Front End | Electronic Components Supply Network
2024 - Annus Horribilis for electronic components in Europe
All markets fluctuate year on year in response to general and specific economic and political factors, but 2024 was an exceptionally tough year for the European electronic components market. Will 2025 turn out to be any better? In this article Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn) provides some insight into the predominate factors behind Europe’s Annus Horribilis and shares his predictions about how 2025 is likely to unfold
M
embers of the Electronic Components Supply Network (ecsn) address 98% of customers within the UK
electronic components supply network. In common with many electronic components trade associations elsewhere in the world, ecsn is itself a member of the industry’s ‘association of associations’, the International Distribution of Electronics Association (IDEA). Each month IDEA collates the wide range of performance statistics that each member organisation routinely collects from its authorised distributor members and compiles them into statistical reports broken down by numerous subsets including component type and geographic market, to provide manufacturer authorised distributors with useful insights into overall global and regional industry trends.
The European outcome 2024 The Graphic T1 2024 Total Components displays the data collected from IDEA member organisation over the past twelve quarters. Looking at the graphic from left to right the brown bars show the amortised European “Bookings” (Net New Sales Revenue Entered) declining from Q1’22 to Q4’23, then growing slightly in Q1’24, declining once again in Q2 and Q3’24 before recovering slightly in the last quarter of the year. The blue bars show “Billings” (Sales Revenue Shipped and Invoiced) which from Q1’22 grew slightly for five consecutive quarters, peaking in Q1’23 but then declining over the following seven quarters. The Book-to-Bill ratio (B2B) - a key
12 March 2025
of cancelling some of their orders once one manufacturer was able to deliver), which seriously ‘skewed’ the market. Meanwhile, components manufacturers were striving to meet their customers’ demands, sweating assets and adding unplanned manufacturing capacity. IDEA lost no time in flagging up this “over booking” problem to the wider industry but customers took little corrective action. The result was that by Q3’22 the global electronic components industry was suffering significant “inventory indigestion” and is still working off the remaining “inventory hangover”, which is unlikely to be fully ‘normalised’ until 2H’25.
Technology drivers
industry metric for manufacturer authorised distributors - peaked at 1.66:1 in Q4’21, an outrageous number beyond anything recorded in the past 40 years, but by Q1’22 it had declined to 1.42:1. The B2B continued to decline over the next six consecutive quarters before improving over the next five quarters, but the ratio always languished in negative territory.
Historical perspective The B2B ratio is important to IDEA members because it provides them with a valuable insight into the future performance of the market. A negative number suggests a looming decline, whilst a positive number holds the promise of a future upswing in sales revenue growth. In ‘normal’ times in the electronic components market, we would expect a B2B ratio of 1.02:1 (approx. 2% growth quarter- on-quarter) and in a strong market possibly
Components in Electronics
see the ratio climbing to 1.10:1 (approx.10% growth quarter-on-quarter). For a decade or so manufacturer lead-times for most electronic components had been hovering around four weeks, well below the real long-term lead-time trend of 12 weeks, so customers were lulled into believing that a minimal inventory level (probably only equal to four weeks of their average usage), was a safe bet. When the global COVID restrictions came to an end the global economy increased dramatically and component manufacturers experienced a corresponding dramatic increase in customer demand that far exceeded their ability of fulfil. Lead-times rapidly jumped out to 12, then 16 and then 20 weeks as customers rushed to add order cover (Bookings) to meet their production requirements. Some customers foolishly tried “double ordering” (placing multiple orders for the same components with different manufacturers with the aim
The global and European electronic components market is primarily driven by the advancements in semiconductor technology needed to extend existing market sectors and create brand new ones by enabling new products that are either faster, smaller, more power efficient or a combination of all three elements. The global Cellular Mobile Phone (CMP) market remains the largest consumer of electronic components, followed by Computing and Automotive, but these sectors have all shown minimal growth over the last few years. Europe is a large consumer of CMP and computers but sadly doesn’t manufacture these devices, although Europe is a large manufacturer, exporter and consumer of cars. Hyperscale Computing (HC), a sub-sector of Computing, has recently experienced exponential growth in demand, principally from developers of Artificial Intelligence (AI). AI engines
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