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Optimism Grows for Q4 Component Sales

Although supply chain stakeholders have tempered their growth expectations for the year, sentiment around component sales remains in positive territory through Q4. The ECIA’s  Electronic Component Sales Trends (ECST) index exceeded its baseline of 100.0 in August to reach 108.4, with a September outlook for 107.9.

Although supply chain stakeholders have tempered their growth expectations for the year, sentiment around component sales remains in positive territory through Q4.

Source: ECIA

The ECIA noted that in June, the index fell below 100, prompting concerns about the market’s health. While expectations often exceed actual results in the ECST, ECIA Chief Analyst Dale Ford said a positive outlook augurs well for Q4. “Any level of continued upward improvement in the market is a valuable indicator of continued positive market momentum,” he said in a release. “This month-to-month positive market trend is projected to continue through the fourth quarter and the end of the year based on the results measured in the Q3 ECST survey.”

The IPC saw similar results in its August economic survey. Sentiment in the electronics industry showed a modest uptick in August, though it remained below the peak observed in April 2024. The improvement was driven by stronger demand and reduced costs. The IPC’s demand index increased 3.3 percent in August. This rise was fueled by better, albeit still contracting, backlog, capacity utilization that shifted to expansion, and heightened order sentiment.

The ECIA’s semiconductor sales trends improved by 5.5 points to reach 111.8 in August and electromechanical devices saw a 2.8-point improvement to 108.6. Passives grew by 6.5 points to 104.7.

Semiconductor market expectations for September slip from the August results but still sustain an overall positive market expectation at 103.0. Every product sub-category achieves a score of 100 or above in both August and the September forecast.

The Q4 ECST outlook shows 35 percent of participants projecting growth in Q3 with 10 percent expecting growth of between 3 and 5 percent. Component manufacturers have become the most conservative group in their sales sentiment, ECIA reported, with overall scores in negative territory below 100 in both August and September. This group has typically been the most optimistic in their views in prior surveys. Sales sentiment expressed by distributors comes in strongly positive in July, August, and the September forecast.

Recent earnings forecasts found component makers’ inventory levels remain high while distributors have made headway in drawing down their excess supplies.

All but 2 end market segments are projected to deliver positive sales sentiment in September. Only computers and consumer electronics score below 100.

Optimism Grows for Q4 Component Sales

ECIA’s Dale Ford

“This latest quarterly survey result continues the expectation coming into 2024 that growth for the year would be driven by second half performance,” said Ford. “It is encouraging that positive sales expectations have been sustained all the way to the Q3 survey conducted in August.”

The level of lead time stability reported in August slipped as the average of those reporting stable lead times dipped from 89 percent to 81 percent. Semiconductors and passive components both saw a notable increase in the percent reporting decreasing lead times.

IPC saw a significant rise in capacity utilization of 5 points in August, reaching 104.  Cost pressures eased slightly, with both the labor- and material-costs indexes dropping by 1 point. Despite this decline, both indexes remain in expansionary territory, indicating that a majority of businesses continue to face cost challenges.

The IPC also asked respondents about their concerns. More than 40 percent of electronics manufacturers are “very” or “extremely” concerned about geopolitical risks (42 percent) and the impact of trade policies and tariffs (44 percent) on their operations.

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Optimism Grows for Q4 Component Sales

Author: Barbara Jorgensen

Barb Jorgensen is editor-in-chief for supply chain publication EPSNews and has covered electronics manufacturing, procurement and business for more than 25 years. Barb spent most of her career with Electronic Business magazine and EBN; freelanced; and then founded online publication EPSNews with two industry veterans—Bolaji Ojo and Gina Roos. EPSNews was acquired by AspenCore in 2017.