The barrel is half full
08 December 2009
We can’t wait to see the back of 2009 – but now is the time to start looking at what lies beyond.
The good thing about 2010 is that it will not be 2009. The easiest forecast to make is that after things have been bad they will get better, and after the longest and deepest recession in living memory it therefore makes sense that it can go on no longer. While that may be the consumer mentality, which obviously has its own beneficial effect on the economy, there is no room for such emotional forecasting in business.
And when businesses do get together to assess the state of the industry the results are not necessarily as positive as many would hope. Last week the afdec group released its annual report which included a review of 2009 and a look forward to next year.
Part of the Electronics Components Supply Network (ECSN), afdec represents the interests of compnent distributors in the UK and Ireland. It polls executives within the ECSN membership during the middle of November to get data for its annual review.
The performance for 2009 was a predictably dismal fall of 13% to a market for electronics components of £2.9 billion. In truth, despite minor growth in 2004 and 2006, the market has tumbled every year from a high of £10.2bn in 2000 to its present level, due to a number of well-documented factors including the dot.com crash, globalisation and off-shoring, and more recently the credit crunch.
The return to some degree of growth in 2010 should therefore be a positive sign, but it will not be until during the second half of the year, according to afdec, that most of the industry’s 2.2% growth will occur. Even some of the flattening out over the coming half year may be no more than protecting stocks, as the growing strength of the Chinese market puts pressure on component lead times. 2010, according to these forecasts, would still be the second worst year for a decade, which takes some of the gloss off the fact that it is an improvement on this year.
Other items in the forecast are that most countries around the world will have a fairly static 2010 – even China and India despite having higher underlying growth levels – the inflationary impact of higher oil prices, continued problems for companies trying to get credit and a weak pound against the dollar and Euro.
On the whole then, according to these figures, 2010 does not sound like a barrel load of laughs, but there is reason at least to see that barrel as being half full, rather than half empty. One of the main problems in 2009 has been the complete lack of visibility, but with forecast like this one – indicating stability and slight growth – it is likely that some level of confidence will return to the electronics industry. The wider this confidence stretches throughout the supply chain the greater the visibility will be for every individual company within it.
And the other main positive is that we in the UK are not volume manufacturers any more. A small rise in component requirements can represent many prototypes and pre-production runs. It adds credence to the notion of innovating our way out of a recession – and innovation is not a parameter that can be numerical captured in a forecast such as this. I remain optimistic and enthusiastic about the year ahead.
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