Electronic Component Sales Outlook Dips, Recovery Delayed

According to the ECIA Chief Analyst Dale Ford, the most recent survey results have shown a significant shift in expectations, with a negative outlook in the electronic component sales sentiment, contrasting previous positive projections.

The survey results from May, along with the Q2 survey, suggest that the market’s recovery will likely be extended, with a possible turnaround in year-over-year growth anticipated no earlier than the end of 2023.

Additionally, indicators from the U.S. manufacturing industry reveal a delayed rebound this year, with the PMI contracting for the seventh consecutive month in May and no signs of demand recovery. However, supply chain barriers have subsided, setting the stage for future growth once demand returns.

Interestingly, the sales sentiment among manufacturers, distributors, and manufacturers’ representatives differed significantly. Distributors and reps exhibited a bearish outlook, with overall index scores of 71 and 60, respectively, while manufacturers averaged 91 percent. Some speculate that the stark divergence could be attributed to stronger performance in manufacturers’ direct business, while inventory balancing in the distribution channel is still underway.

The survey encompassed various electronic component categories, including semiconductors, EM/connectors, and passives, all of which experienced lackluster performance in May. With the exception of military/aerospace, end markets reflected a prevailing pessimism.

Analyzing the Quarterly ECST survey, Ford suggests that meaningful quarterly growth will likely be delayed until at least Q4. Sentiment for Q2 and Q3 predominantly revolves around flat sales expectations. In Q3, overall positive growth expectations stand at 32 percent, slightly surpassing the 28 percent with negative expectations. However, a comprehensive analysis indicates a continued downward sales pressure during the first half of the year, with the possibility of achieving equilibrium in Q3, preceding a resurgence in growth in either Q4 or Q1.

While most product lead-time trends remain stable, the chip market stands out with notable instability. Survey responses indicate that 53 percent of participants perceived semiconductor lead times as stable, a decline from 64 percent in April. Simultaneously, 42 percent reported decreased lead times, compared to 31 percent in April.