In this article, ECSN chairman, Adam Fletcher and market analyst, Aubrey Dunford, summarise the results of the association’s annual Forecast
The Forecast predicts the UK and Ireland electronic components market will see modest growth in H1 2023, returning billings (sales revenues) growth of between zero to 6.3 per cent, with a mid-point of around 3.5 per cent. In H2 the association predicts billings will slow modestly in the range 4.0 to 3.0 per cent for a full year range of 2.0 to 4.9 per cent and mid-point of 2.8 per cent growth over the previous year.
ECSN’s market analyst, Aubrey Dunford, confirmed that market conditions in 2019, 2020, 2021 and 2022 had been far from normal due to the pandemic but that some ‘normality’ can be expected to return in 2023: “The problem is trying to determine the ‘new normal’ in a global economy recovering from the pandemic’s aftershocks including double digit inflation and increased energy/borrowing costs, while dealing with a war in Europe.
“The ‘distributor total available market’ will have grown in 2022 by about 18 per cent. That said, product shortages, extended lead-times, exchange rate fluctuation, rising raw material costs and labour rates, have led to price rises higher than our members anticipated. Global demand has remained higher than we forecast and is still strong despite the slowdown in China as the handset and PC market cools.”
From early 2021 ECSN members saw book-to-bill ratios rise to levels rarely, if ever seen. Unprecedented bookings were driven by extending lead-times and price increases.
Dunford continued: “The high book-to-bill ratios carried on throughout H1 2022. From the middle of the year, ratios for passives and electro-mechanical products started to decline and headed towards unity in the summer months. However, semiconductors continued to see a high B2B ratio throughout Q3. Members are confident of growth for at least the first half of 2023.
“However, looking into H2 2023 is more difficult. Uncertainties remain, especially in light of the predicted recession, so we are forecasting growth will slow at the year’s end.”
Although component industry analysts are forecasting global growth will decline and turn negative in 2023, Dunford sees that decline limited to consumer electronics applications: “In the UK the component market is driven by automotive, industrial and professional applications. We expect 5G and data communications will remain strong, although investment may slow. Also, the military and aerospace sector will remain strong for more obvious reasons.”
Adam Fletcher said: “The consensus opinion held by ECSN members is that by mid-2023 lead-times will be stabilised at around an average of 12 to 16-weeks for most semiconductor and passive components, with interconnect and e-mech components remaining in the eight to 10-week lead-time. There will remain outliers on longer lead-times across all component categories. I suspect all electronic components will remain on lead-times in the six to 16-week timescale for at least the next few years.”
The electronic components market’s trajectory continues to be up and to the right. Despite 2022’s difficult market conditions, which Fletcher believes will continue throughout 2023, he remains confident that stronger underlying growth will return because so many competing applications are driving it. 5G, cloud/high performance computing and automotive are key ‘push’ applications, with automation, medical, aviation and military running a close second in 2023.