13 Dec 2016

2017 Forecast For Electronic Components Market

Editor, Ian Poole looks at the outlook for the components market and the electronics industry as a whole for 2017

The global electronics industry rises and falls according to many factors. The prediction for the electronics component market and for the electronics industry as a whole is dependent upon many factors.

There are many factors ranging from the political outlook, to local economic conditions, banking, and the global level of confidence that all affect the outlook.

A selection of surface mount electronic components including SMD capacitors, SMD resistors, integrated circuits, etc

For components distributors, manufacturers of electronic equipment and many others, it is necessary to have an understanding of the predictions for the electronics component market for 2017. In times of boom, components are harder to source – prices rise and lead times significantly increase, especially for semiconductors. In times of recession prices fall and availability increases. Building this into forward planning enables manufacturers to keep production lines running whilst also keeping costs down.

At a meeting in London, the manufacturers’ authorised distributor, afdec, group within the Electronic Components Supply Network, ecsn, discussed the underlying global conditions as well as the more local conditions that affect their network. A summary of the local and global markets was made to enable distributors, component manufacturers, and equipment manufacturers to match demand and availability.

ecsn Markey Analyst Aubrey Dunford, who is an expert in the field gave the main presentation bases on analysis he had undertaken throughout the year. He had analysed the global conditions and felt that the UK & Ireland electronic component market is likely to grow by 2.5% in 2017.

It also appears that the overall global market will grow as well, possibly at a rate of around 3%.

Major factors for 2017 component predictions

There are many different factors affecting the predictions for the overall components market in 2017.

There are many know factors that affect the market. Analysis of existing growth trends globally and for different countries is one factor. Another is the new and growing electronics industry sectors. Automotive and the new Internet of Things sectors are expected to grow significantly driving overall growth. Obviously sectors like mobile and fixed telecommunications, computer devices of all forms and many others are well established and likely to grow less.

However there are many unknowns that could affect the economic conditions that govern the overall global economy.

  • New USA President – often referred to as the Trump effect, this is a major unknown which could have a significant effect on the global economy. The world is unclear just what the policies of the new US president will be.

  • Brexit – With the UK planning to leave the European Union, the conditions under which this will happen still need to be negotiated, and the outcome could have a significant effect on many areas of the global economy.

  • European Elections – following on from Brexit, it is quite likely that other countries could have pressure to leave the EU. In addition to this there is a possibility that many governments could change. There also seems to be a movement whereby totally new governments come to power that have untried policies. This places a major uncertainty into the conditions for 2017.

  • European economies – in recent years with countries like Greece requiring enormous bailouts there has been considerable unease in the financial markets about the future. With Italy now looking a little less stable this could have a major effect on global confidence and business which will impact the electronics manufacturing industry.

  • World recovery – after the major downturn of 2008, many economies have been very slow to recover. In fact the latest statement from the IMF states that global growth is projected to remain modest at 3.1% in 2016, slightly weaker than projected in April 2016, and it states there has been an impact caused by the uncertainty of Brexit. Then for 2017 it states that recovery is expected to gather some pace in 2017 as conditions in some economies normalise.

2017 prediction trends

In recent years the sales of electronic components have been remarkably stable. The electronics industry as a whole has maintained a small growth.

Global industrial growth has remained steady at around 3% for the last four or five years. Within those figures some countries have grown more than others. The large growth countries are China and India, although China’s growth is slowing Other countries like Japan and Russia have seen low growth rates. Even the USA is only growing at around 2%, which is below the global average.

Most of these countries are expected to maintain their current overall growth rates for 2017 with little change in most areas.

These figures are for overall economic growth rates, although it is expected that the electronics industry and hence the usage of electronic components is expected to follow these general trends.

Electronics usage for the 2017 component predictions

When looking at the global electronics component predictions, it is necessary to look at the areas in which electronic components are used these days.

There are the many traditional usage areas including general industrial electronics, domestic electronics, mobile telecommunications, fixed line telecommunications and the like.

May of these areas are remaining steady, but one are that is seeing a considerable level of growth recently is the automotive industry. The level of electronics that is being incorporated into automobiles these days has increased considerably, and the level is set to grow even further. Anyone buying a new car these days will have far more electronics control than even five years ago. The level of autonomous control is set to dramatically rise, and this, too will increase the level of electronics in the standard car. This will boost the electronics industry as a whole and also the electronics component requirements.

Adam Fletcher of afdec said. "The transition toward increased driver assistance is gaining huge momentum. It will open new markets both within new and existing vehicle platforms and will start to have a real impact on industry revenues by 2019". He cautions however that "fully autonomous vehicles are probably further away than is generally acknowledged".

Another major driver is the Internet of Things. With automated homes, factories and cities becoming a reality, the level of electronic control, and the need for modules is increasing even now and will continue to do so markedly, fuelling the growth in the use of electronics and the demand for components.

Book to Bill and inventory

Aubrey Dunford confirmed that the ‘Book to Bill’ ratio remained just above unity in 2016: “The continued slow-down, particularly in the Asia Pacific market, combined with low interest rates has meant that the whole supply network is well stocked and manufacturers have ample production capacity.”

Dunford said, “We believe that during uncertain times customers will continue to order in line with their confirmed demand. With good inventory availability and short lead times the electronic components supply network is well positioned to support the needs of its customers”.

2017 outlook summary

There appears to be an underlying confidence in the market, although there is not any expectation of high growth. The growing markets like automotive and IoT are already seeing growth and many expect these to be major factors that fuel the growth in 2017 and beyond.

It is expected that design activity will remain strong and that this will ensure new products enter the make tint he coming years. Without this the markets will slow and stagnate.

That said growth will not be enormous. Overall economic global growth of around 3.1% will be matched by a similar figure for the electronics industry.

As such the outlook looks steady for 2017. The economic meltdown on 2008 is still having its effect, but the positive shoots or automotive and IoT are now growing well and should bolster other areas like telecommunications (mobile and fixed) as well as the many other areas of industrial and domestic electronics.

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About the author

Ian Poole is the editor of Radio-Electronics.com. Having studied at University College London to gain his degree he went on to undertake a career in electronic development working for companies including Racal. He became the hardware development manager at Racal Instruments where he was in charge of the hardware development activities within the company. Later moving in to freelance work as a consultant he also developed Radio-Electronics.com to become one of the leading publications for professional electronics engineers. He is also a Fellow of the Institution of Engineering and Technology and is the author of over 20 books.

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