Government policy begins to threaten components

Government policy begins to threaten componentsJon Mainwaring
Government economic policy, along with continuous rises in interest rates, is threatening a recession in the electronic components sector, according to the Association of Franchised Distributors of Electronic Components (AFDEC).
The association says that immediate prospects for the components industry look far worse than previously predicted. While AFDEC had already revised its growth estimates downwards from 10.5 per cent to 7.3 per cent after results from the first quarter of this year, it expects it will have to revise these estimates further if current trends continue.
AFDEC blames the government for this. “It seems nonsensical to be making industrial conditions very difficult while insisting that investment in industry is a major objective,” said the association.
Although the UK distribution industry sells mainly to local customers, AFDEC says that the strength of the pound is having an indirect adverse effect upon firms. “Their customers are having problems with export markets, which has had a knock-on effect,” said AFDEC’s economist Martin Williams.
Meanwhile, component manufacturers must expect to suffer losses in export sales, according to Gary Kibblewhite, chairman of AFDEC. He says that there are few bright spots on the horizon. “With sales of semiconductors to industrial markets and sales for passive components between nine and 10 per cent down in the first half of 1997 compared with the first half of 1996… this does not bode well for the second half of the year,” he said. “Clearly distributors are looking carefully at not only inventory levels, which have to be kept in check within downward market phases, but also at expense levels.”
The only area where there has been progress is in electromechanical products, which has undergone a small growth of 5.5 per cent. However, there are a few other positive signs.
One is the growth of semiconductor sales into the PC market. These actually grew in the first half of 1997, up 0.6 per cent up on the first half of 1996.

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