Distributors Flourish As Component Demand Explodes

Contributor:
Ron Bishop

Ron Bishop Ronald Bishop is President of Bishop & Associates, Inc., a market research firm specializing in the global electronic connector market. The firm publishes a monthly newsletter titled, The Bishop Report, and an annual review of the connector industry, The Connector Industry Yearbook. ( More... )

07.03.2006 // Posted by: Ron Bishop // Posted in: Articles, Connectors

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Ronald Bishop

July 03, 2006

Bishop & Associates has increased its 2006 Connector Industry forecast to +9.6%, up from the previous forecast of 7.5%. The improved outlook for connectors is based on a strong beginning to 2006 where year-to-date May bookings are up +19.8%, and billings are up +14.2%.

The strong demand for connectors is the result of a strong economy worldwide, especially in the U.S. and Japan where GDPs are much better than originally forecast. China continues strong with GDP at +10.2% in Q1 2006. Hong Kong’s GDP was +10.2%, India +9.3%, Singapore +10.3%, and Indonesia, Malaysia, the Philippines, South Korea and Taiwan were all in the +5% to +6% range.

All end-use markets are growing, especially consumer electronics, which is being driven by high demand for cell phones and flat screens TVs. Even the recession prone telecom infrastructure market is showing some growth again. It is evident that the electronics industry is in a “sweet spot.”

The following table provides Bishop & Associates’ 2006 connector industry forecast by region of the world.

On June 7th, the Semiconductor Industry Association (SIA) also increased its 2006 forecast from +7.9% up +9.8%. The SIA also increased its longer term outlook, predicting semiconductor sales would increase +11.0% in 2007, 12.0% in 2008, and +4.0% in 2009 for a +9.2% CAGR between 2005 and 2009.

All this bodes well for the electronic distributors because their sales performance tracks closely with the fortunes of the semiconductor and connector industries. The following graph provides year-over-year quarterly changes in sales for the public companies in each sector since Q1 1999.

This chart clearly shows that electronic distributor sales performance moves in step with semiconductors and connectors.

As the following data shows, public electronic distributors increased sales +10.8% during 2005. During the first quarter of 2006, distributors achieved a sales growth +21.8%, and profit increased 57.5%.