Following a year of disappointing electronic component sales, the supply chain is optimistic for 2024. Respondents to the ECIA’s December Electronic Component Sales Trend (ECST) survey expect the overall components index to exceed the 100-point threshold for growth in January to reach 105.6 — an increase of 27.8 points.

If this projected growth is actually realized in January, it would be the strongest month-to-month growth in the history of the index with the exception of one month in June 2020, according to Dale Ford, ECIA’s chief analyst. As always, some caution in expectations is prudent given previous disappointments in index results falling below expectations, he added.

Source: ECIA

So far, economic signals are mixed. Overall demand for manufactured products remains soft, according to the Institute for Supply Management, and its factory index entered the 14th month of contraction in December. The leading index, the PMI, gained 0.7 percent from November to register 47.4 but remains below the growth threshold of 50 percent. New orders declined 1.2 percent to 47.1.

“We’ve been in this 47- to 49-percent trough since September although the PMI’s subindexes are moving and realigning toward a more favorable position to respond to demand when it bounces back,” said Tim Fiore, chair of the ISM’s manufacturing survey committee. “New orders declined, although December is not typically a big month for new orders anyway.”

ECIA’s overall index scores languished between 72.2 and 90.6 during 2023. The actual sentiment index result for December came in at 77.8, 5.5 points below the outlook of 83.3. For the full year of 2023, none of the major component segments achieved an index score at or above 100 which would have indicated positive sales growth sentiment, Ford said.

Nearly all component categories are expected to grow in January. Electromechanical and connector components register the highest score in the January outlook at 114.4, a 30.7-point jump from December. Passive components are expected to jump 28.4 points from December driving the index up to 105.2 in January. Despite its leap of 24.4 points, the semiconductor category falls short of passing the 100-point mark as it comes in at 97.4 in the January forecast, according to the ECIA.

During 2023, the projection for overall growth in the index in the coming month fell far short of lofty expectations at least three times, explained Ford in a statement. All three of the major categories were expected to top 100-points at some point during the year only to fall short. Hence there is a need to sound a note of caution for the January 2024 outlook.

Despite this concern, even if the index achieves half of the forecast improvement in January, it will represent an extremely healthy start to the year.

Following an established pattern, manufacturer representatives presented the lowest expectations for January. However, even this group projects an improvement of over 25 points between December and January, ECIA reported. The expected improvement reported by distributors and manufacturers was only marginally better than manufacturer representatives at 29.3 and 27.9 points. This base of strong expectations across all three of the major reporting segments serves to boost confidence in the overall outlook.

ECIA’s overall end-market index follows the same trend as the component indices with a forecast January leap of 29.5 points. Every end-market segment is forecast to see major improvements in their scores with industrial electronics expected to achieve the biggest improvement of over 36 index points. The highest overall forecast index score for January is reported for avionics/military/industrial at 136 points. The lowest expectation is for consumer electronics at 88 points. However, the consumer electronics outlook for January is higher than all but two of the actual scores for end-market segments in December.

Growing stability in product lead times continues to be the primary story in December, Ford noted. Lead times decreased for both electromechanical/connectors and passive segments between November and December. Only 1 percent and 3 percent of respondents, respectively, reported increasing lead times in December for electromechanical/connectors and passives. The semiconductor category saw a jump in the number of respondents reporting decreasing lead times in December.

From an overall perspective, stability continues to be the dominant condition with 69 percent reporting stable lead times on average while the overall number of reports of increasing lead times was 3 percent in December. Outside reports indicate the challenge of elevated inventory levels persists into the new year, Ford concluded. However, it would appear that participants in the supply chain are achieving a manageable level in the flow of products through the supply chain.

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