Front End I Electronic Components Supply Network
Continued strong growth in the UK and Europe…
Despite all the economic and political headwinds impacting the UK and Europe, the electronic components market demonstrated strong growth into Q4 ’18 and members of the Electronic Components Supply Network (ecsn) are cautiously optimistic that growth will continue into 2019, albeit at a slightly slower pace. ecsn and IDEA chairman Adam Fletcher reviews the data and provides the association’s member insights into “what’s happening” in the market…
continue. If they are proved correct, we will be experiencing the longest period of sustained growth since the 1980s.
…and Europe Adam Fletcher W
ay back in 2017 ecsn and its members forecast that the UK Distributor Total Available Market
(DTAM) for electronic components would grow in the range 6.5-10.5% in 2018, achieving a mid-point of 8.5%. In the event the outcome was comfortably on the higher side of the association’s guidance, as the UK DTAM actually grew by 9.7%. Drilling down, the association forecast that the UK DTAM would grow in the range 2.5-6% in the last calendar quarter of 2018, achieving a mid-point of 5%. The actual outcome for the final quarter of 2018 was an astonishing 10%, growth, twice the association’s mid-point forecast for the quarter.
Continued growth in the UK At the end of 2018 ecsn members forecast that the UK DTAM will grow by a further 6% in 2019. The graphic (DTAM By Quarter 2013 – 2019) shows the historic position (blue bars) contrasted with the forecast range. The green bars indicate the association’s forecast minimum range and orange bars the maximum by quarter. Having already achieved a record of eleven months of sequential growth ecsn members are optimistic that progress will
10 March 2019
The Graphic T3 illustrates total electronic components Billings achieved in European markets in Q4'18 and contrasts and compares the results with the previous quarter's results and those achieved in the same period in 2017. The blue bars compare Q4’18 European Billings with the preceding quarter’s figures, revealing that the electronic component markets in the Nordic and Austrian regions experienced growth whilst the overall European market declined by an average of 5.5%. Markets in France, Germany and Switzerland declined slower than the average in the period, but UK and Italian markets declined faster. The light brown bars compare Q4’18 with the same quarter 2017 and reveals that all European electronic component markets experienced growth in the last quarter of the year, averaging out at 8.3%. The Italian, German, Swiss and Austrian markets growing faster than the average. The dark brown bars compare Billings in
the current year to date (YTD) with the same period 2018, revealing that with the exception of the Nordic region all countries experienced Billings growth. The UK, Italian, Swiss and Austrian markets grew faster than the European average of 7.1% while French and German markets grew just below the average. Billings in the Nordic region declined slightly. A European average DTAM Billings
growth rate of 7.1% in Q4’18 compared to the same quarter the previous year is a particularly strong result. It sets an unbroken record of twenty-one consecutive calendar quarters of growth and suggests that regardless of Bexit, momentum for growth for European electronic component markets will continue into 2019.
What’s driving electronic components growth? Whilst it’s great to be able to report such positive growth it’s important to understand why this is happening and how it may affect the market in the future. 2018 was something of a ‘bluebird’ year for global electronic components markets
Components in Electronics
driven by sequential improvements in global economic conditions and rising GDP aided by a multitude of new applications for technology, particularly in automotive, computing, 5G infrastructure and factory automation (IoT). Manufacturers of electronic components however remained reluctant to invest heavily in new manufacturing capacity because of the volatility of the global economic environment in recent history. They viewed the return on investment in manufacturing capacity to be a riskier proposition than investing in alternative commercial strategies such as mergers, acquisitions, stock buy-backs etc. The sequentially increasing demand for components compounded by a lack of international manufacturing capacity and has resulted in the average lead-time for all electronic components increasing over a three year period from an average of two to six weeks to 10-16 weeks, while some components are currently on 26+ week lead times. ecsn’s manufacturer members and their authorised distributors in the UK have increased their local inventory through Q4’18 and into Q1 2019 in the range six to eight weeks of sales volumes to buffer their customers from any potential delivery problems that may arrise as the UK leaves the EU at the end of March 2019. As customers acknowledge the change in lead-times their ERP systems naturally increase their order cover to reflect the new reality, which of course further exacerbates demand. Many customers have or are in the process of increasing their in-house inventory of electronic components. This action has in my opinion been mainly responsible for the strong UK DTAM revenues in Q4 2018 and forecast for Q1 2019 and is likely to result in a slow down in Q2 2019 as this additional buffer inventory gets “consumed.”
Softer short-term demand The global electronic components industry is slowing as customers for mobile phones – the primary market driver - hold off purchasing new phones until faster 5G products and services become available. In the IoT market customer concerns about
the lack of an international standard for security are holding up mass deployment, while the slow-down in the Chinese economy and the current trade dispute between the US and China is causing real concerns. Automotive sales have been slowing since mid 2018 and in Europe, are not forecast to recover substantially until the second half of 2019. Consumers are concerned about the issues surrounding diesel engines but more widely are considering the economics of moving towards hybrid or electric powered vehicles.
Longer term outlook The forecast for the UK, European and Global electronic components markets however remains “up and to the right”. I believe that stronger growth will return on the 2H 2019 and continue into 2020 with manufacturer lead times for electronic components returning to a new normal average of 10-to-16 weeks. The electronic components supply network is very robust and authorised distributors are well used to successfully and professionally managing the sort of change we’re currently living through. I believe that what risks remain can be best mitigated by positive and timely engagement with partners up and down their supply network.
Adam Fletcher is Chairman of the Electronic Components Supply Network (ecsn), a business association established in 1970 that today offers support to all organisations with an interest in electronic components throughout their entire lifecycle. He is also chair of the International Distribution of Electronics Association (IDEA), an association of individual country electronic components associations whose objective is to share best industry practice.
Further information about The Electronic Components Supply Network and afdec may be found at the following website:
www.ecsn-uk.org with regular industry updates available to all on the Breaking News pages.
www.ecsn-uk.org 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
