Front End | Electronic Components Supply Network Electronic components - Q1’22 update
According to Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn), trying to forecast during a period of political and/or economic market turmoil is a challenge for any organisation, but particularly so for companies in the electronic components supply business. Accurate forecasting has always been a combination of judgement, experience and good luck, a situation magnified in today’s market as companies strive to manage their inventory in line with their customer demand and product availability from suppliers. At the end of last year ecsn members collectively forecasted that ‘billings’ (sales revenues) in the UK and Ireland electronic components markets would continue to grow strongly into the first half of 2022 but cautioned that growth would probably slow somewhat in the second half of the year. Of course, they couldn’t envisage a ‘Putin effect’. In this article Fletcher shares the actual Q1’22 outcome with CIE readers and ponders on what the rest of the year might have in store for our industry
A stronger than forecast start to 2022
The companies that comprise the ecsn membership collectively forecast that ‘billings’ in the UK & Ireland electronic components market would grow in the range 12 per cent to 16 per cent in Q1’22, but (as yet) unaudited figures reveal that the market actually grew by 18 per cent when compared to the Q4’21 and a staggering 29 per cent when compared to Q1’21. The established historical trend for the UK & Ireland electronic components markets is for strong growth in the first quarter of the year, generally followed by a good second quarter and a steepish decline in the second half of the year. The graphic ecsn Billings (sales revenue) by Month April ‘20 to March ’22 confirms the continuation of this trend: The blue circle highlights Q1’21 and the red circle highlights Q1’22, showing the way most growth in each of the quarters occurred in March, followed by a slowdown in the growth rate in April.
Book to bill stabilising? A key tracking metric in the electronic components industry is the B2B (book to bill) ratio, which provides a useful indication of commercial performance by comparing new orders entered with actual sales revenues. In Q1’21 the B2B ratio stood at 1.38:1 pointing towards a high level of future billings and suggesting that
10 May 2022
the market was severely “overheating”. The B2B declined to 1.18:1 in Q1’22 indicating a cooling in the market, but overall strong market growth remained. A similar result is being reported across global electronic components markets.
Components pricing The global demand for handsets and cars slowed a little in Q1’22, which caused a corresponding decline in average electronic components lead-times, but
Components in Electronics
future demand in these sectors remains strong and any market adjustments are likely to be short lived. Prices of raw materials (particularly palladium, nickel, titanium, copper) continue to increase, as does the cost of labour, shipping and energy. The headaches that manufacturers of electronic components are currently suffering are being exacerbated by the need to “sweat assets”, the exceptional efforts needed to increase throughput in the current environment in a bid to meet
market demands. To maintain profitability and investment manufacturers are seeking ways to mitigate rising ‘input pricing’ which means unit prices for electronic components - particularly commodity passive components - will continue to rise in 2022.
COVID, geopolitical tensions and logistics
The impact on global economics following Russia’s invasion of Ukraine and how the
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