Electronic connector segment: mid-year check

ECCO’s president, Bernard Gizzi, looks at factors and trends impacting the interconnect product segment and offers tips for staying ahead of the market

During 2020 most of us would not have predicted the wild swings in the electronic components industry that were to come, with the connector segment—usually a trailing indicator—languishing in slow bookings and unknown forecasts. How times have changed. Today, connector manufacturers are enjoying high bookings and strong profits. In fact, recent earning calls from TE and Amphenol were extremely positive, with executives commenting that Y/Y sales grew 35 per cent or more, exceeding the high end of their financial guidance. So, what’s happening to fuel strong growth in the connector segment specifically.

Commercial air is bouncing back in North America but remains choppy globally given Covid variants and lack of widespread vaccinations. Medical equipment demand remains high driving a continued need for safety and reliability. More blind mating connectors and push pull technology is emerging.

The severity of supply chain disruptions worldwide has caused pre and/or double ordering in the interconnect commodity category, which usually only occurs in active electronics. There are examples of ships being delayed up to six-weeks due to port closures, labor shortages and air/rail delays due to lack of equipment and personnel. 

A connector manufacturer with a factory in Vietnam closed in July without notice, sending all employees home and shutting down production indefinitely. According to a recent TTI MarketEYE report, up to 10 per cent of the world’s shipping capacity is currently unavailable due to port congestion, lockdowns and other logistics issues. The report comes as shipping traffic at Vietnam’s ports queues up following a coronavirus lockdown, while 328 ships sit idle at ports from south China to Long Beach USA.

Rocket-ships, robotics, drones and 5G IoT are all using more surface mount lightweight composite connector materials for their durability and efficiency.

The automotive and EV sectors continue to accelerate giving rise to technologies such as USB-C, FAKRA and optical style connectors, with ruggedized high current SAE J1772 connectors being used in local parking lots and charging stations.

Military and defense spending remains high, keeping the strong single digit growth going. An infrastructure bill is pending that could add to industrial and construction segment growth in 2H 2021 and into 2022.

Many suppliers are invoking ‘force majeure’ on contractual clauses and inflationary pricing is likely to continue to move higher for the remainder of 2021. 

Raw materials like resins and precious metals have become scarce causing less than 30-day price notices and sometimes order cancellations or backlog re-pricing.

What does all this mean for buyers of electronic connectors for the remainder of 2021? Firefighting is the new normal. Phrases like ‘stuck on a boat or in a container in customs’ is a common note on late material line items. So, get a grip on your supply chain and forecasts so you don’t become the chokepoint for your company’s revenue growth because suppliers let you down. Order early and often.

Also, spend time with your engineers and product teams making sure multiple sources exist for key connectors and cable assemblies. Finally, increase communications with suppliers. Share more information on legacy, core and new product development, bringing them closer to your company’s data and decision making.