Component distributors are reporting improved business confidence and higher order levels compared with the last three months of 2009.
However, there are still worries that a sustained recovery in the electronics market will not happen until the second half of the year at
the earliest.
A survey by Electronics Weekly of 20 managers in the distribution sector recorded an almost universal increase in confidence and new ordering levels as the economy emerges from recession.
“Last year, we worked twice as hard for half as much and were grateful; this year it could be four times as hard but the revenue will go in the right direction, providing we can bill and ship the product,” said one manager.
The survey found that 90% of managers reported order levels higher than in the fourth quarter of 2009.
“Design activity across Europe has significantly increased in Q4 2009 and into Q1 1010 and we are witnessing a huge growth in the ‘funnel’ of opportunities, which will ultimately drive projects and then production revenues in the fullness of time,” commented a semiconductor distributor.
However, there was evidence that distributors are not yet completely convinced that the present upturn in the component market will mark the beginning of a period of sustained sales growth.
Almost 70% of those questioned did not expect the market to sustain growth until the second half of the year. Two distributors even suggested it could be 2011 before sustained growth returned to the market.
“Since 2010 will be measured against a very bad 2009, with the first half of 2009 having seen a 30% drop, the first half of 2010 will already experience a very profitable growth. Some hope it will return to levels of the first half of 2008,” commented one manager.
One of the consequences of increasing ordering levels is pressure on the supply chain. This is resulting in lengthening lead times on products as diverse as microcontrollers and tantalum chip capacitors.
According to one distributor, “The issue is clearly an underestimation of the market situation by the suppliers.
“We all expected a double dip starting around March,” he added. “Now high bookings are reaching out to June and beyond. A huge lack of new capacity will keep the situation tight. Book-to-bill month-to-date is 1.5.”
Almost all the managers questioned said that lead times were increasing on some products. Typically, lead times were stretching to 20 weeks for components such as standard logic, voltage regulators and specific connectors.
But some distributors said they had experienced lead times of 24 weeks and even in one instance 40 weeks on some hard-to-get components, including specific microcontrollers and passives.
“Lead times are flying out” is how one distributor described the situation.
There were even examples of allocation on some switches, relays and tantalum capacitors.