Spread of applications drives disti market forward

Encouragingly this growth is being supported by a myriad of applications. “It isn’t one big thing,” Burr-Lonnon observed. “It is lots of small things, a wide spread of applications, plus automotive which can make a difference in volumes.

“There are blips, product allocation being one, and some of that will run over into 2019” he continued. “Even so, it would be a surprise if things fell apart.”

It could be the volume component distributors who feel the pinch more than the high service sector which targets design engineers buying a low volume, high mix set of products for a specific design project.

This would look to be the message as DMASS reported that the European semiconductor distribution industry growth was solid, but slow in the second quarter of 2018.

Despite, or because of, severe allocation issues in many key technologies and products, the market, grew 5.7% in Q2/2018, to 2.32bn Euro. 

Commented Georg Steinberger, chairman of DMASS: “A record quarter, no doubt, but in times of allocation you would have expected more dynamics in the market. It is a bit of a paradox, but it seems that the massive shortage in capacitors with no end in sight is starting to limit growth potential in semis, as customers do not want to build inventory that cannot be put to production. It also seems that the growth is mainly driven by price rather than volume.”

Andy King, President of Arrow Electronics, acknowledged that his company had a fairly constrained supply situation on MLCC.

“There's more product actually coming through and out to the marketplace, but the demand is outstripping that,” he told financial analysts recently. “So we're continuing to manage our supply chains with our supplier partners very, very carefully. At this point, we are – more things are getting built, more things are getting to market. So we're sort of keeping pace with the demand, but it's a process that we keep very close tabs on and work very carefully with our customers and suppliers.”

Avnet CEO Bill Amelio described his company’s lead times as “extended but stable, they haven’t got worse.”

Phil Gallagher, President of Avnet’s Electronic Components business added: “The lead times, just to expand on those, we have not seen a big change from the last quarter. We know there's definitely some constraints out there. We're managing through it. Even going back to the last question, our inventory, we're constantly optimising our inventory against our supply chain needs from our customers when we get good forecasts.”

He is upbeat about the market. “The demand environment's pretty good. I mean, the verticals, transportation/automotive, continue to be strong. Industrial continues to look really positive.”

The growth in Europe is being propelled by the low cost manufacturing regions or countries, with the exception of Austria and Benelux. While UK and France grew around the average, Italy ended shy of double-digit.

After a solid Q1, Germany only grew less than two percent in Q2. Nordic countries on average grew by 8.1% while Eastern Europe steamed ahead with 14.4% plus. In numbers, Germany posted 671m Euro sales, Italy by 9.2% to 224m Euro, UK by 6.9% to 166.9m Euro, France by 5.4% to 161m Euro, Nordic by 8.1% to 200m Euro and Eastern Europe (w/o Russia) by 14.4% to 386m Euro.

Steinberger observed: “It is always hard to judge the market by quarter, if you find a lot of side-effects like channel-shifts, exchange rate and allocation. However, the long term trend is clear: low cost manufacturing regions continue to win, while the major markets tend to stall at a high level.”

Product-wise, the surprising strength of commodities were the highlights of Q2. Discretes, Power Discretes and Sensors grew in double digits, so did some programmable Memory technologies, Standard Logic, MPUs and High-end-MCUs. At a product group level, Discretes grew by 20.2% to 138m Euro, Power Discretes surged 16.4% to 245m Euro, Opto edged up 3.8% to 223m Euro.

Analogue ICs grew 3.2% to 679m Euro, Memories rose 5.5% to 194m Euro and MOS Micro progressed 6.4% to 479m Euro.

Programmable Logic declined by 3.4% to 150 Million Euro and Other Logic by 4.3% to 115 Million Euro.

“Technologies at the moment do not really allow a proper trending or a conclusion on end markets,” said Steinberger. “The only two positive constants for the last quarters were Power Discretes and 32-Bit-Micros (MPU and MCUs), the latter one looking like a generation shift from 8- and 16-Bit as well as from DSPs towards standard architectures like ARM. In general, too much depends on other than demand-creation-based factors to see a real trend. Given the supply situation, 2018 should provide mid-to-high single-digit growth for the industry.”

“Incredibly busy,” is Nigel Watts’ take on the market. “It’s bizarre, the market is absolutely flying,” says the managing director of sales, marketing and design support company, Ismosys.

“It’s across the board – design activity is hectic, we are acquiring new customers at a pace and seeing new markets take flight.”

He instances an array of sensor applications which are spanning body, biometrics, medical, and wearables.

Backing Mark Burr-Lonnon’s view, Watts added: “Five to ten years ago, this growth would have been based on a killer app. Now it has a wider base, lots and lots of smaller applications are coming through at the same time. It’s a perfect storm.”

“Therefore,” he added, “I don’t think we are going to see the usual sinusoidal effects on the semiconductor market, this growth could last for three to five years and take the global semiconductor market revenues to $5bn.”