Demand for components remains stable, prices are rising and deadlines for some components are still long.
Specialized electronics distributors are cautiously optimistic that strong demand for components will continue throughout the year and sales growth will rise to high single-digit or double-digit levels this year.
Some specialist distributors are concerned that electronics buyers planned orders last year for 2022 due to long delivery times for important semiconductors and other components, and that purchase orders will weaken this year. But delivery times are still long for many parts, and buyers can schedule orders for 2023 later this year.
Greg Pelokin, executive vice president of government at Richardson Electronics Ltd, said in April that deadlines for chip delivery were mixed. “Some have improved, but some have continued to expand. “Overall, the deadlines seem to be 24-36 weeks, with some still in the 52-week range,” he said.
He said Richardson works closely with its partners in radio frequency and power management technologies to manage lead times in customer support. Demand for RF chips and power management chips this year is as strong as last year, he said. Satellite communications and the 5G business segments are actually stronger than last year, according to Peloquin.
“It’s amazing the revenue and reservation records we’ve had over the last few years at the height of the pandemic,” he said. “Our sales will grow by more than 60 percent by 1.49 from the book to the account in the first nine months of our fiscal year,” Pelokin said.
He added that demand for 5G infrastructure and green energy applications, the two main markets and applications that Richardson is focusing on, “is extremely strong and we do not see a slowdown in 2022,” Pelokin said.
Strong demand can contribute to higher prices, along with increased costs for materials, fuel and transport. “With all the problems now, the total cost of making the product and then delivering it to the customer has increased,” Pelokin said.
He said Richardson’s RF technology partners have increased capacity, which helps keep lead time “off or slightly improved”. However, much of the added capacity “seems to be occupied by car boys,” Pelokin said.
Joel Levine, president of RFMW, a specialized distributor of radio frequency and microwave ovens, said the distributor had 25% sales growth in 2021 with strong demand from defense, space, 5G and industry segments.
Some buyers are hesitant
He said the business has been sound so far in 2022, but some “customers in certain segments take up little waiting before making large new orders”. Some customers may have already purchased enough parts last year to be “safe” and may now be hesitant to order components with long lead times.
“We can’t say if people built their inventory,” Levine said. However, as delivery times are long, many “smart customers have been planning things in the middle of last year” to make sure they have enough parts for 2022, he said.
Levine said chip prices rose last year, but in the first quarter of 2022, price increases appear to have slowed. “But it’s still the beginning of the year and suppliers seem to be on the rise now,” he said.
“It feels like some suppliers are raising prices every quarter,” Levine said. “I’m not saying they always do, but they monitor their prices very closely.”
Levine said he was a “cautious optimist” about low double-digit sales growth in 2022. At the moment, demand is stable. “Time will tell what the effects of macroeconomics and global disruption will be,” he said. Levin added that if supply chains endure, “it will be a really strong year. “It’s not impossible to see double-digit growth this year,” he said.
Strong demand for connectors
Specialized distributor distributors also say that the demand for interconnection so far in 2022 remains as strong as last year. “Demand is strong in all sectors of our business, thanks in part to emerging markets such as commercial aviation and energy,” said Ernie Schilling Jr., president and CEO of Powell Electronics. In addition, there is “delayed demand due to supply chain delays or aggressive orders in anticipation of upcoming price increases,” he said.
He said some brands of connectors have had longer implementation times due to “planning and inventory models adopted by these companies. Those with stable stocks of raw materials have done well. “Those who have just-in-time, price-oriented supply chains with minimal stocks of raw materials have had the hardest time delivering,” he said.
Connector prices continue to rise. The connectors had a “constant increase in prices” quarterly or monthly depending on the raw materials and these parts, Schilling said. However, the supply chain problems with the connectors were not as acute as the problems faced by semiconductor manufacturers.
He said there was “quite a bit of production movement from region to region in the connector industry to match customer base consumption or look for lower-cost structures,” Schilling said. However, there was no large increase in capacity.
Connector deliveries are increasing
Schilling said there should be healthy growth this year. There should be a low one-digit increase in bookings this year, but shipments are likely to remain high single-digit numbers until the end of the year.
Certain market segments and applications will help stimulate demand for connectors over the next few years. “Stressful times and the environment always seem to inspire innovation and new technological leaps,” Schilling said. “We see a lot of hotspots in innovation in medical, consumer, space and sensor devices,” he said.
John Huffnagel, vice president of sales and engineering solutions in North America at PEI-Genesis, said the business has recovered since Covid demolished the electronics industry in 2020. Demand for connectors is strong in all customer segments, he said.
“We are currently at a record high. The demand for connectors in our product portfolio has remained stable over the last 6-9 months, ”said Hufnagle. He noted that there were “customer pockets” who ordered more last fall due to supply chain problems. Now the demand is stable. “
Connector labels are increasing
He said that there are a number of product families that have long deadlines, but “we do not see any real extreme changes” in terms of deadlines. However, the prices of connectors have increased. The size and number of price increases vary from supplier to supplier and product family to product family. There have been many price increases last year and price increases have continued until 2022, Hufnagle said.
“In some cases, we have seen multiple increases over the last year, and there may be further increases as we go through the year,” he said. “These are some very different and challenging times I’m moving through.” In many cases, price increases range from 3 to 7 percent.
Hufnagle noted that PEI-Genesis’s business has been affected by the increase in material costs, as PEI-Genesis is a value-added distributor. PEI-Genesis buys components for building ready-made connectors. There are various materials for inserts, coatings and cladding materials, most of which have been influenced in some way in the raw materials market, he said.
“We can get an increase in one component of the connector, which has a huge impact on the part as a finished product,” said Hufnagle.
In addition to rising material costs, connector manufacturers face other challenges, including staff and logistics. “These challenges don’t seem to be changing very quickly at the moment,” Huffnagel said.
Wayne Nelson, general manager at Benchmark Connector, said that due to some shortages of materials and problems with costs and transportation, delivery times will increase in the foreseeable future. He added that there have been more price increases this year, “Each supplier has raised prices in 2022 and is probably more,” he said.
Despite problems with raw materials, logistics and personnel, Hufnagel expects healthy high single-digit growth in the connector business in 2022.