Will Europe end year with an upturn?
Adam Fletcher, chairman at the Electronic Components Supply Network (ECSN), reviews the component distribution market and finds hopes for an upturn before the end of the year fading.
The global electronic components markets have thus far had an uninspiring 2012. In Europe a weakening macro-economic environment has severely impacted the market for electronic components, resulting in a decline on previous years.
A pattern of decline between the second quarter of 2012 and the same period in 2011 is emerging across all of the European electronic components markets; France (13%), Germany (15%), UK/Eire (18%), Italy (21%) and Nordic (27%). The average decline across Europe is (17%).
In its forecast for the UK/Eire electronic components market in 2012, issued at the end of last year, ECSN predicted the quarterly distributor total available market (DTAM) figure. Members returns indicated that the decline in the market would “bottom out” in the first quarter of the year with reducing negative results in Q2 and Q3. But it expected Q4 would see a welcome return to positive growth.
ECSN’s forecast for the first half of 2012 was therefore a decline in the range (11%) to (6%), but the actual outcome proved to be a much steeper (17%) decline.
The economic factors impacting the global electronic components market are way beyond the influence of any of the organisations operating within it. “Looking at the data I believe that the UK and Eire electronic components market will now “bottom out” in Q3 2012 followed by two further quarters of improving but negative results before positive growth returns in Q2 next year,” says Aubrey Dunford, ECSN’s market analyst.
Chris Shipway, country director at Avnet MEMEC UK is more cautious. “We’ve had a good summer, since our vertical market focused demand creation approach has allowed us to win in the markets that are currently buoyant, but overall I can’t say that I can see a real prospect of a general upturn later in 2012. I don’t think the market will turn down further either, almost certainly staying flat for the rest of the calendar year,” said Shipway.
There may be some bright spots, believes Leon Mordang, v-p sales and marketing at Omron Electronic Components Europe, although in general terms he sees depressed demand in most markets at the moment.
“Customers and distributors are tending to use up inventory where they have it, but clearly this can’t continue indefinitely so I’d expect an uptick in the next four to six months,” says Mordang.
UK distributor Anglia on the other hand expects to see continued growth in Q4, bringing its 2012 revenues in ahead of calendar 2011.
“Given that the market turned down way back in July 2011, [the industry] ought to see growth returning soon”, says Steve Rawlins, CEO, Anglia, “Whether or not this is actually achieved depends to a great extent on whether or not the supply chain has continued to invest during the downturn”.
“Our industry is maturing faster than a Stilton cheese,” says Nigel Watts, managing director, Spectrum Electronics group. “The primary role of Europe in today’s global electronics industry is as an R&D centre. Market verticals such as LED and automotive are and will continue to outperform the more traditional market sectors such as Telecom and Industrial.”
There may be further good news regarding the LED sector. “Companies are also building end products such as light engines and fixtures in Europe, which is great news, however this is a narrow window of opportunity before commoditisation will eventually drive the manufacturing to lower cost centres of production,” says Watts.
An upturn in the second half of 2012 now looks very unlikely.
Not that this is an entirely new situation. The data for 2009 included in the graphic above proves that we’ve been here before.
Then as now our market we are being driven by prevailing economic conditions rather than the historical cyclical changes in semiconductor technologies.
The situation remains volatile and demands careful planning because changes in the digital economy happen quickly.