The May Electronic Component Sales Trends (ECST) survey shows overall sales sentiment took a body blow compared with expectations, reported the ECIA, and collapsed to 72.2 points compared with previous forecasts for the month. The May index fell by 14.5 points compared with the April index of 86.8. This is the third month in a row of declining results.

Any number above 100 indicates growth. The June outlook only improves modestly to 78.6 points.

Source: ECIA

The most recent ECST results are a dramatic reversal from expectations of a positive outlook over 100 in May, said ECIA Chief Analyst Dale Ford in a statement. The results of the May survey combined with the Q2 ECST survey results point to an extended market recovery period with a turnaround in year-over-year growth coming at the end of 2023 at the earliest.

Signals from the U.S. manufacturing industry also indicate a late rebound this year. The PMI contracted for the seventh straight month in May and demand showed no sign of recovery. Supply chain barriers have finally subsided, the Institute for Supply Management reported, and the industry is poised for growth once demand returns.

The ECIA found the sales sentiment among manufacturers, distributors and manufacturers’ reps diverged. Distributors and reps had a bearish outlook with overall index scores of 71 and 60 respectively.  Manufacturers averaged 91 percent,  with three component categories scoring at or above 100. One possible explanation for these extremely different views could be that manufacturers are seeing stronger performance in their direct business while inventory balancing in the distribution channel is still in process, said Ford.

None of the electronic component categories tracked by the survey — semiconductors, EM/connectors and passives — did well in May. End markets also reflected pessimism with the exception of military/aerospace.

The results reported in the Quarterly ECST survey indicate that a return to meaningful quarterly growth will have to wait until Q4 at the earliest, according to Ford. Sentiment for Q2 and Q3  is dominated by flat sales expectations. For Q3, overall positive growth expectations come in at 32 percent, above the 28 percent with negative expectations. A summary analysis of the ECST results from May and Q2 points to continued downward sales pressure through the first half of the year with the possibility of achieving equilibrium in Q3 ahead of renewed growth in Q4 or Q1.

Product lead-time trends show a level of “stability” with the exception of the chip market. Fifty-three percent of survey respondents saw semiconductor lead times as stable, down from 64 percent in April. This decline was matched by 42  percent of respondents noting decreased lead times, vs. 31 percent in April. Distributor Fusion Worldwide this month reported demand in the automotive market for ICs and sensors is increasing and lead times are stretching out.

Credit for the improving lead time picture is not necessarily due to increased production, according to Ford. Given the overall assessment that inventory overhang is the greatest challenge facing the supply chain currently, product mix issues would appear to be the main contributor to any reports of increasing lead times as inventories balance out in the declining market.

Fusion, in fact, reported some component makers have lowered prices on server ICs to reduce backlog.