UK connector sales growth slows in Q1 2022, but orders accelerate further

30 May 2022

ITSA Q1 2022 market summary_UK quarterly connector bookings vs billings 2018-2022
ITSA Q1 2022 market summary_UK quarterly connector bookings vs billings 2018-2022

In its latest market summary, trade body, ITSA (Interconnect Technology Suppliers Association) reported that Q1 2022 revenues decreased slightly by 7% versus Q4 2021; however, they are still up 9% as a run rate over 2021. Moreover, ITSA members' revenues are now back at +12% over pre-pandemic levels & the book-to-bill ratio is incredibly positive at 1.22:1.

Full year 2022 orders were up 10% year on year and are now 28% higher than pre-pandemic levels. Key market gains have been in automotive, communications and data centres, all with double digit growth, and also broadcast is now starting to show small growth. Distribution is a major contribution to members' growth and is now 46% above pre-pandemic levels. Meanwhile, mil/aero remains slow and has still not fully recovered. ITSA members represent around 20% of the UK interconnect market.

Without exception, all members reported a bumper order intake for Q1 2022, and although revenue growth slowed compared to Q4 2021, some members saw sales increase in excess of 40% over the same period in 2021, and bookings were also outstanding with members reporting orders up 60%+. Book-to-bill was extremely positive, with an average of 1.22:1. This has followed the trend at the end of 2021, and as a result members are carrying strong forward order books. Buoyant markets are medical, security, data centres and telecoms. Data centres are again driven by increased demands for home or remote working; medical for obvious (pandemic) reasons. The defence market has a lot of activity, which is in part due to the war in Ukraine. The broadcast market continues to recover on the back of COVID restrictions being lifted, as well as festivals, live events and so on gathering pace for the summer months.

Overall, ITSA members are enjoying a positive start to 2022, and are expecting the year to be an outstanding one. There was a suggestion that some customers are placing multi orders across different suppliers to try and mitigate lead times and stocking issues.

As reported last quarter, all members are now significantly above 2019 (pre-pandemic) levels, but with this exceptional growth comes supply chain issues. Problems in the global supply chain of raw materials, components and, in particular, cables means that lead times are increasing, with 12 weeks seeming the norm (one member reported an instance of a 3-year lead time!). Costs are increasing everywhere, and on everything, and while members have tried to contain this, it has resulted in price increases being passed on to customers.

In our last quarterly report, members felt that the current level of demand was not sustainable; however, the signs are that the current upward trend will continue throughout 2022. There will be some peaks and troughs, but overall members are positive.

There continues to be a high-level investment taking place by members and/or their corporate headquarters, including acquisitions and developing new facilities; this follows on from the positive trend of investment that has happened over the past 2 years, despite the pandemic.

So, in summary an incredibly positive start to 2022 for ITSA members.

ITSA Q1 2022 market summary_UK quarterly connector sales by market sector 2018-2022
ITSA Q1 2022 market summary_UK quarterly connector sales by market sector 2018-2022

Most member companies were thinking about returning to normal working conditions; however, for the future, there will be a hybrid way of working, and it seems that many customers are also adopting a flexible approach to working.

S&P Global/CIPS UK Manufacturing PMI

According to S&P Global/CIPS data for Q1 2022, the PIM stood at 55.5, which is down on the final period of 2021, but remains positive. The PMI has remained above the neutral level of 5.0 now for 23 months, which signifies sustained growth; domestic orders were still OK, but export orders contracted for the sixth time in the past seven months.

Manufacturers faced escalating costs, and incoming prices rose for the twenty eighth consecutive month; key areas affecting this included utility costs, transportation, surcharges and exchange rates. Lead times also extended again for the thirty third consecutive month.

Employment continues to expand with most contributors expecting this to continue.

Contributors to this research continue to have a positive outlook for 2022, with 55% forecasting growth in production, and hardly anyone expecting contraction. Price rises accelerated in March to try and offset some of the cost increases.

S&P Global/CIPS data is used by ITSA to measure comparisons in market trends, and once again it independently demonstrates the quality and validity of ITSA’s data.

ITSA Q1 2022 market summary_UK quarterly connector sales by distribution & OEMs 2018-2022
ITSA Q1 2022 market summary_UK quarterly connector sales by distribution & OEMs 2018-2022

Summary

2022 has started where we left off at the end of 2022, with positive trends in almost every market and technology.

Significant global events have occurred since 2021, and in particular, the war in Ukraine is having a huge impact on all areas of ITSA members' businesses; this coupled with rising utility costs, higher prices on incoming materials, shortages in the chip market and rising labour costs means that our members are fighting many battles to manage their businesses and the growth rates.

ITSA members continue to face huge difficulties in recruiting skilled, experienced and qualified people, and have started to look into innovative ways to meet their recruitment needs; ITSA will be producing a separate special release on this topic.

Where we saw consumer confidence returning at the end of 2021, this has now been significantly dampened by the rising cost of living and inflation expected to rise to 7% or more.

As an association, ITSA continues to grow and enhance our profile, and we will be announcing another new Associate member in the next few weeks.


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