2025 – The ‘Fun’ Continues in the Electronic Components Supply Network…!


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


ur thanks to the Editor and Publishers of Components in Electronics (CIE) for inviting the Electronic Components Supply Network (ecsn) to contribute the introduction to the 2025 edition of CIE Distributor Directory. Founded in 1970, ecsn is a “not-for-profit, member managed industry association” promoting the use of electronic components in the UK and Ireland and representing the manufacturer authorised distributors of electronic components who serve the market. Our members address 98% of the UK electronic components supply network where the buyer / seller relationship is primarily between the Systems Integrator and manufacturer authorised distributors, often with significant commercial support from the components manufacturer. Systems Integrators primarily partner with manufacturer authorised distributors because they are best placed to guarantee supply of quality products with full supply traceability, They are also able to leverage their relationships with the multiple leading component manufacturers they represent to supply many products on the customer’s BoM (Bill of Materials), which has the twin benefits of contributing to the customer’s supply base reduction and increasing the focus on their purchasing spend.


International Components Demand Market Cycles... The ‘Demand Cycles’ in global electronic components markets vary: Markets in the US and Europe are at their strongest in the first half of the year. In contrast, Asia-Pac - which includes China – experiences its highest growth towards the end of Q’3 and into Q’4, while Japan reports its strongest growth in Q’2 each year. This counter-cyclicality is to be welcomed because it goes a long way towards balancing the global demand for electronic components over the year but the huge increase in demand following the pandemic overwhelmed the global market and wrecked the normal seasonal cycle. For over a decade customers in the electronic components market have been accustomed to manufacturer lead-times of four to six weeks but faced with rapidly escalating delivery times post-pandemic, their Enterprise Resource Planning (ERP) systems, which are highly influenced by lead-time values, massively increased their in-house inventory and supplier order cover in a bid to meet the new reality. This situation was exacerbated by an increase in “double ordering” (customers placing orders for the same components on multiple suppliers with the cynical? intention of promptly cancelling the other orders as soon as one supplier delivers), which contributed massively to the now known to be ‘fictitious’ demand. The spectre of some of the largest customers, particularly automotive manufacturers, shutting down production due to a shortage of electronic components - particularly of semiconductors - increased awareness by politicians and the general public to the importance of electronic components to global economic activity. It also raised concerns about the geographic concentration of advanced semiconductor manufacturing in Asia and particularly, in Taiwan.


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“Indigestion...” It remains a truism that “what goes up, must come down...” and despite the warnings from ecsn and many other industry analysts that customer demand was artificially inflated, the oft forecast glut of semiconductor and many other electronic components quickly became a reality. We lived through a period of “supply indigestion” in 2024 where the inventory pipeline right across the electronic components supply network was hugely inflated and as we move into 2025 the worst of this excess inventory is behind us, but it will take all of 1H’25 to get the overall inventory closer to historical norms, as it’s a certainty that the product mix currently held in inventory across the global electronic components market no longer meets customer requirements. The components currently in most demand will have to be manufactured against the prevailing lead-time, which for most semiconductor products is realistically a minimum of eighteen weeks, but manufacturers have so much cash invested in existing inventory that until it “turns” (is sold and paid for) they are reluctant to produce the latest component developments. It’s a sad fact that many semiconductor manufacturers are already seeing their capacity utilisation rates fall to unacceptably low levels and are reluctantly taking the opportunity to undertake maintenance operations, furlough staff and push back their new investments. Inventory held by manufacturer authorised distributors is also at inflated levels, and they too cannot justify increasing investment in inventory that is slow to turn, so more sporadic shortages are to be expected.


What’s Happened in UK Electronic Components Market in 2024… In the Forecast ecsn released in November 2023 the association predicted that a decline in growth in the UK and Ireland electronic components markets throughout 2024 was likely, but members just didn’t recognise how steep that decline would turn out to be. At the time the association forecast single digit ‘Billings’ (sales revenue) growth in the range (1.6%)- to-4.1% in 2024 compared to the previous year, but in the event the year ended showing a decline of almost (20%) compared to 2023, driven primarily by a combination of weak demand and an industry-wide inventory overhang.


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