European Semiconductor Distribution reports weak first Quarter

As expected, the European components distribution experienced a further decline of its sales in the first quarter of 2008. According to DMASS (Distributors’ and Manufacturers’ Association of Semiconductor Specialists), the semiconductor distributor and manufacturer members achieved quarterly distribution revenues of 1.38 Billion Euro in Q1/2008, which represents a decline of 7.9%. Sequentially (against Q4/2007), sales were up 12.3%. DMASS only reports industrial semiconductor sales, defined as all semiconductors, excluding the PC channel. Ian Bass, Chairman of DMASS, commented on the first quarter data: “We expected a drop in Q1 as we were up against the all-time-high quarter of European Semiconductor Distribution History. Unless something severe happens - like a sinking demand in volumes - the cycle should ease out over the course of the year. We are still confident that the European market has a big manufacturing potential and therefore an upside specifically for distribution with its high focus on very innovative mid-size customers. On another note, I warmly welcome our two new members, Maxim and Anglia. Both will help us to strengthen further our statistical representation of the European semiconductor distribution market.” The first quarter looked quite similar in Western Europe and much more positive in Eastern Europe. Of the bigger sales regions, the steepest decline against last year’s Q1 occurred in the UK with -22.1% (117 Million Euro), followed by France (-11.4% to 114 Million Euro) and Italy (-9.8% to 183 Million Euro). Germany “only” fell by 7.2% to 461 Million Euro, proving its resistance against the massive production transfer that has affected all of Western Europe. Benelux declined by -14%, Iberia by -11% and the Nordic Region by -5.6%. The winner was again Eastern Europe with +10.5% with a total of 162 Million Euro, led by Russia, Poland, Hungary and the Emerging Countries (Rumania, Baltic States, Ukraine, etc.). Ian Bass: “The regional development was very consistent with what we saw in previous quarters. Of concern is without doubt the ongoing weakness of the markets in the UK and France. While Italy and Germany recovered with +22% and +20% respectively against the Q4/2007 figure, the UK (and Ireland) only managed to exceed Q4/2007 by 2% and France by 12%. However, from a design perspective, those countries continue to be strong.” Product-wise, the different areas were all negative, the only distinction being the degree of impact. Discrete Components (including Power) declined only by -3.2% to 241 Million Euro, MOS Micro (Microprocessors, Controllers and DSPs) went down by -5.9% to 322 Million Euro and Analog components lost 6.7% (down to 373 Million Euro) against Q1/2007. All other areas lost over-proportionally, with Programmable Logic (-14.1%) and MOS Logic (-14.2%) leading the product decline. On the positive side, IGBTs (+42%) and DRAMs (11.9%) grew by double digits. Ian Bass concluded: “As stated in previous reports, the downturn on products in most cases is not driven by a lack of demand but by a continued erosion of the average selling prices. We fully expect the price pressure will soften during the year. From a market perspective, distribution customers in Europe continue to be world leaders in their fields, with high export rates and strong positions in fields like industrial, automotive and increasingly environmental technology. Europe is leading the development in those fields.”