Electronic component orders fall, but not as sharply

ARLINGTON, Va., March 10, 2009 – Electronic component orders continued to fall in February, but not as sharply as in January, according to the monthly index compiled by the Electronic Components Association (ECA).  The 12-month average, comparing this year’s results to last year’s, continued a descent that began last summer.

 

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CONSUMER ELECTRONICS DROP

Only games show life Given the absence of compelling product offerings, along with the dismal economic environment and an inventory hangover from the 2008 Christmas selling season, it should not be too surprising that world production of consumer electronic products, excluding cellphones and computers, will fall this year. Output is predicted to drop by 6.4 percent versus an anemic 1.7 percent increase in 2008. For reference, world output fell by only 4 percent in 2001, the last time that the industry suffered a downturn. But game consoles are likely to achieve a gain of 10 percent this year as games represent a form of affordable family entertainment.

AUTO ELECTRONICS

Auto electronics finally crash 2008 was not a good year for automotive electronics manufacturers. Global vehicle production fell by 3.0 percent. US output plummeted by 19.8 percent and West European production was down by 10.3 percent. Even though electronic content is steadily rising in cars and trucks, cost containment is a major issue at vehicle manufacturers. Consequently, automotive electronics output managed only a thin 0.4 percent increase in 2008, versus a 10.1 percent surge in 2007. This year, the combination of slumping vehicle demand and even more intense price pressure will drive down automotive electronics production by 5.7 percent. But an accelerating industry recovery will take growth rates back up to 8.7 percent in 2010 and 12.3 percent in 2011, as vehicle obsolescence and pent up demand lift industry prospects.

Beginning with July 2008, ECA has made two major changes in its monthly order index, which for 12 years has been a barometer for market trends in the electronic components industry.

• The first change has been to update the index baseline year from 1996 to 2006, which better reflects today’s market realities.
• The second change is to report numbers for North America only, which is expected to improve the consistency of results from reporting companies.

The actions came as a result of research by the ECA passive components market services committee, which has responsibility for ensuring accuracy of the association’s market reports.

A LEADING INDICATOR

While not a forecast of future sales activity, the index has proven to be a leading indicator of market movement and sales trends. Actual sales numbers tracked by several marketing firms have shown that the index provides a four- to six-month glimpse of potential ups and downs in the market. In fact, the index portended the collapse of the electronic components market in 2001, although few could grasp the warning signals at the time.

The new index reflects more dramatic movement in the adjusted four- to five-week order trending. Results from the 12-month moving average are expected to be similar to previous reports based on the 1996 baseline.

The ECA indexes provide relevant trends based on recent history, and are not used to calculate actual sales revenues. Still, the monthly order report from ECA provides member companies and market analysts with a valuable tool to adjust forecasts up or down based on future market expectations.

ECA’s market services committee believes the new index will better represent manufacturers’ order activity and month-to-month fluctuations.