UK electronic components market to grow in 2015

09 December 2014

According to the afdec group within ecsn, the UK & Ireland market is set to continue steady growth in 2015. 

The forecast released indicates that the market will continue to grow in the range 0%-to-3% in 2015, achieving a mid-point of 1.5% and confirming members' confidence that the gradual recovery is likely to continue in-line with improvements in the macroeconomic environment. 

Analysis of the consolidated returns from the association’s membership indicate that the overall UK / Ireland Distributor Total Available Market (DTAM) in 2014 will grow by approximately 3% when compared to the previous year. The association's forecast for 2015 predicts a further Distributor Total Available Market (DTAM) growth of around 1.5% to give a market value of around £1.1bn within a Total Available Market (TAM) result of circa £2.9bn. 

Aubrey Dunford, ecsn Market Analyst confirmed that the UK / Ireland electronic components markets performed at the bottom end of the range of guidance provided in the association’s forecast for 2014, principally because the predicted growth in the second half of the year was not as strong as expected due to sluggish growth in the global markets, especially in the key market of Europe. Dunford said that higher growth in some sectors of the market such as Automotive where Distribution is not so strong means that they estimate that the TAM has increased by more than the DTAM at 6%.

Returns from members indicate that the UK / Eire electronic component market is likely to stall slightly in the first half of 2015 as stock in the supply chain is rebalanced and then we expect to see modest growth return in the second half. We’re likely to see a corresponding increase in the TAM, meaning the distributor share will remain constant in 2015.

Dunford confirmed that in 2014 the ‘Book to Bill ratio’ started to decrease in the first half of 2014 and  reached unity in the third quarter showing that we should not expect to see growth in the first half of 2015. With excess inventory in the supply chain they see that customers are not placing scheduled orders and are relying on being able to purchase from stock as needed, Dunford notes. The slow-down in particularly the Asia Pacific market has meant that the whole supply chain is overstocked and manufacturers will take some time to adjust production levels. It will take some months for the supply chain to come back into balance. In the meantime with stock and short lead-times they do not expect to see an increase in the book-bill ratio.

According to ecsn / afdec chairman Adam Fletcher the well-publicised slowdown in macro-economic conditions in the Eurozone and beyond have contributed to a reduction in business confidence, whilst consumers and other industrial sectors such as aerospace, automobiles and defence sectors remain buoyant: The Industrial Market sector on which the bulk of the UK and Ireland electronic components market is reliant, lagged behind other market sectors in the first half of the year but then caught up and exceeded UK GDP growth, Fletcher said. Flattening growth and declining industrial confidence in the UK’s primary export markets in Q4 suggests a slower start into 2015 but members remain confident that growth will continue in the market.

Avnet Memec Country Director, Chris Shipway, anticipates reporting year on year sales growth of approximately 5%, driven by very active sales in the Mil / Aero, Wireless and Audio sectors. He recently increased the size of his team and re-defined his approach to the market and can already see some positive results.  

Micrel, a recent addition to ecsn membership also expects to grow around 5% next year: They are encouraged by the growth they are seeing in the mainstream design funnel and production starts given continued efforts in bringing out new products to the market, said Distribution Sales Manager, Pete Horwat. Despite the tough economic conditions that are prevailing in Europe, strong product portfolio, including their Ethernet range continues to show excellent growth amongst the UK electronics industry. In addition, introduction of power modules in 2H’14 is gaining high interest in the market.

Forecasts are becoming more accurate and the swings in the market are stabilising, according Alex Grout, Managing Director of connector specialist EDAC Europe Ltd. Grout has only been with EDAC since April 2014 but he has been able to report a record year in the history of the group: Most of the new products EDAC Group has built recently are bespoke, “made to spec” for specific customers. He puts his organisations success down to the service it offers to customers: What makes them different is their low MOQ and customisation capability, coupled with fast and flexible service.

Demand Creation is a recurring theme among ecsn / afdec members. John Macmichael, Managing Director of Solid State Supplies 2001 said his company grew rapidly in 2014 and expects further expansion next year. Their clear focus remains on supporting the electronic design community. They don’t just help with the best components for particular applications, they assist customers in integrating parts into successful new products and work hand-in-hand with them as projects progress from R&D to volume production.

ISMOSYS Managing Director Nigel Watts agrees. He attributes his company's continuing success to the implementation of true demand creation initiatives combined with the effective use of a sales team that focus on those customers judged to have already  “met the grade." He sees further significant growth both in terms of designs and production revenues in 2015 and beyond but he believes that sales and marketing teams in the UK electronics industry need to do more to identify, support and secure the next tranche of high growth emerging customers, and do everything in their power to ensure the eventual revenue remains “local”. 

Continued product innovation is important to refresh demand and satisfy customer needs” says Peter Hannon - Managing Director – Harting. In 2014 Harting continued its development of total interconnect solutions for the “integrated industry” environment, where systems, hardware, software and embedded electronics come together in an integrated smart network infrastructure: Hannon says "our 'Industry 4.0' concept symbolises a fourth industrial revolution to follow the earlier examples of the steam engine, the assembly-line and  electronic controls.

CamdenBoss also experienced an improving market in 2014, in terms of both supply chain stability and customer orders. Company Managing Director Nicki Kay believe that 2015 will continue to maintain this more positive trend although the on-going fragility within the Eurozone will compel a close focus on all activities to ensure the company is not de-railed by macro influences: The Internet of Things is offering all hardware manufacturers great opportunities for innovative designs and new product developments that can be offered out to the global distribution network, Kay said. The more positive attitude of the Government towards UK manufacturing and the constantly increasing costs in the Far East means that manufacturers have even greater chances of competing on a global basis and launching innovative UK products that are both price competitive and price stable.

Sales across all regions for 2014 have again been excellent: up 42% in EMEA over the same period in 2013 (which was itself a strong year), up 35% in Asia and 20% in the Americas said Graham Maggs, Director Marketing EMEA, Mouser Electronics. EMEA sales were particularly pleasing: Germany, already the biggest region, is growing at 50%, followed by Italy 44%, the UK 40% and France 38%. Mouser is also seeing excellent growth in Scandinavia at 38%.  

In conclusion ecsn / afdec chairman Adam Fletcher noted that lead-time availability for most electronic components remains at historically low levels. Much of this is a direct result of lower than anticipated global growth in 2014 particularly in China, which accounts for over 50% of global consumption: His intuition suggests that the global electronic components markets are likely to experience growth in the range 3%-to-7% in 2015: There has been little appetite or incentive to invest in new manufacturing capacity, as a result electronic components manufacturers have sufficient capacity to cope with global growth of 5% but when this is exceeded, which it will be, lead-times are likely to extend quite quickly.  All organisations right across the electronic components supply network must continue to improve their collaboration and forecasting to mitigate supply problems. Open, honest, communication cost virtually nothing but adds great value for everyone, Fletcher concludes. 

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