The UK electronic components market declined by 10% in the first half of 2020 compared to the same period last year, states the ecsn/afdec Association. Forecast for the second half of the year suggests that the market decline will slow and reveal a 2H’20 decline in the range between 3 and 9%, with a mid-point decline of about 6%. The mid-year forecast released today by ecsn predicts that the UK & Ireland electronic components market will show a full year decline in the range of 6-10%, with a mid-point of 8% decline on the previous year.
“The sharp decline in growth in 2020 is primarily the result of a global economic slowdown caused by the COVID-19 pandemic, which was not a forecastable event in 2019”, said Aubrey Dunford, ecsn Market Analyst. “However, the ongoing trade war between China and the US had already reduced demand in Q4’19 and enabled customers to de-stock based on increased availability due to tumbling component lead-times and because of their weakening customer order book”.
The ‘Book to Bill’ ratio which was positive in Q1’20 but declined slightly in Q2’20 but the polynomial trend suggests that the B2B ratio is likely to remain positive into the 2H’20.
“Customers who had been destocking in Q4’19 increased their in-house inventory and order cover in Q1’20 as manufacturer lead-times for components started to increase and with it, the potential risk of product shortages due to the population lock-down and China’s closure of much of its manufacturing industry,” Dunford continued. “Fortunately, the supply situation has eased considerably in Q2 ’20, partly aided by lower global demand for electronic components”.
ecsn’s afdec members’ visibility in the electronic components market remains very limited due to the almost total absence of clear guidance from their customers, and there is understandably a wide and diverse range of opinions on the likely outcome for 2020.
“It’s always our aim to provide the electronic components markets, our members’ customers and investors with a balanced and evidence-based forecast and our forecast for the second half of the year reflects careful analysis of our members’ statistical data, reports from industry analysts and empirical data from a wide range of sources”, said Adam Fletcher, ecsn chairman Adam Fletcher. “Looking further ahead we believe that 2021 is likely to be a year of low growth and modest recovery for the UK and Ireland electronic components markets. Stronger real growth will probably not return until 2022, however the range of member and industry analyst opinions about when and what the rate of the growth will be remains very diverse”.
Looking ahead, Fletcher is confident that UK electronic components markets will return to growth over the next few years but at a rate lower than the global average rather than at the top of the growth curve. He believes that stronger international economic growth, the impact of mega mergers and acquisitions and continued underinvestment in capacity for the manufacture complex electronic components will once again drive extended lead-times and shortages of some electronic components.
“The pendulum of supply and demand continues to swing very erratically and will continue to cause a ‘stop-start’ effect on our industry”, Fletcher concluded. “Until the entire electronics industry starts to really collaborate effectively and share its business intelligence throughout the supply network, we will all be at risk from these extreme market oscillations. I’m certain that stability will return, but I will need a crystal ball to predict just when…!”