The forecast covers only the first half of the year as the second half is only the ‘best guidance’. This is due to the lack of customer visibility in the electronic components market coupled with a wide range of “unknown unknowns” and uncertainties created by Brexit, the ongoing Covid-19 Pandemic, US / China trade war and global economic instability, says Adam Fletcher, chairman of ecsn
He also warns of lead times extending to lead times and allocation of orders. “Lead times have gone up 4 to 6 weeks in the last six weeks which is a big leap,” he said. This is confirmed by distributors.
“We began to see small signs that material costs may increase, and lead-times for some components began to lengthen at around the end of October but as we approach the end of the year the dynamics may have changed significantly. We now know that material costs are increasing and that lead-times are very likely to extend by many weeks,” said Graham Munson, Vice President EMEA Customer Service at Mouser Electronics
The forecast predicts that the UK & Ireland electronic components market will be flat in the first half of 2021 in the range of -2 percent to +4 percent, with a mid-point decline of 0.5 percent. The second half guidance see growth from flat to 6.5 percent, with a mid-point of 2.7 percent growth on the previous year.
“2019 was a year of correction after two years of exceptional growth in 2017 and 2018”, said Aubrey Dunford, ecsn Market Analyst: “Our members believed that a market upswing would commence in 2020 but what we saw was a sharp market decline primarily as the result of a global economic slowdown caused by the COVID-19 pandemic, which was not a forecastable event in December 2019”
There were already a number of uncertainties emerging in December 2019 which led ecsn to issue only guidance for the second half of the year, but the full year saw a decline of 8 percent 2020 will be close.
The visibility in the electronic components market remains very limited due to the almost total absence of clear guidance from their customers, he says. “It’s always our aim to provide the electronic components markets, our members’ customers and investors with the best forecast possible,” said Dunford “but forecasting in the current conditions is particularly challenging. Our best view is that we will see a slow return to low single digit growth throughout 2021 and that the first half of 2021 will be more or less ‘flat’ compared to the first half of 2020. Our guidance is that growth will increase into the second half and that 2021 will end showing Billings growth of around 2.7%”.
However the forecast is a concensus of distributors in the UK and many are more bullish.
“The Asia-Pac market remains buoyant and things are improving in the Americas, which in turn should have a positive effect on the supply network. One thing we can be sure of: 2021 will be an interesting and dynamic year for everyone in our exciting industry, driven by supply and emerging markets,” said Munson at Mouser Electronics.“Although it now seems clear that 2021 will see President Biden take over in the White House it is far too early to see what effect that will have on the ongoing trade war between China and the US and the consequent effects on the global electronic components market,” said Dunford. “However, what is clear that even as we enter into 2021 global demand driven particularly by China and Asia-Pac is rising and that lead times are extending on some key ‘commodity’ electronic components.”
Looking even further ahead, Fletcher says UK electronic components markets will continue the return to growth over the next few years but at a rate lower than the global average rather than at the top of the growth curve. The impact of mega mergers and acquisitions and continued underinvestment in capacity for the manufacture of complex electronic components will once again drive extended lead-times and shortages of some electronic components.
“The pendulum of supply and demand continues to swing very erratically and will continue to cause a ‘stop-start’ effect on our industry,” he said. “I’m certain that stability will return in 2021 but we should expect a few bumps along the way.”
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