European DTAM Soars; IDEA Counsels Caution

Sales up 21 per cent, a book to bill ratio at 1.18:1.

The latest electronic components DTAM (Distributor Total Available Market) figures released by IDEA (International Distribution of Electronics Association) indicate that European Distributors are continuing to see dramatic sequential growth in bookings and billings.

 

Life looks sweet in the European distribution market. Well, not so fast. Yes, there has been dramatic growth in the past few months, but and there's always a but, there is a warning this charge will lose momentum in the coming months.

 

According to IDEA vice president Adam Fletcher, the electronic components markets in Europe has historically grown in the first and second quarters each year but the dramatic rate of growth indicated by the consolidated figures in the first quarter of 2010 was far higher than previously forecast and is in fact back in line with historical European first quarter trends.

 

Then Fletcher counsels caution:  “Despite the fact that the first quarter results are in line with the financial results reported by many sectors of the global electronic components market it is very unlikely that this high bookings growth rate will continue in Europe”, Fletcher said. “We feel that it will level off over the next few quarters as manufacturing lead-times in the semiconductor and passive markets normalise closer to six to eight weeks”.

 

The supply network visibility in the European electronic components market remains limited, with no single identifiable demand driver, despite anecdotal evidence of improving customer confidence. Fletcher suggests that much of the increase in bookings activity has been driven by the extension of manufacturing lead-times and their impact on customers ERP (IT) systems: “Over the last decade customers have become ‘conditioned’ to expect almost ‘ex-stock availability’ for electronic components and have set the data in their ERP systems accordingly. The manufacturing lead-time has a very significant impact on the algorithms used in customers ERP systems and as lead-times have extended the result is a request for greater order cover (bookings). We need to proceed carefully because as manufacturing lead-times decline to more normal levels order cover is also likely to be scaled back”, concluded Fletcher.

 

Total European distribution bookings in the first quarter of 2010 increased by 21 per cent when compared to the previous quarter and by 55 per cent when compared to the same period in the previous year. Sector specific bookings changes are impressive compared to the same period last year. Semiconductors rocketed 69 per cent; passive components were up 40 per cent; and electromechanical components and other components increased by 23 per cent.

 

The book to bill ratio jumped from 1.04:1 in the last quarter of 2009 to 1.18:1 in the first quarter of 2010.