News analysis: Electronics business booming, but industry remains cautious
2 mins read
After the uncertainty of the last few years, the semiconductor industry has bounced back with enthusiasm. Not only are manufacturers showing more confidence, but customers are also buying more components than they have for some time. These factors are combining to see global sales of semiconductors booming; sales are likely to be around 30% higher than they were in 2009.
One of the more bullish of those following developments in the semiconductor market is Malcolm Penn (pictured), chairman of Future Horizons. Penn was almost alone when he forecast early in 2009 that demand in 2010 would grow by 15%.
"We were ridiculed for our optimism in January 2009 and throughout the year when we stuck to our guns," he said. "We never stopped believing in the numbers however. We are proud of the fact we got this analysis right, but equally sad that no one had the courage to listen."
Now, Penn has revised his forecast upwards, expecting sales to grow to around $300billion in 2010; an increase of 31% over 2009. "And there's still some scope for upward revision," he added.
Penn focuses on sales by semiconductor manufacturers. What about the distributor's point of view?
Alan Jermyn is vice president of marketing for Avnet Abacus. "The book to bill ratio has been exceptionally strong for the past six months. As a general view, sales of passive components in 2010 are forecast to be around 15% up on 2009, while the Bishop Report forecasts connector sales to be 13.5% better than 2009."
Meanwhile, bookings and billings in the European semiconductor distribution sector 'went through the roof' in the first quarter of 2010, according to distribution association DMASS. Sales in Q1 reached €1.345billion, 33.2% higher than in the same quarter in 2009 and the growth trend is continuing in Q2.
DMASS chairman Georg Steinberger said: "In 25 years in the industry, I have never seen the components distribution market rebound from crash to cash in five quarters. The sector is back at its 2008 levels and not far away from the record year in 2007. With all the bookings – provided it is not all fog and mirrors – 2010 is set to become a record turnaround year for distribution. It cannot be all inventory correction, as previously suggested; there must be real growth."
While demand is on the up, supply remains a problem and a number of reasons are being suggested. One of these is manufacturers shutting down production last year and now having problems bringing lines back up again. There are certainly reports of extended lead times and overt allocation.
"Signal inductors in 1812 size are widely quoted at 30 to 50 weeks, dependent on manufacturer," said Jermyn, "with some power inductors quoted at a similar timescale. Increased lead times are also reported on SMD varistors. Similar dramatic lead time increases have been seen on some film, tantalum and electrolytic capacitors (particularly high voltage radial lead)." And a shortage of tantalum powder is impacting availability.
iSuppli's Component Health Watch points out extended lead times for bipolar power devices and says standard logic products will see 'continued constrained supply'.
"One issue that should be of concern to all consumers of components, particularly in times of shortage, is the growth in counterfeit products availability," said Jermyn. "I urge all customers to be clearly aware of the provenance of the products they purchase."
Despite the generally optimistic statistics, there is the feeling that the industry is waiting for things to go wrong again. Certainly, there is an awareness that economies around the world could experience a 'double dip' recession. Jermyn said: "I think we all subscribe to the view that the current trading conditions are unsustainable."
Penn disagrees: "We have now had four straight quarters of industry growth, yet still no one believes in the strength of the recovery. The phrase 'ah but …' is driving the industry consensus. No one looks too far beyond the next quarter," he concluded.
