Growth Expectations for Electronic Component Sales

Long term growth, and short-term challenges, drive the electronic components industry. 

The electronics components industry is undergoing a period of unprecedented growth, driven by rapid technological advancements, increasing demand for consumer electronics, and the proliferation of emerging technologies such as machine learning, Internet of Things (IoT), intelligent automation and the increasingly popular artificial intelligence (AI). 

While it’s no surprise that the electronic components markets will continue to grow for the long term, companies need to create procurement, supply chain operations and forecasting strategies that will be in the best interests of their companies in this growing, but volatile industry. 

Survey Says

The outlook for electronic component sales is overwhelmingly positive, fueled by the expansion of the global electronics market. According to market research firm Precedence Research the global electronic components electronic components market size was estimated at $190.28 billion (USD) in 2022 and it is expected to rise to $368.4 billion (USD) by 2032, growing at a compound annual growth rate of 6.83% during the forecast period 2023 to 2032.

Factors driving this growth include the increasing adoption of electronic devices across various industries, the rise of smart technologies, and the rapid digitization of economies worldwide.

Furthermore, emerging trends such as electric vehicles (EVs), renewable energy systems, and the deployment of AI are expected to drive strong demand for electronic components such as semiconductors, sensors, and power management devices. Additionally, the proliferation of IoT devices and connected technologies is creating new opportunities for electronic component manufacturers, as the demand for miniaturized, energy-efficient components continues to rise.

We are fortunate to work in an exciting and growing industry. But these 30,000-foot views of the industry and don’t represent the issues that we are facing at ground level. Data is typically trailing and often doesn’t take into account current events that may significantly impact demand, either up or down. Just one unexpected negative geopolitical event, an unexpected raw material shortage or economic shock, can impact your customers and your business overnight. 

The Business Issues

Here are some wide-spread business issues in the electronic component industry that can impact day to day operations. 

Supply Chain Disruptions. The electronics industry is highly reliant on global supply chains, with components often sourced from multiple countries. Disruptions such as natural disasters, geopolitical tensions, and the COVID-19 pandemic have highlighted the vulnerability of these supply chains, leading to shortages and price fluctuations.

Rapid Technological Obsolescence. The pace of technological advancement in the electronics industry is relentless, leading to frequent product innovations, shorter product life cycles, and obsolescence. 

Price Volatility. The electronic component market is notoriously volatile, with prices fluctuating due to supply and demand dynamics and rapid changes in market conditions. 

Regulatory Compliance. The electronics industry is subject to stringent and evolving regulatory requirements, including environmental regulations, product safety standards, and export controls. Ensuring compliance with these regulations adds complexity to the manufacturing and distribution process. 

The Forecasting Issues

Forecasting involves several key elements to accurately predict demand and plan shorter-term inventory levels and procurement activities. 

Historical Data Analysis. Examining past sales data and trends is essential for understanding patterns and seasonality in demand. Historical data serves as the foundation for developing forecasting models and identifying factors that influence demand fluctuations.

Market Research and Trends Analysis. Monitoring market trends, technological advancements, and changes in customer preferences provides valuable insights into future demand for electronic components. Industry reports, market surveys, supplier intelligence, and competitor analysis help anticipate shifts in demand and identify emerging threats, or opportunities. 

Customer Demand Forecasting. Collaboration with key customers, collecting feedback, and conducting demand planning meetings can help gather insights into future requirements and tailor forecasts to specific customer needs.

Supply Chain Visibility. Real-time data on inventory levels, lead times, production capacity, and transportation constraints enables better anticipation of supply chain disruptions and adjustments to forecasts. 

Collaboration and Communication. Effective collaboration and communication among different departments, including sales, marketing, operations, and finance, are essential for successful forecasting. 

Scenario Planning and Sensitivity Analysis. Conducting scenario planning and sensitivity analysis helps assess the impact of different scenarios, such as supply chain disruptions, changes in market conditions, or unexpected events. 

Continuous Improvement and Evaluation. Regularly evaluating forecast accuracy, monitoring deviations from predicted demand, and analyzing root causes of discrepancies help identify areas for improvement. 

By integrating these elements into their forecasting practices, electronic component businesses can enhance their ability to anticipate demand, optimize inventory levels, and respond effectively to dynamic market conditions.

The Supply Chain and Procurement Issues

In the face of these challenges, buyers can adopt several strategies to mitigate risk and navigate the volatile electronic component market effectively.

Diversification of Suppliers. By diversifying their supplier base and engaging multiple suppliers, buyers can reduce dependency on any single supplier and mitigate the risk of supply shortages or severe price discrepancies.

Long-Term Contracts and Relationships. By committing to strong supplier relationships, buyers can negotiate favorable pricing terms, secure access to critical components, and convince suppliers to invest in quality assurance and risk mitigation measures. Buyers should expect to continue facing pricing pressures and should be prepared to adopt flexible pricing strategies. 

Supply Chain Visibility and Transparency. Implementing supply chain visibility and transparency initiatives can help buyers identify potential risks and vulnerabilities in the supply chain proactively. Collaboration and information sharing between buyers, suppliers, and industry stakeholders are essential for managing risks effectively in the electronic component market. Buyers can gain valuable insights into market trends, supplier capabilities, and emerging risks, enabling them to make informed decisions.

Inventory Management and Planning. Maintaining adequate inventory levels and implementing strong inventory management and planning processes are critical for mitigating the risk of supply shortages or excess inventory and minimizing the impact of supply chain disruptions. 

What’s Ahead?

Looking ahead, the electronic component market is expected to continue its trajectory of annual growth, driven by increasing demand for electronic devices. However, daily challenges such as supply chain disruptions, price volatility, and regulatory compliance will continue to shape the market landscape. Efforts to enhance supply chain resilience and mitigate risks are expected to gain momentum, with buyers participating in supply chain visibility, diversification, and collaboration initiatives to meet their short-term challenges.