The European cup

The European cupGary Kibblewhite, chairman of AFDEC gives an overview of the electronic component distribution market in Europe and the UK looking at major trends and where the market is going As electronic component distribution becomes increasingly pan-European at the lower end of the scale and fully global at the higher end, there is a tendency for trends that originate in one industrial nation to generate a ripple effect on others. In part, this is due to the growing interdependency of manufacturing and supply chains although the nature of differing economies and manufacturing programmes will govern how quick and how influential any effect will be. Such effects may obviously be negative or positive but there are also occasions when they will be a combination of both. As an example, the world-wide components industry has been suffering the consequences of dramatic falls in prices of both semiconductors and passive components. This means that the sector has to sell many more products simply to maintain its status quo in sales turnover. But because the OEMs are paying lower prices for components, this allows equipment makers, for example, to either maintain equipment prices or even reduce them. The end users, in turn, are likely to purchase more because they are getting better value for their investment. In the case of the UK, however, although this was true for the early and mid 90’s these benefits have been negated since the latter part of 1996 by the strength of sterling which has, despite lower wage costs, made UK-produced goods considerably more expensive compared to their continental European counterparts. It is not, perhaps, surprising that distributors across Europe have become increasingly resilient and innovative. Value-added services have been continually introduced, primarily as a result of requirements from end customers, but also as a function of the increasing re-assignment of accounts by the component manufacturers. Recent figures from the International Distribution of Electronics Association (IDEA) cover trends in the UK, France and Italy. While they do not include figures from Germany, which is the biggest component distribution market in Europe, the consolidated figures tend to reflect national trends and may be extrapolated with a high level of confidence across the complete European market. Since Q1 of 1994 , when the statistics started, the quarterly sales of UK, France and Italy combined have increased from 550m Ecu a quarter to the Q4 97 level of 815m Ecu – a huge increase. Over this period, the consolidated book-to-bill ratio has remained comparatively constant with very small differentials. However, the credibility of the book:bill ratio as an indicator of the market trends is becoming more and more suspect as distributors move to “ship to line” ordering where orders are only booked when they are billed. The UK’s AFDEC statistics are the most sophisticated of any component distributor trade association in the world and segment markets into more product areas than anyone else. All the trade associations that contribute to the IDEA statistics are based on returns from their members and members of most European-based distributor trade associations tend to represent a healthy slice of their national available distribution markets. For example, the percentage for AFDEC is 90 per cent, for SPDEI in France it is 84 per cent, and for ASSODEL in Italy it is 68 per cent. Other countries that are part of IDEA such as the USA, Belgium, Spain, Sweden and South Africa do not gather monthly information from their members in a form that makes consolidation possible. For example the US-based NEDA only collects monthly from a “panel” of members and is, therefore, only able to publish general trend data rather than precise market numbers. The latest IDEA statistics show that, whereas continental Europe has grown steadily over the last four quarters, the UK has stagnated, largely as a result of the pressure on our exporters caused by the strong pound. Across Europe component distributors are faced with most of the same pressures as in the UK. Common component pricing is now the norm “worldwide” except for some passive and electromechanical component companies who continue to operate differential pricing – depending on the market in which they operate. However, the rise of the multinational distributor together with vastly improved communication means that all component suppliers are moving towards common market prices across Europe. The introduction of the Euro as a trading currency next year will further increase the ease of comparisons and lessen the risks currently associated with mixed currency dealings. What is certain is that the overall pervasiveness of the distribution industry means that its growth will outstrip the GDP’s of the European nations for many years to come.
Gary Kibblewhite is chairman of the Association of Franchised Distributors of Electronic Components (AFDEC) and chairman of IDEA

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