The UK’s manufacturer authorised distributor group, AFDEC, has released its analysis of the UK and Ireland’s electronic components market for 2012 and 2013. AFDEC’s market analyst, Aubrey Dunford, said the results were worse than anticipated.
Dunford’s estimate for the UK and Ireland’s DTAM (distributors’ total available market), which includes figures from Digi-Key for the first time, declined 14% in 2012 to £1.01bn, while the TAM (total available market) was down 16% to £2.6bn. Looking on the bright side, he did point out that this meant distributors had increased their share of the market. This, he said, was likely to increase further in 2013.
“Returns from our members forecast that the UK and Ireland electronic components market will continue to improve sequentially throughout 2013, with positive growth returning in the second half of the year,” he said. “We’re likely to see a slight reduction in the TAM – down 1% to £2.58bn – however the DTAM will remain around the same, and therefore a larger share of the total, as customers consolidate their use of manufacturer authorised distributors.”
AFDEC Chairman Adam Fletcher believes continued inventory correction has been exacerbated by weaker than anticipated growth in China.
“Unfortunately when the largest market sneezes, we all catch a cold; if it wasn’t for the huge volumes being driven by smartphones and tablets we may well have caught pneumonia,” he said.
According to AFDEC’s figures, the book-to-bill ratio started trending up in March ’12, became positive in July ’12, possibly indicating momentum towards a recovery.
Trends in the UK market
The UK’s manufacturing output is 5-10% less than it was 5 years ago as the trend for offshoring continues.
“In common with the rest of Europe and the USA, we have become a ‘design centre’ for manufacturing operations in the low cost Eastern economies… the design win revenue generated in the UK and Ireland in 2013 will probably be worth more than twice the actual sales revenue,” said Nigel Watts, Managing Director of Ismosys.
In a panel discussion following presentation of the UK and Ireland market figures, Watts pointed to the importance of design houses and consultancies in the UK, which are not reflected in AFDEC’s TAM figures. Answering, AFDEC chairman Adam Fletcher said that the activity of these consultancies was notoriously difficult to measure – projects are often counted twice, he said, since consultants habitually work with more than one distributor during the design process and then choose one to work with at the end. AFDEC would like to get some data from design houses directly, rather than from channel members, but this has not yet materialised.
The discussion about offshoring, of course, brought up the old chestnut of design tracking. Avnet Memec’s UK & Ireland Country Director Chris Shipway said the company had excellent internal systems for design tracking, so the part of the business that does the demand creation is rewarded, even if it’s only a commission rather than credit for the full sale.
However, one manufacturer’s representative at the meeting assured me that while many distributors now have systems in place to track design wins offshore, it is still far from prevalent.