Electronic component distributors who held their nerve and planned for the future in the face of supply chain turmoil are set to benefit as business returns to normal.
Dave Jones, Senior Manager for Passives, Farnell
After a turbulent period resulting from the impact of Covid on global supply chains, the market for passive electronic components is experiencing a welcome return to relative stability. The situation in 2021 and 2022, when continuing demand from across industry was thwarted by stock shortages, looks to be in the past. A supply surplus has seen distributors’ shelves replenished and lead times for orders back to pre-pandemic levels of between 10 and 16 weeks.
As ever with the electronics sector, some short-term uncertainty remains, but looking ahead the prospects are positive. Mordor Intelligence’s latest report on the current state of the market for passive components puts its value at $45.53 billion, a figure that it predicts will grow at a rate of more than 6% to reach just over $62 billion by 2029.
The swing from a situation where demand massively outstripped supply to one where stock is readily available is typical of the balancing act that distributors are used to negotiating. The need to be prepared for fluctuating market conditions isn’t a new issue, even if the events of recent years have brought it into sharper focus.
In fact, smart distributors have used their experience in recent years to ensure they are better positioned to plan and stock everything they need to satisfy customer demand.
Suppliers have been doing the same. As Simon Leuz, Team Lead Distribution EMEA at Wurth Elektronik explains: “Customers and service providers still have substantial stock in their warehouses. Nevertheless, Würth Elektronik has been investing in its supply chain and stock to enable growth. A strong supply chain, good availability and great partnerships will be significant to service customers when the market picks up again. We’re seeing this as a challenge as well as an opportunity. We expect the second half of 2024 to be brighter and better.”
Markets are warming up
While their role may not grab the same headlines as cutting-edge chips that incorporate artificial intelligence capability, passives nevertheless underpin virtually every new technology that is experiencing strong growth. That ranges for Internet of Things uses in industry through robotics and automation to 5G communications and electric vehicles.
One advantage the market for passives enjoys is that it is consistent and relatively predictable, growing steadily but with no obvious surge in demand for a particular product type or from a specific region. Continued enthusiasm across a wide range of sectors and new applications means the focus continues to be on versatile products that can be used in a range of different ways.
Innovation to meet customer needs
Nevertheless, this isn’t a static market. Increasing complexity of electronic products, particularly in the consumer and automotive sectors, is fuelling the need for more sophisticated components. The post-pandemic years have seen a resurgence in new product development by suppliers, with a steady stream becoming available alongside established lines.
The general trend across electronics continues to be to make products that are smaller, lighter, faster, more reliable, more powerful and more efficient. Components are evolving to support those priorities and the most successful will benefit from surging demand. ReportLinker, forecasting prospects for the electronic components market between 2023 and 2028, predicts strong annual growth of 8.79% in the combined market for active and passive components during that period.
Minimising impacts on prices
The process of adapting to a pandemic that is hopefully now in the rear-view mirror has made industry more robust, and better positioned to address ongoing challenges. These are likely to be driven more by geo-political and environmental factors than market forces. Murata Manufacturing, the world’s largest supplier of multilayer ceramic capacitors, had to deal with the impact on its operations by the earthquake and tsunami that hit Japan’s western coastline on New Years’ Day 2024. Also, recent conflict in the Red Sea region has meant a lot of shipments from Asia are being forced to take longer routes, affecting delivery times.
Careful planning by suppliers and distributors has helped to mitigate the effects of unexpected factors like this for the end customer. Whatever the extent of fluctuation in supply or its source, being prepared is crucial, and the lesson from recent years is that it is important to focus on maintaining business as usual as far as possible. That means investing in stock to prepare for when markets inevitably rebound, and to take advantage of less busy periods to review operations, improve processes and plan for growth.
At Farnell, we’ve found that doing this was the best way to ensure we were able to provide a robust response to improving market conditions. Ensuring our suppliers share our confidence that demand for both established and innovative products will persist is an important part of the strategy.
Foresight pays
In the two years since the market began to emerge from its more severe restrictions, Farnell has continued to invest in the latest ranges and technology developments launched by our market leading suppliers.
. Our ongoing strength – the result of planning and foresight – is a larger and stronger range of products, including passive components, than ever.
My colleague Juergen Ruben, Farnell’s Director Sales DACH & Eastern Europe, explains: “By offering a wide range of high-quality passive components, we are committed to supporting our customers in all their electronic equipment needs. Our focus on providing passive components in the market ensures that our customers receive the best value for their investment. Farnell is positioned to meet this demand thanks to its expanded product range and strong line card.”
Prepared for the future
The market for passive components may be experiencing a brief lull at the moment, but that is part of its cyclical nature. The reasons are obvious, and even if they are outside the control of stakeholders, they are expected to be resolved soon, heralding a resumption in the strong growth that experts predict.
In the meantime, distributors can help to minimise disruption by maintaining a focus on careful preparation and planning that has served businesses well during recent turbulence. At Farnell, we have found that continuing to invest in stock to provide support for product innovation despite supply chain challenges helped us stay ahead of the curve through Covid and meant we were able to continue delivering for our customers. With our partners, we have come out of the experience stronger, and better equipped to help them take advantage of the opportunities that will soon emerge.
