Front End | Electronic Components Supply Network
UK electronic components market bucks declining global trend
According to Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn) most electronic components markets around the world are slowing but the UK market is defying those declines. Members of the association are however forecasting slowing growth in 2H’23. In this article Fletcher provides some insight into the growth trend and shares his opinion about what is likely to happen in the UK market in the second half of the year
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or over fifty years ecsn members have collaborated to produce both near- term and annual market forecasts to aid their members’ business planning, and provide guidance to the wider electronics industry. Thanks to their good judgement - and more than a little good fortune - these forecasts have generally proved to be fairly accurate, but occasionally they simply get it wrong... 2023 appears to be a case in point.
UK electronic components market – Q2’23 - forecast
Manufacturer authorised distributors - overwhelmingly ecsn members - support 99% of all OEM customers in the UK. Each month they submit over 200 data points to the association on the key aspects of their organisation’s performance. The data is cross-checked and compiled into a UK Market Review, which is first shared with members before being published to the wider industry, including other trade associations and industry analysts. Released in December ’22 ecsn’s UK Electronic Components Market Forecast – 2023 revealed that the association’s members were hopeful that the UK market would grow by 4% in Q1 and by a further 3% in Q’2, culminating in a first half year performance of 3.5% growth and thereby continuing a trend spanning ten successive calendar quarters.
UK electronic components market – Q2’23 - outcome In the event ecsn members reported that the UK market for electronic components grew by a remarkable 13.2% in Q1’23 and by a further 13% in Q’2 compared to the same quarters in the previous year. The six-month period concluded showing 13.1% growth, significantly different from ecsn members’
12 September 2023 Components in Electronics
forecast of 3.5% growth - see graphic “DTAM by Quarter for 2017 – 2023”. Also included in the graphic is the association’s forecasts for Q3 and Q4 ’23, both of which predict mid-point growth of 2% over the previous year. It’s my opinion that the actual 2H’23 outcome will be largely driven by what’s happened to the Book-to-Bill (B2B) ratio during the year.
The UK electronic components market - book-to-bill ratio – 2H’23 The B2B ratio is an important metric as it predicts what is likely to happen in the future to ‘Bookings’ (new orders) when compared to ‘Billings’ (shipments made to customers). Unity = 1, with a positive number indicating growth and a negative number indicating a decline.
The ‘goldilocks’ B2B ratio is about 1.05 to 1.1 as this indicates satisfactory but controlled market growth, ‘neither too hot nor too cold’. Although somewhat difficult to decipher the graphic “afdec Members’: Book: Bill Ratios by Month” does show what has happened to the B2B ratio since June ’20 by total and by commodity type. It reveals that the semiconductor B2B peaked at 1.8:1 in January ‘21 and the polynomial trend line cycled from 0.85:1 in June ‘20 to peak at 1.32:1 in June 21. A B2B ratio of this magnitude has never been seen in the UK in the past fifty years but we weren’t on our own: The trend was reflected globally as OEM customers loaded more and more order cover on their suppliers and pushed already extended manufacturer lead-times out further still. The polynomial trend line started to follow the decline: It dropped to 1.10:1 in March ’23 before climbing again to 1.14:1 in June ’23.
Impact on electronic components market
The UK electronic components market out- performed many of its European peers in the first half of 2023, returning strong ‘Bookings’ and ‘Billings’ figures compared to the same period last year, and at a time when many European manufacturer authorised distributors were reporting negative B2B ratios. Given the current economic and geopolitical circumstances customers could be forgiven for harbouring a lingering scepticism about the ability of the supply network to deliver in a consistent and timely manner but it’s apparent that in the UK at least they are continuing to place orders and continuing to hold significantly elevated in-house inventories to ensure they can fulfil their customers’ needs.
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