LONDON The Association of Franchised Distributors of Electronic Components (AFDEC) believes that the market available to distributors (DTAM) in the UK has entered a new phase where small but steady growth in the total market is expected. However, this growth masks considerable change in the nature of the market. AFDEC expects this phase will continue for at least the next 2 – 3 years.
The Association’s 2005 Statistical Forecast reports that, after the three years of dramatic decline, 2004 saw an increase in the DTAM of 6.6% against a forecast of a 3.2% growth made this time last year. In addition distribution has gained share of the total available market which grew by 3.4% last year, in line with AFDEC’s predictions.
The DTAM growth in 2004 of 6.6% covers a rise in sales from £1108million to £1181million and in 2005, it is predicted to grow by 4.3% from £1181million to £1232million. Semiconductors sales will grow 5%, passives by 3% and electromechanicals by 4%. A growth of 3.5% from £1232million to £1276million is forecast for 2006.
The total market will grow by 3.4% from £4489million to £4644million in 2004 and in 2005 will grow by 3.4% from £4644million to £4804million. Semiconductors sales will rise 3.5%, passives by 2.5% and electromechanicals by 3.5%. AFFDEC believes the total UK component market in 2006 will grow by 2.0% from £4804million to £4901million.
According to AFDEC chairman Gary Kibblewhite, an area of change that obviously affects the UK market has been the movement of high-volume electronics manufacturing to lower labour-cost areas. AFDEC believes, however, that the remaining market is inherently more stable and more likely to be influenced by the well being of the underlying UK and European economies.
The cyclic nature of the global electronic components industry is likely to continue but the dramatic swings that have been seen in the past are very unlikely. Nevertheless, the influence of these cycles will still be felt (albeit with far less impact) within the UK as prices and lead times from the manufacturers vary.
Since the downturn of 2001, Distribution’s market share has increased – primarily because so much UK manufacturing has gone elsewhere. The consequences have been far more marked for the component suppliers who were directly supplying into the OEM’s and the larger EMS companies. The shift by the EMS companies to move into manufacture has also impacted the market – but to a lesser extent. Distributors’ sales to EMS companies increased from 17% in 1999 to over 25% in 2003.
The distribution channel continues to increase in importance as the overall distribution share has grown from 17.7% in the ‘boom’ year of 2000 to over 25% in 2004 and will grow further in 2005. The AFDEC members' share of the Distribution Total Available Market remains unchanged at 84%.
The automotive market remains strong as most of the major car manufacturers’ highly stringent requirements on quality and approved manufacturing techniques have restricted the use of off-shore facilities. Electronic systems continue to be used to create new features and improve existing ones – not only on high-end models but increasingly on standard models.
A bigger issue that is increasingly affecting the whole of the electronics industry is the forthcoming legislation on hazardous materials and the disposal of hazardous waste – trying to change the supply chain whilst maintaining supply of both existing and modified components will be logistical nightmare.