However, some distributors say they will see double-digit revenue growth due in part to the robust European automotive industry.
The European electronics distribution market will end 2016 growing 4-6 per cent and similar sales growth is likely in 2017, according to distributors and a leading distribution trade group.
Distribution business in Europe in 2016 improved compared to 2015, according to Adam Fletcher, chairman of the Electronic Components Supply Network. “We are seeing modest growth. It varies depending on the country,” he said.
“The market that is growing fastest is Germany, which dominates the European business today. The German market is growing by 6-8 per cent,” he said. The UK market will grow between 2-4 per cent. The French and Italian markets are growing faster than that.” Fletcher noted that the exchange rates are “flattering some of the results” because the euro has appreciated fairly strongly against the dollar.
European distribution sales would have been stronger this year, if the industrial market had not been sluggish. “We expected a much stronger pick up in our industrial markets,” said Fletcher. “Those markets are picking up a little bit, but they’re not strong. The market that is growing fastest is automotive.”
Fletcher said distribution sales growth in 2017 is likely to be similar as 2016. “My personal view is that 2017 will be more of the same. I don’t think we will see a real increase in business until probably 2019 because there’s no real strong fundamental driver,” he said. Business could pick up significantly in 2019 because of the automotive industry’s efforts developing the connected car, or autonomous vehicle, and the growth of the Internet of Things (IoT).
Fletcher said automotive will help drive double-digit sales for European distribution beginning in 2019 due in part to development of the connected car. New infrastructure will have to be put in place to support connected car technology.
He said 5G technology will be needed to support the “seamless connectivity of vehicles traveling down the highway or in the city,” he said. He added IoT will be a driver for the electronics industry and for distribution, but not for several years. IoT will “catch fire” once there is a robust investment in industrial electronics allowing for machine -to- machine communication, which is part of the Industry 4.0.
However, in Europe and North America there has been very little investment in industrial electronics. “Many people talk about Industry 4.0 in the factory of the future. It’s a lovely concept but the reality is the standard doesn’t exist yet,” he said. Once the standard is created, there’ll be more investment in industrial IoT.
Distributors expect improvement
Many distributors say their automotive business in Europe is strong and will likely improve in the coming years as automakers develop the autonomous vehicle. Some distributors report that their business in Europe overall in 2016 experienced double-digit growth and expect strong growth in 2017 as well. For instance, Digi-Key’s European business will end 2016 growing 15-20 per cent and similar growth is likely in 2017, according to Dave Doherty, president and chief operating officer for
Gerry Fay, senior vice president, Avnet, Inc. and president, Avnet Electronics Marketing, global said Avnet has had healthy growth in Europe as “the central European market for automotive and industrial is strong. We’ve had 13 quarters of year-over-year growth in Europe. We see Europe as being robust, if I exclude the UK. We are seeing some softness from Brexit,” said Fay. He said growth in Europe in 2017 will be “a little bit stronger than in the Americas next year.”
Mouser Electronics says its European business in 2016 is up 16%. “Europe has been relatively strong all year,” said Mark Burr-Lonnon, senior vice president for Middle East, Europe and Africa for Mouser. He expects similar growth in 2017. “We don’t see anything that would dramatically” impact sales for the better or the worse, he said.
Burr-Lonnon said Mouser’s growth in Europe is increasing its number of customers. “The big thing that drives whatever we do is customer count,” said Burr-Lonnon. “We learned a long time ago that if we focus on the customer numbers, the sales number will follow.”
He said Mouser does not “rely on a couple of really big customers” for sales. “Out model is really about lots of small customers buying NPI-type products. That general swell of new accounts drives our sales,” he said.
Michael Knight, senior vice president of TTI Americas for TTI said the distributor’s European business was strong in 2016, but it usually is. “Even in the worst
years, we’ve had double-digit growth in Europe,” said Knight. “This year our business in
Europe will outpace North America by 3X.”
Knight said there is a “great appreciation” for TTI’s business model in Europe. TTI specializes in passives, connectors and electromechanical devices and carries a lot of inventory.
“Our model today plays better in Europe than it does even in North America,” he said. European customers appreciate TTI’s “commitment to inventory.” Europe has local and regional distributors that don’t “have anywhere near the inventory profile that we do, which means they don’t have the spend that we do so they don’t have the leverage,” said Knight.