Front End | Electronic Components Supply Network
UK electronic components market experiences stronger than forecast growth
According to Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn), forecasting the performance of the UK electronic components markets has forever been a thankless responsibility. When the eventual outcome becomes known the forecasting body is either regarded as being ‘lucky’ when it gets things nearly correct, or just plain ‘wrong’ when it doesn’t. Data from the Manufacturer Authorised Distributors that comprise ecsn’s afdec group reveal that Q1’23 saw much stronger market growth than the association forecast at the end of last year. In this article, Fletcher reviews the consolidated Q1’23 figures and suggests that despite the very welcome stronger than anticipated growth in the first quarter, the market will almost certainly slow significantly over the rest of the year as components manufacturer lead-times reduce and the confidence of OEM customers in the ability of their suppliers to deliver improves.
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ach month Manufacturer Authorised Distributor members generously submit a wide range of business metrics to ecsn from which the association’s analysts extract and compile key business and market information, which it then confidentiality shares throughout its membership. An abbreviated form of the data is also released to the media in support of the wider electronics market. On this occasion however, ecsn is sharing more detailed information with readers of Components in Electronics, principally as a reaction to the market disruption caused primarily by the COVID pandemic, but also in anticipation that it will improve market understanding,
help mitigate negativity and assist all organisations in the electronic components supply network to interface appropriately with their business partners.
Key metrics starting to decline Key for all organisations in the electronic components market is the Book-to-Bill (B2B) ratio, a key metric arrived at by comparing “Bookings” (new customer orders) figures with “Billings” (product shipments invoiced to customers) figures in a particular time frame. The difference between the two data points is “Backlog” (orders accepted but not yet shipped). A quick look at the polynomial trend shown by the black line in the graphic ‘afdec Members: Book: Bill Ratios by Month’
reveals that the B2B transitioned from negative in April 2020 to a peak of 1.30:1 in Q1’21 before declining to around 1.1:1 in Q1’23. For context, the B2B ratio in normal market conditions (remember those…?) is around 1.05:1, an indicator of modest, stable growth in the market. In contrast, the current B2B of 1.1:1 is significantly higher than expected at this point in the cycle, suggesting that growth is likely to continue into Q2’23, while the unprecedented B2B of 1.30:1 we saw in Q1’21 is very unlikely to ever be seen again.
The Q1’23 outcome
The Distributor Total Available Market (DTAM) figure is another important metric as it sums up the “Billings” (sales revenues)
performance of all ecsn Manufacturer Authorised Distributor members in defined time periods. The graphic: ‘DTAM by Quarter for 2017 – 2023’ plots the changes in market growth relative to the same quarters in the previous year. It reveals a declining market over the period Q1’19 to Q4’20 but that in Q1’21 the market started a strong recovery, a positive trend that has continued for nine consecutive quarters. In its Market Forecast released in December ‘22 ecsn Manufacturer Authorised Distributor members predicted that the UK market would grow in the range 0%-to-7.5% in the first quarter of this year before beginning to steadily decline over the three succeeding quarters. Some even saw the market entering negative territory when compared to the very strong growth in the previous year. Boy, did they get that wrong? The Q1’23 outcome actually grew by an astonishing 13.2%, almost twice as much growth as forecasted by ecsn members.
What’s driving this growth No one is able to honestly say what lies behind the current growth in the UK electronic components market but some of the suggestions put forward by industry pundits include; the current high levels of geo-political tension caused by the Russian invasion of Ukraine, the trade war between China and the US that has negatively impacted UK, business, and OEM customer concerns about the real availability of electronic components as a consequence of the major supply problems they’ve had to contend with over the past 18 months. Other suggestions include risks to international and last-mile logistics and stronger than anticipated demand for
12 May 2023 Components in Electronics
www.cieonline.co.uk
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