic components markets will continue to grow over the next few years but at a rate lower than the global average rather than at the top of the growth curve. I’m sure however that this growth will not be linear and the odd bump along the way should be anticipated. UK customers can mitigate the impact of dynamic components lead-times by actively engaging and honestly communicating their organisations needs with the manufacturer authorised distributors in their electronic components supply network to help maintain market stability.


www.ecsn-uk.org


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