Globally new market opportunities are created particularly in industrial and professional equipment, mil-aerospace, and in 5G handsets and infrastructure for the IoT. Adoption of EVs is weak but the deployment of AI in phones and computing is promising, although AI is probably two to three years away form making a major impact on edge computing and new applications outside of data centres, continued the forecast.
Currently there is a glut of electronic components with both components manufacturers and their authorised distributors, said Adam Fletcher, chairman, ECSN. There are artificially inflated in-house inventory and supplier order books yet weaker demand from end customers. Much of the ongoing inventory problem in the semiconductor sector has been caused by the implementation on non-cancellable, non-returnable contracts (NC/NR) between manufacturers, their authorised distributors and their customers, explained Fletcher, signed in the hope of securing supply regardless of the cost. As semiconductor supply came back on stream following the pandemic, goods ordered were shipped and customers had to pay for and accept delivery for products which remain as excess inventory today. Until this ‘overhang’ is consumed, there will be no growth, warned Fletcher.
Current market conditions and a turbulent geopolitical situation made forecasting somewhat uncertain, said ECSN. “The decline in growth in the UK and Ireland electronic components markets throughout 2024 exceeded the decline predicted in the forecast ECSN issued at the end of last year,” said Fletcher. Single digit sales revenue growth of between 1.6%-4.1% 2023-2024 was reduced to a decline of 19.7% “driven primarily by weak demand and an industry-wide inventory overhang,” he said.
“Bringing global inventory back in-line with current demand levels throughout the electronic components supply network, is proving to extremely difficult, however the underlying demand for electronics in virtually every area of modern life continues to increase, which is why ECSN is forecasting a return to growth in 2025,” said Dunford. “Sadly, we now believe the upswing will not begin until the later part of 2025, although the timing and scale of this growth is still difficult to determine.”
This year’s forecast predicts that the UK & Ireland electronic components market will continue its negative growth pattern in the first half of 2025, with billings or sales revenue down between 8.7%-to-2.6%, with a mid-point decline of around 4.6%. A modest recovery is expected in the second half with 1%-9% growth. The outcome for the full year will be 4.9%-2%.
The ECSN forecast data is based on information provided by its manufacturer authorised distributor (Afdec) and electronic components manufacturer members.
The outlook for China is also challenging, said Dave English, managing director of G English Electronics, a component manufacturer based in London and with offices in Shenzhen. Increased freight shipping costs are making imports less attractive and although production is moving to Vietnam and the Philippines, some manufacturing is being repatriated to the UK.
