ecsn: UK/Ireland component sales to grow 1.4 % in 2024

Adam Fletcher, ecsn Chairman warned, “ the forecast released by the association today (30 November 2023) encompasses all of 2024 but given the current market conditions and geopolitical situation a revision may be required for the second half of the year.”

Added ecsn Market Analyst Aubrey Dunford, “Our members expect that the market will be flat throughout the first half of 2024. The outlook for the second half of the year will depend on manhy factorts that fremain very uncertain.”

He cites a growing demand for applications based on 5G and infrastructure systems for smart vehicles as applications where UK companies can make a mark.

“For 2024, the key issue remains on the demand side and how strong some market sectors, especially industrial, will remain,” Dunford continued.

According to ecsn 2023 will see components distribution sales rise 10% to £1.88 billion, a record performance for the sector, and well ahead of the association’s original forecast of 2.8% growth in 2023.

“The strong growth that global electronic components markets saw throughout 2023 exceeded the forecast ecsn issued at the end of last year, said Fletcher. “At the time our members predicted single digit ‘billings’ (sales revenue) growth in the range (2%)-to-4.9% in 2023 but we now believe that the outcome is likely to be 10% growth, driven primarily by customers’ ongoing concerns about components availability. The geopolitical tensions resulting from the Russian invasion of Ukraine, additional sanctions imposed because of the ongoing US / China trade war and more recently, events in the middle east have encouraged our members customers (OEMs) to maintain inflated in-house inventory and order backlogs but we’re now seeing an escalating trend towards them rebalancing both their in-house inventory and their order books”.

Electronic components manufacturers and their authorised distributor partners have strived hard throughout the year to reduce components lead-times and meet the demands of their customers.

Average lead-times today are in the 10-to-12-week range, although some outliers to this trend remain, particularly in the field of microcontrollers and discrete transistors.

“There is now a substantial inventory build-up right across the electronic components supply network, which coupled with weakening customer demand into 1H’24 will ease pressure on supply, but is unlikely to reduce lead-times much further and we will not see a return to pre-pandemic levels”, said Fletcher, “Customers must recognise this and continue to track the lead-times for the electronic components their organisations need and carefully manage their order backlogs and in-house inventory appropriately. The good news is that long, medium, and local distance logistics are now operating much more effectively, but as manufacturing capacity is transferred out of China to Vietnam, Singapore, India etc., there will be on-going revisions to routes and transport loading capacity that will need to be made and settled on during 2024 and will inevitably result in some disruption”.

ecsn’s 2024 forecasts suggest that the UK & Ireland electronic components market will be essentially “flat-to-down” in the first half of 2024, returning sales revenues growth of between (3%)-to-1%, with a mid-point growth of around (1%). In the second half of the year the association predicts that sales will grow modestly in the range 1%-to-8% to give an outcome for the full year in the range (1.5%)-to-4.1% and showing a mid-point of 1.4% growth over the previous year.

Despite the correction in the inventory levels Aubrey Dunford sees many reasons to be optimistic about the industry prospects for 2024.

“Many areas are continuing to grow as innovation creates new market opportunities. In the UK, and indeed in most of Europe the component market is driven by the industrial, professional equipment and increasingly the automotive sectors” Dunford said. “Military and aerospace will for obvious reasons remain strong but growth in areas such as electronics infrastructure and EV charging are also an opportunity for the UK. The continuing roll-out of 5G handsets and related infrastructure, IOT, AI, cloud computing / high performance computing and automotive are the likely ‘primary demand drivers’ in global applications” Dunford said. “The industrial automation, medical and aviation will be subdued in the first half of 2024 but are expected to return strongly”. Although it’s the buzzword of the moment there is no doubt that the deployment of Artificial Intelligence (AI) will increase the demand for data and electronic components but probably not as quickly as the current hype suggests, in reality it’s probably 2-to-3 years away from making a major impact on Edge computing and new applications outside of the data centre”.

Despite ecsn forecasting lower growth in 2024,Fletcher isconfident thatthe trajectory for UK/Ireland and global electronic components markets continues to be up and to the right and that stronger underlying growth will return to global electronic components markets in 2025 and beyond.

“The electronic components supply network fortunately still operates as a “people to people business” where great relationships, effective communication and collaboration, along with a large dose of good humour rank high amongst the key elements for success” concluded Fletcher, “but many geopolitical and economic uncertainties still threaten to impact the market. To help mitigate the supply and demand imbalances in the market I encourage all organisations to play their part in their industry’s continuing success by participating and contributing to the collaboration process both up and down their supply network. These initiatives really cost very little but the improvements they can make to an organisation’s competitive advantage will benefit them, their partners and the UK / Ireland economy as we move into 2024 and beyond”.