U.K. component sales continue to fall - Embedded.com

U.K. component sales continue to fall

LONDON — The total available market (TAM) for electronic components in the U.K. is predicted to have declined by 8 percent in 2007 and the distributors share (DTAM) will have declined by 6 percent according to the latest forecast from the U.K.’s Association of Franchised Distributors of Electronic Components (AFDEC). With continuing economic uncertainty and a slow down in the growth of the world’s economies, AFDEC forecasts that the DTAM will decline by a further 1.8 percent in 2008 before showing a small growth again in 2009.

In 2007 the U.K. electronic components market was heavily impacted by the slowing of the domestic and European economies, lack of confidence in the financial markets and a slowing in the global electronic industry cycle. Fierce competition and the consequent price erosion together with an escalation in the trend to move production and/or sourcing out of the U.K. has unsettled the market and shows no signs of improving in the short-term.

Component manufacturers will continue to reduce their direct support in the U.K. said AFDEC and their reliance on the authorized distribution channel will increase. Distribution margins overall should remain stable with commodity products remaining under more pressure but newer design-in products will see margins maintained or even increased. AFDEC believes that the use of electronics will continue to expand into a greater range of applications and U.K. companies will continue to play a significant role in development of these applications.

Pressure will remain to move production to cheaper locations and the component sourcing that remains in the U.K. may continue to move to the seat of production. However, says AFDEC, there is real concern in the supply network about the increasing prevalence of counterfeit components within the supply network. Another threat to local distributors is that purchasing from suppliers including authorized distributors from outside of the U.K., primarily through Internet purchasing will continue to increase.

Source AFDEC

AFDEC chairman, Adam Fletcher, said “The U.K. market has now become more focussed on what is happening here and elsewhere is Europe rather than the what is happening worldwide. This means we are not seeing the same level of cyclic movements as in the past but we are much more dependent on what happens in our economy and to a degree what happens to the German economy as that is a major export market for us.”

The effect of price erosion is highlighted by Fletcher’s assertion that the number of components being shipped in the U.K. is back to the level of 2000 when the TAM was nearly three times that expected this year. And forecasting is becoming more difficult as “short lead times and low visibility of forward orders will make it extremely difficult for any companies to see beyond about six months,” said Fletcher. Pressure on pricing and margins on commodity products will continue with only electromechanical parts seeing any relief, partially due to the increase in raw material prices.

Forecast table by component type. Source: AFDEC

DTAM by product. Source AFDEC

  • This story appeared in the EE Times Europe print edition covering December 10, 2007 – January 13, 2008. European residents who wish to receive regular copies of EE Times Europe, subscribe here.

    See other stories from this issue here.

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