Order levels are picking up and as a result business confidence is strengthening the among component distributors.
Electronics Weekly’s September survey of a panel of 20 managers in the distribution sector found that the vast majority (90%) were more confident of business prospects than three months ago.
This was a clear improvement on confidence levels in the June survey.
See: Distribution orders picking up, according to survey
A similar number told
Electronics Weekly that new order levels were increasing. One distributor said order levels for some product areas were up by as much as 10% in the past few months.
One note of caution came from two managers who said that business from contract manufacturers (CEMs) had been surprisingly quiet, but this could be due to a more pronounced summer lull.
Eighty per cent of the managers on the panel said they were no longer cutting inventory.
One area of the business which has changed in the past three months is the lengthening of lead times on many products.
This is perhaps the strongest evidence that business in the component distribution sector is starting to turn around after the industry downturn which hit in the third quarter of 2008.
“There is talk of some manufacturers not even quoting on some parts as they cannot deliver. Allocation here we come,” said one distributor.
Lead times of 20 to 24 weeks on some commodity parts were not uncommon, according to managers on the panel.
“Lead times are definitely lengthening and allocation is becoming increasingly common,” said one.
The market may be starting to emerge from recession, but there is still uncertainty about when sustainable sales growth will return.
All the managers said they expected growth to return next year, but most thought it would not happen before the second quarter.
“Most feedback from analysis is that Q309 and/or Q409 will see a level of normalisation, however we do not see this in the UK at this stage. I expect it later on in 2010,” said one distributor. But this was the most extreme view on the timing of the recovery.
Electronics Weekly will repeat the survey in December.