© begemot 30 Analysis | December 07, 2015

UK Electronic Components Market - Low Growth at best in 2016

According to the manufacturers’ authorised distributor (afdec) group within the Electronic Components Supply Network (ecsn) the UK & Ireland electronic component market is likely to remain ‘flat’ in 2016.
The forecast released by the association today indicates that the market will at best achieve only slight growth and may even contract in 2016. Predicted figures in the range (2%)-to-2% with a 0% mid-point (i.e. ‘flat’) confirm members' concerns that any recovery in the manufacturing sector of the economy will be extremely gradual and is only likely to continue in-line with improvements in the macroeconomic environment.

Analysis of the consolidated returns from the association’s membership indicate that the overall UK / Ireland Distributor Total Available Market (DTAM) in the current year (2015) and will show a decline of approximately (1%) when compared to 2014. The association's 'flat' forecast for 2016 points towards a DTAM value of around £1.1bn within a Total Available Market (TAM) value of circa £2.9bn.

Presenting the forecast, Aubrey Dunford, ecsn Market Analyst confirmed it’s now likely that the UK / Ireland electronic components markets results for 2015 will end just beyond the lower end of the range of guidance provided in the association’s forecast delivered in December last year. According to Dunford, the first half of the year saw a recovery in growth in-line with the association's guidance but this growth trend stalled in the second half of the year, principally due to sluggish growth in the global markets, especially in the key European markets. "Whilst Automotive, Aerospace and Defence markets have recovered well the critical Industrial components market on which much of Europe relies on to drive growth has continued to falter,” Dunford said.

"Higher growth in some sectors of the market such as Automotive where Distribution lacks a firm foothold suggests that the TAM should increase by more than the DTAM but many of these electronic systems are designed in the UK but manufactured in Eastern Europe so in real terms, the TAM has declined by (5%) to £2.74Bn,” Dunford continued. “The information provided by our members indicates that the UK / Eire electronic component market is likely to have a modest first half of 2016, recovering in the second half of the year as macroeconomic conditions improve and inventory across the global electronic components supply network is rebalanced to meet the actual demand. We’re likely to see a corresponding recovery in the TAM, meaning the distributor share will only increase slightly in 2016.”

According to Dunford, the continued slow-down in particularly the Asia Pacific market has meant that the whole supply network remains overstocked and it will take some time for manufacturers to adjust their production levels in-line: The ‘Book to Bill' ratio, which turned negative in May ’15, has stubbornly remained below unity and looks unlikely to recover until Q1 ‘16: “Until the B2B ratio recovers beyond 1.1:1 for a sustained period there's no way growth can return to the market,” said Dunford. "We believe that it will take some months for the supply network to come back into balance. In the meantime with good inventory availability and short lead-times, the electronic components market is well positioned to support its customers' requirements,”

ecsn / afdec chairman Adam Fletcher, believes that the problem for the electronic components market is not ‘if’ but ‘when’ and ‘how strong’ the recovery will be: “We have seen a much wider than normal range of opinions from our members, other industry associations and industry analysts, who are all seeing positive signals in terms of opportunity," but he remains concerned that this optimism is not yet feeding though to the real numbers. Fletcher councils continuing caution: "The frenetic pace of merger and acquisition activity in the electronic components markets is likely to slow in 2016 but the outcome of this consolidation will take another 18 months to work through. I suspect that in 2016 we will continue to bump along at the bottom of the recovery cycle with much stronger consistent growth likely into 2017/8."

ecsn / afdec chairman Adam Fletcher concluded by stating his belief that all organisations right across the electronic components supply network must continue to improve their collaboration and forecasting to mitigate supply problems: "Well managed open, honest, communication throughout the supply network costs virtually nothing but provide great value for everyone, not least by increasing confidence in our own capabilities.”


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