Electronic component sales continue to defy headwinds as the ECIA’s monthly sales trend indicator exceeded expectations in May, six points above prior-month forecasts. Component manufacturers, distributors and manufacturers’ reps continue to maintain a positive assessment of component sales growth through June.
The ECIA’s Electronic Component Sales Trend (ECST) survey reached 117.6 in May and dips slightly, to 115.4, in June. Any reading above 100 indicates growth.
Over the past nine months, all major component categories have achieved solid, positive sales sentiment. Semiconductors reached a high of 123.1 during this period; passives averaged a lower 112.5. Only 10 points separate the two, ECIA pointed out.
The ongoing global shortage of semiconductors will keep demand signals strong and for any chip designed into a product there are dozens of interconnect, passive and electromechanical (IP&E) required to support it. Still, economic concerns continue to shadow the electronics market.
“It would appear that there is a general sense of concern about the impact of the economy on the market while judging specific end markets still yields more hopeful expectations,” said ECIA Chief Analyst Dale Ford in a release.
The end-market outlook presents an interesting anomaly in the overall picture, Ford added. In assessing June prospects, the overall sentiment drops below 100 to 96.1. However, the average of the individual market outlooks comes in at 107.8 with only the computer and consumer electronics categories dropping below 100. The medium-term outlook measured by the quarterly ECST paints a solidly positive picture through Q3 of this year. More than half of respondents report expectations of growth in Q2 and Q3 with roughly 25 percent expecting growth above 3 percent. An average of only 13 percent sees a decline in Q2 and that drops to 9 percent in Q3.
As Ukraine continues to battle Russia, the avionics/military/aerospace sector continues to see improving sales expectations. Industrial electronics and automotive electronics also deliver very positive expectations. Telecom networks and medical electronics see a drop in sales expectations while consumer electronics maintains a mostly flat outlook. Mobile phones and computers continue to see declining sales in the index with results well below 100 for a number of months now. The outlook for mobile phones improves modestly to a flat outlook for June.
Expectations for semiconductor growth jump significantly in Q3 as expectations of growth improve from 43 percent in Q2 to 59 percent in Q3. Nobody sees any possibility of a decline in chips sales in Q3, ECIA reported. Passive and electromechanical sales sentiment becomes slightly more conservative in Q3 compared with Q2 – but still very positive overall.
Unfortunately for end customers, expectations of lead time extensions jumped significantly in May across all component categories. An average of 39 percent of ECIA respondents saw increasing lead times in May with only 7 percent seeing a decline in the average. In semiconductors, 46 percent see longer lead times. In passives, the average was 28 percent. The combination of solid end-market demand and supply chain challenges are continuing to stress the lead time expectation.
Inflation a top concern
The IPC, which also tracks industry sentiment, reported nine of 10 electronics manufacturers surveyed are currently experiencing rising material costs, while 86 percent of electronics manufacturers are concerned about inflation. Three main forces are exerting pressure on the economy, and conversely, the electronics manufacturing industry, IPC said: geopolitical uncertainties, inflationary pressure and China lockdowns exacerbating supply chain disruptions.
“Economic data from the last month makes the U.S. economy appear worse than it probably is, while the opposite is potentially true for Europe and China,” said Shawn DuBravac, IPC chief economist, in a statement. “While Europe avoided a decline in the first quarter, it will continue to face a multitude of headwinds in the coming quarters.”
U.S. industrial production rose 1.1 percent in April, reported IPC, continuing its strong post pandemic recovery. End-markets, driven by the automotive industry, also increased. Manufacturing rose 0.8 percent in April. Auto production jumped 3.9 percent while non-auto manufacturing rose 0.5 percent. The mining sector (i.e. oil rigs in the Gulf) also continues to report gains, increasing output by 1.6 percent percent during the month. High oil prices should drive further gains for the mining sector. Industrial production is now 4.2 percent above pre-pandemic levels.
EU manufacturing output fell 1.2 percent in March, the first decline since October 2021. Manufacturing output is up 0.7 percent over last year and up 1.7 percent since the start of the pandemic. The electronics industry, which includes categories such as components, loaded boards, computers, communications equipment and consumer electronics, saw output increase 0.8 percent in February. The sector is up 16.6 percent from prepandemic levels.
Many areas of China are just now starting to emerge from extended Covid lockdowns that began in April suggesting the economy likely slowed sharply in the second quarter, according to IPC. China’s zero-Covid policy likely means more lockdowns in the future and further supply chain disruptions.