Front End | Electronic Components Supply Network


A tough start to 2024 G


lobal electronic components markets have always been primarily driven by innovation in semiconductor manufacturing processes but also by strong underlying demand drivers which, over time, have included mainframe computers, personal computers, data- and telecoms, digital cameras and TVs, mobile phones, high- performance computing (HPC) and more recently, automobiles. Now that electronics have become truly ubiquitous in modern life the base underlying demand for electronic components is today closely related to the growth in global GDP. In a ‘normal’ market (whatever that is!) global semiconductor sales growth has consistently been approximately 3 per cent higher than the growth in overall global GDP.


Currently, the most significant driver for electronic components is the build out of artificial intelligence (AI), primarily within the HPC and data-centre markets. Whilst in semiconductor terms specialised AI processors have a very high ASP (average selling price), the number of devices sold annually is relatively small. Fortunately, this situation has been offset by the large quantities of high bandwidth commodity memory chips needed to support each AI processor. Over the past couple of quarters this demand ‘spike’ has helped drive up both sales revenues and volume growth for memory in the global semiconductor market. That said, any recovery in the semiconductor market will inevitably remain fragile until we see the overdue upswing in the unit sales of logic, analogue and microprocessor devices.


The UK electronic components market is today primarily driven by “Industrial Electronics”, a term that also covers a wide range of sub-sectors. The Medical, Instrumentation, Automotive, Aerospace and Military subsectors also contribute significantly.


12 May 2024


The graphic “afdec Members – Total Sales Growth” looks at the ‘quarter-on-same quarter-last-year’ growth rate from Q3’01 to Q1’24. It is apparent that the established pattern is a period of growth followed by a period of decline, a reoccurring cycle that has many drivers behind it. For instance, the downturn in 2001 was the result of the ‘Dot Com Bubble’ bursting. The downturn in 2008 reflected the impact of the ‘Financial Crash’ following the Tsunami in Japan, and the decline two years later (2010) was due to global inventory correction. We enjoyed a short period of relative stability before the impact of Brexit triggered further inventory level increases, which was followed by a further decline due to COVID lockdowns. The inventory building that went on in the post-COVID period drove strong growth before the inevitable correction started in Q3’23. Looking further into the graphic it’s interesting to observe how closely the ‘shape’ or ‘profile’ of the


Components in Electronics


outcome correlates to the established growth/decline cycle i.e. ‘N’ quarters of growth is followed by similar ‘N’ quarters of decline. Rather worryingly extrapolating this data suggests that the UK electronic components market is likely to be in declining growth mode for several quarters, unless there is some unforeseen event that forces an early reversal.


In the forecast released at the end of last year ecsn members forecasted a “slow start” to 2024, but the first quarter of the year proved to be significantly more uncomfortable than they expected as our industry continued to progress through the current period of ‘inventory indigestion’. In this article Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn), takes the opportunity to review the Q1’24 outcome for UK and international organisations in the electronic components supply network and shares his thoughts on the likely impact the slow start might have on the rest of the year.


Impact of a Q1 miss There is always a lot of discussion in our industry about the ‘shape’ of any market recovery: Will it be ‘V’ shaped or ‘W’ shaped or some other shape entirely? Even in challenging market conditions the UK electronic components market has consistently been a declining ‘W’ shape, growing fastest in the first quarter before declining somewhat in the subsequent three calendar quarters. In 2024 ecsn members joined other industry analysts in forecasting a flat


Q1, improving slightly in Q2 and improving significantly through the last six months of the year. The graphic “ecsn – afdec: Billings Actual and Forecast” shows the forecast ‘shape’ and the scale of the Q1’24 decline. Given the generally poor start to 2024 I now don’t expect stronger underlying ‘real’ growth to return to the UK, EU or global electronic components markets until 2025.


www.cieonline.co.uk


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64