© evertiq Components | December 08, 2017
Authorised distributors see continued growth in 2018
The afdec forecast revealed that the market is likely to have grown by 17 percent in 2017, and distribution's share of the TAM in the UK will have grown to over 40 percent, encouraging the consensus opinion that the recovery in the manufacturing sector of the economy will remain strong and is likely to outperform the macroeconomic environment.
The forecast released by the manufacturers’ authorised distributor (afdec) group within the Electronic Components Supply Network (ecsn) predicts that the UK & Ireland electronic component market will grow in the range 6.5 to 10.5 percent in 2018, achieving a mid-point of 8.5 percent. Aubrey Dunford, ecsn Market Analyst commented that the UK / Ireland electronic components market results for the current year (2017) will have exceeded the higher end of the range of guidance the association provided in December last year. According to Dunford, the market grew strongly throughout 2017: "Every quarter of this year saw sales exceed the upper point of afdec guidance. 2017 is likely to end showing annual growth of around 17 percent in the UK Distribution Market, which compares very favourably with the upper prediction of 4.3 percent we made at this time last year". The ‘Book to Bill’ ratio remained above unity throughout 2017 although in recent months it has softened a little, indicating that the rate of growth will slow as we enter 2018, but the association is forecasting a further five quarters of growth at least. “We are seeing a period of sustained ‘quarter-on-same-quarter-the-previous-year’ growth” observed Dunford, “something we haven’t seen since the 1990s, and the growth we’ve experienced over the last six quarters is the longest period of sustained growth since 2000”. The growth period started in early 2016 but really accelerated in the last quarter, which ecsn initally put down to the change in market prices due to its measurement of the market in UK pounds: “It is now clear that this is only one of a number of factors behind the upswing, among which the upturn in the global electronics markets predominates. The seed change in electronics markets has enabled more competitive pricing of manufactured goods in export markets and UK companies have been able to fully partcipate in that change.” As electronic systems continue to expand into ever more areas of daily life global investment into these areas has rapidly increased: “UK companies find themselves in an ideal position to capitalise on the opportunities presented, most of which are within the market sector served by authorised distributors. Global growth is casuing lenthening of lead times on some product lines but manufacturers are expanding production, although perhaps with more caution than we have seen in the past. It is clear that customers who work in close co-operation with authorised distributors are able to meet their production requirements even although overall availability is more restricted” ecsn/afdec believes that the outlook for 2018 is positive with growth continuing, especially during the first half of the year. That said the association does expect that the growth will slow during the second half: “Our members remain confident that there are opportunities for further growth in 2018, despite numerous factors that simply cannot be predicted with any certainly, not least the Brexit. The global electronics market is set to expand and we hope that the outcome of our Government’s negotiations with the EU will allow UK companies to particpate fully in that growth.” Commenting on the 2018 Forecast ecsn / afdec chairman Adam Fletcher welcomed the continued recovery in the global economy and the return of the global electronic components industry to much stronger and more consistent growth: “The global electronic components market is currently transitioning from consumer products (primarily mobile phones, but also PCs and home entertainment systems) towards fully autonomous transport and smart cities. The vast infrastructure build out including the deployment of 5G mobile networks that will be required to support autonomous vehicles, connected cities and their populations is a huge opportunity. The move from internal combustion engines towards all-electric vehicles is another huge shift that will significantly reshape the electronic components market.” Fletcher does not however expect these exciting developments to become pervasive quite as quickly as is currently being forecast: “It’s easy to underestimate the sheer complexity of the new technologies and the cultural animosity to such profound change, not to mention the inevitable delay while international regulatory and legislative frameworks play catch up. However, the process is already well underway, and I believe that in revenue terms 'things' i.e. hardware products are going to grow faster than the 'internet' deployment.” After almost a decade in the doldrums 2017 was an ‘inflection point’ for the UK electronic components industry and Fletcher predicts that the global electronic components market will see a hockey-stick shaped growth trajectory over the next five years: “I anticipate that the UK electronic components markets will continue to grow over the next few years but at a rate lower than the global average rather than at the top of the growth curve,” Fletcher added. He believes that the ongoing merger and acquisition activity in the electronic components markets is likely to continue in 2018 and cautions that consolidating these changes will continue to be a challenge for all parties: “But assuming there are no new major macroeconomic shocks, the recovery cycle in the global electronic components markets will continue, with much stronger consistent growth likely for the rest of this decade."
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