© dmitry bomshtein dreamstime.com Analysis | February 17, 2021
Longer lead times and price hikes likely to dominate 1H2021
The European semiconductor distribution market seems to have seen the worst back in 2020 and a return to growth is highly likely in 2021. With COVID-19 impact easing and a return to strong growth in Asia driving component demand, the demand in Europe is growing too. However, Q4/2020 still resulted in a slight decline.
According to DMASS Ltd., sales in the European Semiconductor Distribution Market fell by 3.8% to EUR 1.86 billion. The full year ended with -12.4% and total sales of EUR 7.72 billion. “While the 2nd wave of the COVID-19 pandemic is still in full swing and transportation hurdles make it difficult to get high-tech goods into Europe in time, the demand of customers – particularly in the automotive sector – is growing strongly. Longer lead times and price increases from manufacturers will likely dominate the first half of 2021. It remains to be seen if the extremely high bookings level is sustainable beyond summer,” says Georg Steinberger, chairman of DMASS, in a press release Country-wise, any country or region with a strong contract manufacturing base did relatively well in Q4, growing healthily in some areas, while bigger regions still suffered the downturn effects. The spread of growth/decline ranged from -24% to +22%. Germany again declined more than the average, by 8.2% to EUR 487 million. Italy did considerably better, with a decline of only 3.9% to EUR 153 million. France declined by 10% to EUR 117 million; and the UK, despite some Brexit-related pre-shipping, dropped by 15.1% to EUR 118 million. The Nordic countries, like Italy, ended at close to the average, with -5.7% to EUR 146 million. The entire East region, including Eastern Europe (+2.3% to EUR 356 million), Israel and Turkey actually grew, as did Benelux, with +14.7% to EUR 70 million. “The most conclusive insight from the data is that, wherever there is strong contract manufacturing, the market recovers faster. The second obvious development is that Germany, as a stronghold for the European market, gets smaller, in part driven by increased outsourcing to Eastern Europe. So far, the UK has been spared any significant Brexit effect although we will no doubt see more impact as 2021 progresses,” says Georg Steinberger. From a product perspective, Q4 showed some positive development in Discretes, Power and Sensors, as well as in Flash Memories and Microcontrollers, while most other products – Opto, Analog, Memories and Other Logic (ASSPs etc.) – meandered around the average decline. Only Microprocessors, Programmable Logic and Standard Logic saw a double-digit decline. On an annual basis, Analog declined by 13.1% to EUR 2.25 billion, MOS Micro (MPUs, MCUs and DSPs) by 9.8% to EUR 1.57 billion, Power by 11.5% to EUR 872 million, Opto by 8.8% to EUR 717 million, Memories by 19.6% to EUR 651 million, Programmable Logic by 13.7% to EUR 500 million, Other Logic by 8.8% to EUR 442 million, Discretes by 18.7% to EUR 394 million, Sensors by 3.7% to EUR 216 million and Standard Logic by 16.4% to EUR 108 million. “In general, if there is a trend to be seen at all, it seems that in 2020 standard products lost more than complex products or technology categories that require more support. Curious to see if this continues in 2021, specifically on Analog,” continues Georg Steinberger. “As with the overall market, 2020 was a year of significant double-digit decline for distribution”, says Steinberger. “However, we see that bookings are strong and demand is returning, with some likelihood of shortages through the first part of the year. Interestingly, the current discussion about dependency on Asia with regards to component supply, is like groundhog day. For years if not decades, Europe’s focus on Industrial and Automotive led to an effect that leading-edge semiconductor production in Asia may not be centred around European needs. We became sub-strategic a long time ago. The positive news for distribution is that we are the best aggregator for demands of all colours and varieties and therefore the best option for European customers.”