afdec/ecsn Predicts Slow Slog Back to Consistent Growth

For the first time, well one is tempted to say, since records began, the UK and Ireland component distribution market will fall below £1bn in 2009.

"There's your headline," was the gloomy comment from Aubrey Dunford (pictured) presenting the forecast for ecsn/afdec. Keen to lift the mood, Dunford had better, though not scintillating news on the year ahead.

First things first. Dunford says the UK and Ireland distribution market will decline 13.1 per cent to £912m from £1.050bn in 2008. Members of afdec, the distributors' trade association, who contribute numbers for this annual forecast expect the last two months of this year and the first half of 2010 to commence a slow recovery, followed by more consistent growth in the second half of next year.

afdec's forecast of a 0.9 per cent upturn in the first half of next year reflects the sluggish start to any recovery. The full year forecast of 3.9 per cent growth reflects the prediction of business picking up through the second half of 2010.

Dunford and afdec chairman Adam Fletcher are most concerned about a double dip recession in the global component market as the current rush to replenish inventories in the channel, that's distributors and their customers, begins to slow down.

"The initial recovery could just be a refilling of the pipeline," Dunford remarked.

Table1: 2007 to 2010 actuals and forecasts for the UK and Ireland components DTAM 

Looking at the DTAM by product group, afdec forecasts 3.8 per cent growth in the semiconductor DTAM to just over £430m and a 4.9 per cent rise for passives to about a £100m. The electromechanical components sector is predicted to pick up 3.6 per cent to £220m and component assemblies are forecast to grow at 3.4 per cent to about £90m. Other components will rise 4.9 per cent to hit the £90m mark.

This overall growth of between 3 to 5 per cent will not be enough to push the DTAM back to its 2008 level.

On a brighter note afdec reckons product supply issues could restore margins and lead to price increases, though it could be more difficult to lay hands on product. As Dunford remarks those distributors who stocked up on inventory early in the recovery stand to benefit most, and that he feels will more likely be the independent, privately owned distributors who don't have to answer to shareholders on what to some might have looked a risky investment.

afdec's numbers also predict the distributor share of the total available market will edge ahead to 31.5 per cent, which is 0.5 per cent up on the 2009 DTAM forecast and  0.4 per cent ahead of 2008. If the 2010 forecast is correct the channel's share of the component TAM will have grown by 6.5 per cent since 200

Comments

[Ian W]

I asked Aubrey the same question some time ago but have not had a reply
Ian W

[mick]

Ian,

You make some very good points. From memory I think Aubrey commented that the numbers did not include internet sales from, for example Digi-Key and Mouser, which given the success both have enjoyed would boost the UK number. I'll alert Aubrey and ask him to comment

Digi-Key has recently joined ecsn/afdec so I'm guessing that their numbers may be included in future years.

[Ian Davidson]

Mick

I know the UK manufacturing industry has suffered badly in recent years but I wonder if our distribution market might be stronger than the AFDEC report suggests. I have two reasons for asking this:

1/ Many smaller distributors who design components into UK companies are able to successfully supply those products to the Asian CEMs manufacturing units for return to the UK. This counts as UK distribution sales. The larger multi-national distributors with Asian offices supply from their local sources with only a financial contribution appearing on the UK books, meaning the sales may not be included in UK figures.

2/ In the past few years there has been a marked increase in UK activity by overseas internet-based distributors where product is not held locally. How is this accounted for? Is it shown as UK distribution or is it effectively lost from the UK numbers?

It's been some time since I had any involvement with AFDEC so they may have both of these points covered … maybe Aubrey would comment.

Ian Davidson

Idea Business Solutions Limited