Front End | Electronic Components Supply Network
An “interesting” year in prospect for the UK electronic components market
To judge by its direct actions and declared geopolitical ambitions, the US Government started the new year with many unexpected surprises, not least its overt use of blunt financial coercion via trade tariffs and the effect they’ve had on the global economy and thereby, on electronic components markets. Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn), suggests that these actions, while potentially damaging to the long-term credibility of the US Administration and, by association, its relationships with global partners, will have only an indirect and immediate impact on the UK’s electronic components market. In this article, Fletcher suggests that it’s ‘business as usual in the new normal’. He adds: “Continued
successful collaboration throughout the supply network is essential if we’re to mitigate the latest issues and those that will almost certainly arise in the future.”
Limited tariff impact
The direct impact of new US tariffs on the UK’s professional sector – including its electronic components markets – has to-date been very limited, however the indirect effects of confusion, instability and uncertainty have severely curtailed both ongoing and new investment opportunities due to uncertainty about the likely ROI (return on investment). As a result, most European electronic components markets – including UK and Ireland – and alongside Japan, will take some time to fully come to terms with the new US trade position and as a result, are likely to remain effectively “stalled” in 2026. Economists believe that significant financial persuasion and/ or strong business opportunities will be needed if ‘normal’ investment and growth levels are to be regained.
US expansionist foreign policy changes
There have been many column inches written in the press about the changes in US Foreign policy and the implications these changes may have for other expansionist governments, particularly China. The fear is the ‘law of unintended consequences’ may come into play and that the US actions on western commerce may encourage China to do the same in their sphere of influence, particularly with regard to Taiwan. Most informed commentators believe that whilst this could happen,
12 February 2026
it’s unlikely because of the potential disastrous consequences of a disruption to the supply of key semiconductors that the Chinese economy relies on to support its domestic technology industry. I sincerely hope they are proved to be correct because an ‘invasion’ of Taiwan would be an economic disaster for the global economy (and electronic components markets in particular) that would make the financial impact of the COVID pandemic appear insignificant.
Unequal growth
The only growth seen in the global electronic components supply network in recent times has been in the hyperscale computing market where the demand to build-out AI based infrastructure has driven demand for specific graphics processing units (predominantly supplied by NVIDIA) and large volumes of the high bandwidth memory currently manufactured by only three suppliers, to unprecedented levels in the US and Asia. This market is so buoyant it appears immune to the wider geopolitical risks, so manufacturers of these parts are changing the focus of their existing capacity and product mix and making huge investments in new production capacity at the expense of traditional components / markets. It’s not a ‘quick-fix’ however and many of these components are effectively on “allocation” because customer demand
Components in Electronics
vastly exceeds the manufacturers’ current ability to supply.
A welcome ‘knock-on’ effect Whilst other sectors of the global electronic components market have not shared in this dramatic upturn, many manufacturers of passive, interconnect, power conversion and cabling, have been and continue to be, beneficiaries of this increased investment in new AI data centres. At the same time, the hitherto elevated inventory levels of less ‘exciting’ components, particularly microcontrollers, standard logic and analogue devices are now being consumed and seem likely return to a normal industry balance by mid-2026.
Inadequate orders or forecasting Ideally, manufacturers of electronic components and the authorised distribution partners that represent them would have their customers provide them with a rolling six-to-nine- month order cover, linked to a reasonably accurate longer-term forecast of their likely demand. For the last few years most customers have been unable to provide either and as a result, component manufacturers have struggled to effectively deploy their existing assets, let alone plan future investment in manufacturing capacity. Given this outcome and the ongoing geopolitical instability, it’s not surprising that investment by electronic components manufacturers, their
authorised distributors and their mutual customers remains severely restrained.
Extending lead times = more order cover needed
My analysis of returns from ecsn and IDEA members in Europe last year, together with accessible industry data from the rest of the world, strongly indicated that UK customers were consistently failing to add sufficient new order cover on their suppliers and I advocated a modest uplift to help mitigate extending lead-times. Maintaining an operational inventory pipeline with suppliers and ordering up a little more in-house inventory impacts the bottom line a lot less than the alternative of production line stops and inability to ship. The Book-to-Bill (B2B) ratio, (an important industry metric that compares new orders to actual sales) did show a significant improvement throughout Q4 2025, ending the year with a healthy and sustainable 1.1:1. I’d like to think that my comments as an independent observer contributed, but I suspect the improvement was really due to the gradual realisation that the market did indeed need to move in the way I and other analysts were suggesting.
Starvation or gluttony? My current concern however is that many customers in Europe are today increasing their order cover on their suppliers
www.cieonline.co.uk
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