Front End | Electronic Components Supply Network
Exceptional growth in EU electronic components market continued in Q2’23 but is now trending downwards
In his quarterly statistical review of the European electronic component market Adam Fletcher, chairman of the International Distribution of Electronics Association (IDEA), describes the current and likely future market situation for readers of Components in Electronics. Each month IDEA collates statistical data returned by its member associations throughout Europe and publishes the consolidated figures as headline information. It uses three primary reporting metrics: ‘Bookings’ (net new orders entered), ‘Billings’ (sales revenue invoiced, minus credits), and the ratio of the two known as the ‘Book-to-Bill’ (or B2B) ratio, to both review what has already happened in the market and more importantly, to arrive at an informed guide to its future performance.
C
ycles in global electronic components markets have historically run counter to those in the US and Europe in that they experience their strongest growth in the first quarter of the year. Japan reports its strongest growth in Q’2 while Asia-Pac – which includes China – experiences its highest growth towards the end of Q’3 and into Q’4. This counter-cyclicality is to be welcomed because it goes a long way towards balancing the global demand for electronic components. Sadly, the supply problems exacerbated by the COVID pandemic removed this ‘comfort blanket’ when, once the emergency abated, demand in all geographic areas returned at the same time and could not be met. European electronic component markets were not immune to this phenomenon but quickly returned to their normal historical cycle - strongest ‘Booking’ and ‘Billing’ growth in the first half of the year. As anticipated however, Q’2 ‘Bookings’ (and thereby ‘Backlogs’) revealed a declining trend due to OEMs realigning their order cover and in-house inventory levels as manufacturers’ lead-times declined and their confidence in the supply network to deliver on-time improved.
Billings, Bookings, and the B2B The consolidated ‘Billings’ (sales revenue invoiced, less credits) number is the most important metric for both components manufacturers and manufacturer authorised distributors because it’s an accurate indicator of their sector’s overall sales revenue performance. IDEA analysts contrast the ‘Billing’ and ‘Booking’ figures to arrive at the ‘Book-to-Bill (B2B)’ ratio: In electronic component markets a ‘B2B’ greater than 1 is indicative of growth but a number below 1 (negative) is evidence of a decline. The ‘B2B’ ratio hit 0.72:1 (highly negative territory) at the end of Q2’23 from a peak of 1.74:1 (outrageously positive) in Q2’21, strongly
12 October 2023
by 24.2% in the quarter. The dark brown bars in the chart compare current ‘Billings’ with the same point 2022, confirming an average increase of 26.1% YTD across the European electronic components supply network.
indicating that OEM customers in Europe are continuing to reduce their order backlogs on suppliers. All the indications are that the European ‘B2B’ will remain in negative territory for most of 2023 before going positive again in 1H’24.
Overall Q2‘23 Bookings, Billings & B2B trends: European ‘B2Bs’ decline rapidly as order backlogs continue to decrease
Graphic T1 is a visual representation of twelve consecutive quarters of consolidated European ‘Bookings’ and ‘Billings’ together with the corresponding B2B ratios. The chart reveals that growth in ‘Bookings’ further declined in Q2’23 compared to the previous quarter and that ‘Billings’ are now starting to decline in- line with longer term historical trends.
Q2’23 European Billings trend: strong ‘Billings’ growth in the European electronic components supply network continues Graphic T3: ‘Billings’ figures are widely considered to be the key industry metric. The graphic T3 illustrates total electronic
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components ‘Billings’ achieved by IDEA member companies across Europe in Q2’23 and compares the figures with the previous quarter’s results and those achieved in the same period last year. The light blue bars reveal that European electronic components markets experienced an average decline of 4.1% in Q2‘23 when compared to the previous quarter. The light brown bars compare Q2‘23 to the same quarter the previous year and reveal that on average ‘Billings’ in Europe grew
Q2‘23 Bookings trend: European ‘Bookings’ continued to decline as predicted by IDEA members Graphic T2 compares the total electronic components ‘Bookings’ result achieved in Q2’23 by manufacturer authorised distributors in each European country and compares these figures with the results they achieved in the preceding quarter and in the same period in 2022. The blue bar reveals that on average, ‘Bookings’ in Europe declined by 14.1% in Q2‘23 when compared to the previous quarter. The light brown bars compare Q2’23 ‘Bookings’ figures achieved in each country with those reported for the same quarter 2022 and indicate that on average, European ‘Bookings’ declined by 34.1% year-on-year. The dark brown bar compares average ‘Bookings’ achieved by European manufacturer authorised distributors year-to-date, revealing that the average ‘Bookings’ growth rate declined by a
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