The component distribution market is experiencing a significant business slowdown which is likely to carry on for most of next year, according to UK-based distribution industry association Afdec.
Afdec is predicting a fall in the distribution market of around 10% in the first half of next year. This is significantly worse than the fall of 5.8% seen in 2008.
But Afdec admitted that a severe lack of order visibility in the supply chain made any prediction for the second half of 2009 impossible right now.
“We’ll know by the end of Q1 how bad things are actually likely to get, right now we don’t know,” said Adam Fletcher, chairman of Afdec.
Fletcher said that this year, after a difficult third quarter for distributors, the last quarter has seen the market deteriorate dramatically.
“No one has any visibility across the supply chain and some distributors are telling us that they have seen a severe downturn even in the last three weeks or so,” said Fletcher.
Fletcher said there is an inventory correction taking place in the supply chain and he expects that as much as 20% of inventory is being removed by companies.
“Turns business will dominate the distribution sector, which will further reduce visibility,” said Fletcher.
The first market sector to feel the effects of the downturn has been the automotive sector. Fletcher also expects the contract manufacturing sector to come under severe pressure. One hope is that the industrial and defence sectors will be more resilient to the affects of the downturn.
“There is no evidence yet that demand is dropping off in these sectors, but there is still uncertainty and no visibility of the future,” said Fletcher.
Afdec is predicting the distribution total available market in the UK to drop below £1bn for the first time in more than a decade. The biggest declines will come in semiconductor sales with passive components and electron-mechanical products including connectors fairing a little better.
Fletcher did point out that despite the falls in 2008, distributors increased their share of the market as the market as a whole is falling faster.
See also: Credit Crunch: Semiconductor gloom amid economic gloom, in which Electronics Weekly highlights some recent stories that detail the effect of the economic downturn on the electronics industry.