Electronic component sales expectations for March and April have softened compared with previous months, according to the ECIA, as global economic concerns and inflationary pressures increase. In March, ECIA’s sales-trend index fell by 16 points from February to 113.6 percent. April’s expectations are forecast to decline another 7.1 points to 106.5.
Any number above 100 represents growth so the Electronic Component Sales Trend Survey (ECST) index remains in positive territory. Consumer confidence, however, has taken a strong hit as the Russia-Ukraine war escalates. Talk of famine in some areas of the world has heightened concern over global economic, physical and emotional health, said ECIA Chief Analyst Dale Ford in a statement.
Sentiment across all major component categories similarly declined. Electromechanical devices only dropped by a point toward a level of 111 in April. Passives come in at a lower 102. Following a strong jump in February, inductors slumped in March along with connectors and capacitors.
Lead times increased between February and March, led by semiconductors and electromechanical (EM) components.
Concern has been raised by one research firm regarding supplies of MLCCs. China has completely locked down the city of Shanghai. MLCC supplier production centers in China including those located in Tianjin, Suzhou, Wuxi, and Guangdong are facing logistics delays. MLCC suppliers cannot deliver materials to Shanghai and Kunshan, according to TrendForce. Stocks of certain high-voltage automotive MLCC of 250V or higher specifications and high-end server MLCC size 0805/1206/1210 items may be in danger of depletion.
On a positive note, the component sales sentiment in the index has shown its relative strength as it has now registered above 100 for 20 straight months dating back to August 2020. The Institute for Supply Management’s manufacturing index, the PMI, has similarly shown resilience. Although the index dipped by 1.5 percent to 57.1 percent in March, any number above 50 indicates expansion.
End-markets a mixed bag
ECIA reports end-markets are following the component sales trend. Computers measured below 100 in March, along with consumer electronics and mobile phones. The computer and consumer markets are expected to recover in April, however mobile phones will come in around 80. Avionics/military/aerospace was the bright spot in both months among end-markets, reaching nearly 129. Other markets – automotive electronics, industrial electronics, medical electronics, and telecom networks register between 112 and 120 in March and April.
The PMI subindexes for new orders and production declined in March which caught some experts by surprise. Still, there’s no indication demand has waned.
Component sales for 2022 should be solid with order books full, according to ECIA. But with no end in sight to elevated supply chain challenges, manufacturers and retailers continue to face an extremely risky and uncertain future. China’s zero-tolerance policy toward Covid has created more disruption than expected, said Tony Pelli, practice director for security and resilience at consultancy BSI. “At some point they are going to have to emphasize policies such as mass vaccination,” he said.
Common projections for resolving the major supply chain challenges still stretch out into early to mid-2023. The latest ECST survey results see another jump in lead time expectations in March following a February increase. The increase in lead time pressure for semiconductors, EM products and connectors was significant. After a brief glimmer of hope in prior surveys, it appears lead time challenges will continue to confront the supply chain for the foreseeable future, said Ford.
A major gap opened up between the index’s distributor assessment and the views of manufacturers and reps. For components, the distributor index ranged between 123 and 160 for March as it improved substantially from February. Manufacturers and reps saw dramatic drops in the March assessment. While manufacturer assessments of component subcategories sustained 100 or above in March, reps only rated three categories at 100 and one category above 100. This is a major divergence in views between these groups compared with a much more uniform perspective in February.
“Certainly, there are many impacts being felt ranging from the war on Ukraine by Russia to the continued upward trend in the inflation measurements,” said Ford. “It appears that many respondents in the most recent index were feeling the pressure of these forces.”
Overall, the ECST index presents a strong positive picture for both Q1 and Q2 2022. The overall average of the total number of respondents expecting growth in Q1 2022 is 64 percent and only dips slightly to 62 percent in Q2. However, the mix of expectations for growth in the different tiers shows a shift to lower growth expectations in Q2 compared to Q1. Bottom line is that there is solid expectation for growth through the first half of 2022 with growth slowing in the later months.
Semiconductors measure the highest level of optimism with at least 70 percent of respondents expecting growth in both Q1 and Q2.