Front End | Electronic Components Supply Network
managed to quickly adapt and make the necessary changes to their IT systems and supply networks, by-passing their US locations and ‘drop shipping’ export components directly to customers from Asia to Europe or via Free Trade Zones. But they still had to contend with the huge tariff increases - sometimes 110 per cent+ - imposed on the many electronic components shipped from China to wholly owned subsidiaries of US-based companies, authorised distributors and end-customers. IDEA members in the US are currently looking at each shipment on a case-by-case basis, paying the duty where necessary and unfortunately passing the additional cost directly to their customers.
Consumption patterns The new tariffs imposed by the US Administration have undoubtedly had an impact on electronic components consumption patterns in Q1’25 as all parties across the supply network implemented changes to protect their organisations from cost increases and/or a reduction in component availability. It seems that many customers chose to have their suppliers ship components into their in-house inventory in advance of the original due date and before the tariff hikes came into force. The scale of these actions is currently difficult to measure beyond some anecdotal
evidence; however, the effect will certainly turn out to be statistically significant. Careful analysis of the Book-to-Bill (B2B) ratio curve over the last few years reveals that the recovery in Europe which started in Q4’23 is continuing - but very slowly! The greatly extended manufacturer lead-times that prevailed throughout the entire global supply network in 2022/3 resulted in customers vastly over-ordering components throughout 2024, at a time when ‘real’ demand was significantly declining. It’s my opinion that the “inventory overhang” that still remained in Q1’25 was equal to one quarter of average demand, and this will have to be brought down (consumed) before a stable recovery can realistically be forecast. It’s no surprise that customers are struggling to accurately forecast their future requirements and sadly, component manufacturers can no longer turn to historical consumption patterns for guidance. They too desperately need to reduce their overall in- house inventory and associated “holding costs” and are therefore reluctant to increase or even maintain production until they are provided with reliable, real demand data and their customers put hard orders in place.
Concluding thoughts
Whilst I’m delighted to be able to report that the European electronic components
market returned to growth in Q1’25, the ‘Billings’ (Sales Revenue Shipped and Invoiced) remain in negative territory, (22 per cent) below the same period last year. We need to see a growth improvement of over 40 per cent if the European electronic components market is to recover back to 2022 levels, which I’m afraid may take a few years. To help mitigate future supply and demand imbalances I urge all organisations to play their part in the success of our industry by participating and contributing to the collaboration and communication process both up and down their supply network. When well-managed, this industry interaction costs very little but offers great returns for the time 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.
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