The significantly reduced global economic demand behind the decline is due to a number of adverse factors following the global pandemic, not least the increasing geopolitical tensions resulting from the Russian invasion of Ukraine, multiple armed conflicts in the Middle East and the additional sanctions imposed as a result of the ongoing US / China trade war, all of which contributed to a slowdown of global economic growth. In addition, the shipping diversions necessary to avoid potential attacks in the Red Sea has significantly increased costs and delayed cargo arrival times, a situation exacerbated by a shortage of shipping containers.
2025 - Low Growth Forecast… In its Forecast for 2025 released mid-December last year ecsn members predicted that the UK & Ireland electronic components market will continue its negative growth pattern in 1H’25, with ‘Billings’ (Sales Revenues) declining between (8.7%)-to-(2.6%), and showing a mid-point decline of around (4.6%). In the second half of the year, they see ‘Billings’ making a modest recovery in the range (1%)-to-9%, resulting in an outcome for the full year in the range (4.9%)-to-2% but they also believe that the market will still be in negative territory at the mid-point compared to the previous year. Please see the graphic “DTAM by Quarter for 2017 to 2025”, the blue bars represent actual results, the yellow and red bars are the forecast and range. Throughout 2025 you’ll be able to read the latest updates in the pages of Components in Electronics magazine.
Global Electronic Components Market Drivers... The primary demand driver in the global electronic components markets has been and is likely to continue to be advances in cellular mobile phone and related infrastructure technologies, but surprisingly, this sector is currently in “the doldrums”, as is the automotive sector, the second largest demand driver. Interestingly, the number three position is occupied by what until recently was referred to as “High Performance Computing” and is now known as the “Hyperscale Computing (HSC)”, comprising “Cloud, Datacentre and Edge Computing Enterprises”, a market that is currently transitioning away from the high performance CPUs predominantly supplied by IBM, Intel, AMD and ARM towards “Graphics Processing Units” (GPUs) in a bid to meet the “step-function” change in processing performance demanded by the Artificial Intelligence (AI) services behind large language models like the ubiquitous ChatGPT. Predominant suppliers of the new GPUs include Nvidia and AMD but in-house SOC designs from a host of rapidly rising semiconductor start-ups are hot on their heels. Whilst the individual devices are expensive (rightly so given the massive investment required to design, manufacture and test them) it’s really the huge increase in the very high-performance memory required to support GPUs that is driving current revenue growth in electronic component markets. Whilst traditional DRAM and Flash memory continues to hold a substantial market share the demand for Double Data Rate 5 Synchronous Dynamic Random Access Memory (DDR5) and High Bandwidth 3D Stacked Memory Dynamic Random Access Memory (HBM3E) is currently exponential due to their larger capacity, smaller form factor and much faster read/write speeds. As new manufacturing capacity is added the pricing of the new generation of commodity memories will almost certainly come down but no one can forecast when this will happen. Currently the market demand for the new devices is outstripping the manufacturers’ ability to supply and whilst they struggle to add this “bleeding edge” capacity in an overheating market they are not producing other products customers need. It’s not unusual for a semiconductor market recovery to be led or driven by commodity memory and in previous cycles sales of logic, analogue and discrete products quickly followed a similar trajectory. Sadly, this trend has not been apparent in the current growth cycle and as I write demand for these products remains very disappointing. Other leading components markets are also languishing in the “doldrums” due to poor visibility caused by a lack of accurate forecasting by OEM and CEM system integrator customers.
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Global Economic Outlook…
In common with many semiconductor industry analysts ecsn is concerned that whilst the headline sales revenue number is growing the corresponding volume of components shipped is stalling, suggesting that the current growth cycle is inherently unstable. We continue to operate in an environment where well-publicised levels of geopolitical tensions remain elevated beyond those experienced for over several decades. These influences continue to destabilise the global economy, forcing up the price of oil, gas and electricity and contributing to significant inflation that leads to increased bank interest rates and the need for direct financial stimulus by governments. While we’re waiting for the bureaucrats to quickly? and diplomatically? resolve these political problems, organisations in the global electronic components network must find ways to manage these headwinds and continue their organisation’s success.
The good news for the global electronic components industry is the exponential increase in AI features currently being added to cellular mobile phones, consumer and business computing devices and infrastructure which will almost certainly drive an increase in demand for a much wider range of advanced electronic components beyond high- band-width memory. Whilst current availability of the wide and diverse range of electronic components required by UK customers is generally pretty good some low-level sporadic shortages of components remain. It’s frustrating that these minor shortages are usually quickly resolved, only to be replaced by shortages of a different raft of components, but such is the nature of a recovery in a geopolitically unstable and challenging economic environment. And to add to the long list of supply challenges we’re currently having to cope with our industry is bracing itself for the inauguration of US President Donald Trump, who based on his reported rhetoric, looks likely to create further instability and have a highly disruptive influence on international trade.
Concluding Thoughts... The growth curve for electronic components supply network over the mid and long-term remains “up and to the right”, even if predicting the level of growth in the short-term is something of a challenge. ecsn member organisations remain committed to providing the highest possible level of customer support to help mitigate future supply and demand imbalances but I urge suppliers and customers to play their part in our industry’s continuing success by participating and contributing to the collaboration process both up and down their supply network, which when well- managed, benefits all parties. Collaboration costs organisations very little yet offers great returns for the time and effort invested.
For information
Adam Fletcher is Chairman of the Electronic Components Supply Network (ecsn), a business association established in 1970 that today offers support to all organisations with an interest in electronic components throughout their entire lifecycle. He is also Chairman of the International Distribution of Electronics Association (IDEA), an association of individual country electronic components associations whose objective is to arrive at and share best industry practice.
www.ecsn-uk.org
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