2024 - A tough year in prospect for electronic components supply network


By Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn) M


y thanks are due to the staff and publishers of Components in Electronics (CIE) for inviting the Electronic Components Supply Network (ecsn) to contribute the introduction to the 2024


edition of CIE Distributor Directory. Published annually, the Distributor Directory is recognised as the go-to-guide for procurement professionals searching for new suppliers, and for electronic design engineers seeking the latest components with which to update existing products or maximise the performance of a new design. In my experience, members of ecsn are generally natural optimists, always believing the glass to be half full. Even when market conditions become difficult, they seek ways to adapt their operations to bolster innovation and better serve their customers. However, following two years of sustained sales revenue (‘Billings’) growth - that in all honesty exceeded our members’ most optimistic expectations - and in the face of much lower growth predictions for our industry they now conclude that 2024 will have to be a year of past-growth consolidation. It’s even possible that ecsn will have to revise its forecast for the second half of the year but, as always, you’ll be able to read the latest updates online and in the pages of CIE magazine.


Background and 2023 outcome Electronic components manufacturers and their authorised distributor partners strived hard throughout 2022 and 2023 to reduce components lead-times and meet what we now know were inflated and sometimes wholly artificial customer requirements. As a result of their efforts average lead-times for most electronic components hovered around the 10-to-12- week range in Q1’24. Of course, some outliers remain, particularly very specific microcontrollers, some discrete transistors and Multi-Layer Ceramic Capacitors (MLCC). The unintentional consequence of their success over the last couple of years has been a very substantial inventory build-up right across the global electronic components supply network - most notably in semiconductors - which, coupled with a further weakening of the global economic outlook and lacklustre customer demand has further increased


product availability, but ecsn members believe that lead times are unlikely to reduce much further and the pre-pandemic ‘happy days’ of virtually ex-stock availability are unlikely to return any time soon. It’s important that customers fully come to terms with this situation and work with their supply partners to carefully manage their order backlogs and in-house inventory in line with prevailing lead times for the electronic components their organisations need.


A quick review of the UK / Ireland electronic components Book to Bill Ratio


The Book to Bill (B2B) Ratio is an important industry metric for manufacturer authorised component distributors: The B2B compares ‘Bookings’ (new orders entered) figures with “Billings’ (shipments invoiced to customers) figures, the result of which provides a very useful guide to current and future industry performance. Reviewing the graphic “All Industrial Components” reveals that the B2B was generally positive (above the red line that indicates unity) in 2022 but was negative in most of 2023. The usual end-of-year ‘balancing’ suggested that 2024 was likely to see a return to growth in the market, as always provided that general market conditions don’t materially change.


ecsn - UK and Ireland electronic components market forecast 2024


At the end of each year ecsn compiles its Forecast for the UK & Ireland electronic components market from data canvased from its manufacturer authorised distributor (afdec) members. The graphic “DTAM by Quarter for 2017-2024”, provides a visual representation of their consolidated ‘Billings’ by quarter over the past seven years. Our members predicted that the market would be essentially “flat-to-down” in the first half of 2024, returning ‘Billings’ growth of between 3%-to-1%, with a mid-point of around 1%. They further predicted that their ‘Billings’ would grow modestly in the range 1%-to-8% in the second half of the year to give an outcome for the full year in the range 1.5%-to-4.1% and showing growth at the mid-point of 1.4% over the previous year.


Supply network problems continue The mix of components currently held in-stock by manufacturers and distributors across the global electronic components market has over for the past two years, become largely unsuitable for prevailing customer requirements and obscuring what they actually need. Sadly, semiconductor manufacturers have so much cash invested in their existing die bank and finished goods inventory that until it “turns” (is sold and paid for) they are unwilling to build the components currently in most demand. Many semiconductor manufacturers have reduced their capacity utilisation rates to worrying levels, forcing staff lay-offs but enabling much needed plant maintenance. Similarly, the inventory held by manufacturer authorised distributors has become over inflated and they too are unable to justify increasing investment, so more sporadic shortages are to be expected.


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