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Electronics Production | November 20, 2007

European chip distribution market slows down

Research firm DMASS shows lacklustre summer quarter. 2007 market turns slightly negative. All major markets are affected. Positive exceptions are Benelux and Eastern Europe. Programmable Logic and MOS Logic show signs of weakness.
The weakening market environment in the European components market starts to affect distribution as well. In Q3/2007, the European semiconductor distribution market declined by 3.8%. According to DMASS (Distributors’ and Manufacturers’ Association of Semiconductor Specialists), the semiconductor distributor and manufacturer members achieved quarterly distribution revenues of 1.31 Billion Euro. Thanks to the record Q1/2007, 2007 to date is still keeping up, with a minus of only 0.6% against a record equivalent period in 2006.

Ian Bass, newly appointed Chairman of DMASS, commented: “As cycles always come back and do not exclude certain market segments, it was inevitable that the semiconductor distribution market came around to a slowdown after a long run of very successful quarters. The main reasons for the slowdown are the ongoing dollar weakness and the subsequent pressure on equipment export (our customers’ business); the broad technology inventory correction over the last few quarters; and finally the massive component price differences to Asia, which has encouraged a lot of grey market activity and resulted in huge market volume just not materialising as expected. It seems as if 2007 is ending slightly negative for DMASS.”

Regionally, the picture shows the same trends as in previous quarters. While Germany, the biggest market within DMASS, kept the decline at bay with -1.8% against Q3/06 and absolute sales of 434 Million Euro, UK (127 Million Euro) and France (107 Million Euro) again showed a double-digit decline (-18.5% and -13.2% respectively). Italy – the second-biggest market in Europe – declined by 3.8%, to 155 Million Euro. The positive highlights of the quarter were Benelux (54 Million Euro) and Eastern Europe (153 Million Euro), which both showed double-digit growth. Eastern Europe is about to overtake Italy as the second-biggest European semiconductor distribution market, while the combined Nordic market (Denmark, Sweden, Finland and Norway) is overtaking France.

Ian Bass: “The accumulated picture for 2007 still shows many positive signs, among them a strong Benelux, Nordic and Eastern Europe. Of the big regions, only Germany remained positive with an increase of 2% to date. It is amazing to see how the German market seems to avoid erosion effects like other traditional industrial markets such as UK and France.”

From a product perspective, the patterns of growth and decline have converged during Q3/2007. The only product segment that reported growth during the quarter was Discrete components (219 Million Euro), with 1.3%. All the others have declined slightly – MOS Micro, Opto and Analog - to significantly – Memories, Programmable Logic and Other MOS Logic. Cumulatively in 2007, some single product areas still reported healthy growth numbers: IGBTs grew by 27% during 2007, Power-MOS by 12% and SRAMs by 11.3%. Standard Analog and Microcontrollers, with 269 Million Euro and 236 Million Euro respectively in Q3/07 and by far the most significant product segments within DMASS, grew by 3.2% and 4.9% respectively on a cumulative basis. On the negative side, Microprocessors, Programmable Logic and Other Logic declined double-digit, while DSPs and Advanced Analog declined by 8.5% and 3.8% respectively, on a cumulative basis.

Ian Bass concluded: “From a product viewpoint, the situation is not half as negative as the total numbers might suggest. Without a few obviously structural problem zones like Microprocessors, Programmable Logic, Other Logic and to some extent DSPs and Advanced Analog, the mainstream distribution portfolio would still be ok, cumulatively.”

As a more general observation, Ian Bass added that “the more important question is really how Europe overall will shed its image as a mature electronics market and develop dynamics around its core competencies of industrial, automotive and increasingly environmental technology. There is more development going on in these fields than anywhere else in the world. And from a design perspective, Europe and specifically the electronics market served by distribution, command a higher share than the pure components sales may indicate.”

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