Americas: 2019 electronic component forecast

By John Deslinger

The global results for 2018 are in and the numbers look great. For the Americas, it’s even better! The electronic components industry once again put together impressive back-to-back years of growth. When finally tabulated by the industry’s leading trade associations SIA and ECIA, the numbers will show Americas’ semiconductor and passive 2018 year-over-year growth around 19 and 23 percent respectively. By any measure, that’s truly outstanding and serves to justify the record level of capital investment as well. Congratulations to all the manufacturers, distributors and sales reps on a very successful year indeed.

But as you know, the devil is in the detail. One data set I like to look at is ‘percentage change in quarterly sales performance year-over-year’. For the Americas in 2017, semiconductor Q1 growth was 22 percent trending upward each quarter finishing above 41 percent in Q4. 2018 by contrast was just the opposite: Q1 growth topped out at 35 percent and continued sliding quarterly to a low point in Q4 estimated at 10 percent. That trend doesn’t bode well entering 2019. Now let’s examine passives. In 2017, the picture was very flat: Q1 growth at 11 percent ending with Q4 at 12 percent; whereas 2018 Q1 showed 18 percent trending up each quarter with Q4 estimated at or above 28 percent. I can understand that’s a lot of detail to digest, so allow me to simplify market conditions in one table setting up 2019’s expectation:

Quarterly Sales Performance Year over Year

Also of note is one curious anomaly. ECIA tracks the passives to semiconductor ratio. Historically, that data shows 3.7 capacitors sold to every 1 semiconductor. The ratio has been consistent for years. Starting Q4 2017, that ratio jumped significantly to 4:1 and continues through Q4 2018. There can be only two explanations for that much change: new product designs have radically altered the composition ratio; or capacitor shipments to the actual real demand could be over-stated by eight percent. Unfortunately, the second is the more probable of the two. I would suggest cap suppliers get ready for a modest correction as the supply chain adjusts accordingly. On the other hand, perhaps this is not all bad to those suppliers and customers tediously working daily sourcing issues. Relief might be welcomed.

So where do we stand? Well, customer demand remains vibrant, backlogs firm and lead times steady. Inventory levels throughout the supply chain seem to be reasonable except as noted on capacitors. The first half of 2019 is likely to be good but certainly not great, thanks to a 2018 tailwind. It might be a different story in the second half. No one can really predict the on-again/off-again tariff impact on supply chains, a fluid federal policy on interest rates, a potential spillover of EU discord or shortages of qualified labor. Conversely, PMI and consumer confidence remain positive at least for now.

In summary, the 2019 semiconductor forecast for the Americas appears to be around five percent. Passives could be slightly higher. Given the uncertain economic, political and social conditions here and elsewhere, look for most of the growth in the first half.

John Denslinger’s 40-year electronics career ranges from time with passives specialist Murata Electronics, to managing manufacturing plants in Mexico. John is a trained industrial engineer