ECIA: The sales trend of electronic components picked up in July

The Institute of Supply Management (ISM) PMI rose 0.4% in July to 46.4. Manufacturers continue to adjust production and employment levels to meet demand, which has remained weak for the 11th consecutive month. A PMI reading above 50 indicates that the sector is growing.

The chairman of the ISM Manufacturing Survey Committee, Tim Fiore, said the current manufacturing recession may have bottomed out. He added that manufacturers have been adjusting their businesses to meet demand. But it is unclear when demand will rebound.

ECIA chief analyst Dale Ford urged caution about the July ECST index, noting that previous findings were lower than expected. Ford said in a statement that the passive components drove the improvement in the overall index, up 10.4 points.

All electronic component categories improved in July. Among them, the electromechanical / connector is expected to rise 17.5 points in August, breaking the 100 point mark. The outlook for the semiconductor industry was most bleak in August. Ford said that if the market can sustain the recent improvement, sales confidence in all categories could exceed 100 in the fourth quarter, marking a return to overall growth. This will likely deliver on expectations of a year-on-year growth turnaround by as early as the end of 2023.

ECIA said there were differences in market expectations between component manufacturers, distributors and downstream manufacturers. Manufacturers, for example, are more optimistic than distributors. In his second-quarter earnings call, iResearch Electronics CEO Sean Kerins said that the distribution channel is undergoing an inventory correction, which is likely to last for at least a quarter. Ford noted that direct customers of electronics manufacturers may have already consumed some of the inventory, which is why the difference.

So far, sales of semiconductor and passive component manufacturers that have reported second-quarter results have been flat or down overall.

Between May and July, the overall end-market index was generally stable between 77.1 and 79.5, according to the ECIA data. The August outlook overall market index rose 15.2 points. All end markets showed this optimism, and each reported expecting improving sales confidence in August, except for avionics / military / aerospace equipment, which had already scored well above 100.

The August forecast is that automotive electronics, industrial electronics and medical electronics will all break the 100 growth threshold. The lowest score came from the computer market, with an August index of 82.7. However, that jumped nearly 48 points from the November low of 34.8.

In developments consistent with improving market demand, the product delivery cycle trend report from the latest ECST survey showed a significant increase in "stability" reports, with more than half reporting stable delivery cycles. Furthermore, each market reported a sharp decline in the number of markets with shorter delivery times and a slight increase in the level of increased lead times.

This shift in lead-time sentiment is expected for sales to improve, Ford said. Overall, the July survey delivered encouraging news, with clear signs that market conditions are improving in the second half of 2023, Ford added. The July results increase the chances of resuming sales growth in the fourth quarter of 2023.

Ford concluded: " These results strengthen the improvement in the outlook as we enter the second half of 2023."In summary, all the indicators indicate a significant turning point in July sales expectations.

* Article ted from International Electronic Business News EPSNews, Electronic Component Sales Trends Improve in July.