In June, the electronic components industry experienced a slight recovery in sales sentiment after a significant decline the previous month, according to the ECIA (Electronic Components Industry Association). However, the sales index, currently at 76.3, remains below the growth threshold of 100.0, indicating a challenging market landscape.
The positive shift in June’s sentiment can be attributed to the semiconductor sector, which saw a notable 9-point rebound from the previous month. Passives are also showing signs of recovery, although they still have a long way to go after experiencing a 23.7-point drop in May. Electromechanical components remained relatively stable in June, but the outlook for July predicts an improvement of more than 5 points.
While the outlook for July shows hope for further improvement, it’s crucial to exercise caution due to the unexpected downturn in May’s index. Overall, the trend in index results suggests an extended market recovery period, with a potential turnaround in year-over-year growth expected by the end of 2023 at the earliest.
The component sales trends align with the national PMI (Purchasing Managers’ Index), which declined for the eighth consecutive month in June. The Institute for Supply Management’s June manufacturing index dropped to 46 percent, indicating a contraction in the manufacturing sector.
Interestingly, there are divergent perspectives within the electronic components market. Distributors and manufacturer representatives have significantly more pessimistic views compared to component manufacturers. This difference in perspective could be attributed to stronger performance in direct business for manufacturers while inventory balancing in the distribution channel remains a concern.
The avionics/military/space, automotive, and industrial segments, which previously had strong index numbers, saw weaker results in the June survey. On the other hand, other markets experienced modest improvements.
Lead-time trends for products showed a slight compression in “stability” during June, with both increasing and decreasing lead times reported. The semiconductor sector, in particular, experienced a significant improvement in lead times, possibly due to more fabs coming online to increase chip supply. Electromechanical and passive components saw increasing lead time reports at or below 5 percent.
In summary, the electronic components industry faced challenges in the first half of the year, but there is hope for achieving equilibrium in Q3 before a potential renewal of growth in Q4 2023 or Q1 2024.
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