Prospects for the electronics industry

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11 February 2004 News

Information from Arrow Altech Distribution

In the past, South Africa followed the international trend where purchasers of electronic components enjoyed a buyer's market commencing in 2001, and continuing throughout 2002 and 2003. This trend is expected to change during 2004. Most analysts, franchised and independent distributors, agree that part shortages will become a reality due to fabrication shutdowns resulting in capacity limitations and a lack of investment in new capacity by component manufacturers.

Should the electronics industry recover more rapidly than expected, there could be a potential for shortages. This raises concerns about the ability of suppliers to respond timeously to sharply rising market demand. The general consensus is that any stress on meeting demand will rapidly show up in component prices being increased from a lower price base following the decreases experienced during the down cycle.

The general IC market is still showing signs of a recovery as lead times continue to increase in many different product areas. Manufacturers and franchise distributors are increasing their pricing and removing debits, which is causing a bit of a stir in an industry where cost savings have been the practice for over two years. Much of this is due to an increase in demand when inventory and capacity were limited, which resulted in longer lead times and higher pricing over the past quarter.

In addition, there seems to be a great deal of shortages in the passive and capacitor marketplace. We are certainly seeing more of these requirements from an increasing number of customers. Planning and forecasting is essential to riding this wave. Arrow Altech Distribution is working pro-actively with its customers to ensure that their requirements are fulfilled. An advantage during this time is the availability of local stock/pipelining through our stock guarantee program housed in the Jet Park distribution centre.

The South African market for electronic components is not expected to grow at any significant rate, nor decline at the rate we experienced between 2000 and 2002. The domestic electronic component market for 2004 is anticipated to remain 'flat' based on 2003 demand.

For more information contact Rodger Warren, Arrow Altech Distribution, 011 923 9600, [email protected]

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