ECIA’s Electronic Component Sales Trend Survey (ECST) exceeded expectations in April. However, survey participants are clearly cautious in their forecasts for May.
Overall sales sentiment for April beat expectations by more than 13 points as the index grew from 113.6 to 119.6. Any number above 100 indicates growth. Survey participants still expect strength in May, but the index softens to 111.5, a drop of 8.1 points and the lowest level since November 2021.
After a period of dramatic swings in the index, it has settled into a relatively stable range between 111 and 130 for overall sentiment, ECIA reported, with the past 10 months averaging 120.0. The market has seen nearly two years of positive momentum — the last time the index measured below 100 was July 2020.
Looking forward, the electronics component market continues to face strong headwinds. Concerns regarding a potential recession are now adding to other major impacts being felt by supply chain participants such as the war on Ukraine by Russia and the upward trend in the inflation measurements, according to Dale Ford, ECIA chief analyst.
These external pressures are likely significant contributors to the more conservative sales expectations looking forward, he added in a statement. Concerns related to the economy continue to grow as inflationary pressures continue to increase and consumer confidence takes a strong hit.
Electromechanical components saw a significant upswing in sentiment. Following a drop of 16.8 points in March it rebounded by 15.8 points in April. Passive component sentiment recovered just slightly, up 3.4 points; and semiconductors saw a slight 1.1 point dip in April following a steep March decline. Every semiconductor subcategory saw a decline in April with the exception of MCU/MPU. Looking forward to May, with the exception of memory, the sentiment in every subcategory falls between 4 and 11 points.
None of the component categories are expected to dip below 100, said the ECIA.
The overall end-market index tends to be aligned with components. The strongest markets are expected to be avionics/military/space, industrial and automotive. However, the index for computers and telecom mobile phones languished below 100 in April. Mobile phones have remained below 100 for 7 of the past 10 months.
Consumer electronics recovered just above 100 in April. Looking to May, only computers register sentiment below 100 as mobile phones rise above 100. The end-market indexes have outpaced the components index for April and May.
Distributors, suppliers and manufacturers reps differ on their market perception. As a group, reps are relatively pessimistic. Scores range between 67 and 113 in April and between 84 and 113 in May.
Distributors are the most optimistic—their scores reach as high as 160. Avnet Inc., which reported its earnings on April 27, saw year-over-year sales growth above 30 percent in fiscal Q3 to $6.5 billion. CEO Phil Gallagher said there are no signs that demand for components is waning – Avnet’s book-to-bill remains solid; there is no uptick in order cancellations; and Asia-Pacific was unseasonably strong in the quarter.
The latest ECST survey results point to possible lead time relief after actual reported lead times jumped back up again in March, said the ECIA. Passive components show the least lead time pressure while semiconductors are still stretched. However, all three component categories show major improvement in expectations.