Component Orders Continue Flat Trend; Suppliers Hope for Long-Promised Rebound.

Business Editors/High-Tech Writers

ARLINGTON, Va.--(BUSINESS WIRE)--May 23, 2003

Component orders remained flat in April, continuing a familiar trend over the last year, according to the monthly index issued by the Electronic Components, Assemblies & Materials Association (ECA).

But despite the long-term flat line, leading suppliers gathered at the recent ECA Spring 2003 meeting in Washington, D.C., were cautiously optimistic about growth.

Most suppliers at the meeting reported revenue growth tempered by price erosion. One manufacturer expressed hope that after three years of predictions for a second-half rebound, this would be the year in which it happens. Still, some suppliers are concerned that what appears to be growth could be a "false read," spurred by inventory replacement rather than turnover. And, one participant characterized the pricing of commodity parts as "devastating."

The central issue facing the industry is managing what ECA calls the "electronic flow wheel" - the complex interrelationships among players in the lifecycle of electronic components. One manufacturer called the current situation a "disaster." With products passing through so many hands, it has become increasingly difficult to track sales and assign credit for products designed in the United States and manufactured and sold in Asia.

An OEM representative at the session said that there continues to be a fight among EMS and large OEMs for demand and supply chain management rights. A major trend is second-tier OEMs turning over the AVL (approved vendor list) process to EMS. Most of the large OEMs, however, continue to exert as much control over demand and supply as possible.

Another breath of optimism came from ECA's recent monthly report on the capacitor market, which showed March unit sales up by 18 percent over February. Still, year-to-date unit sales of capacitors are down by 13.3 percent compared to last year.

"There has been a general market inertia caused by the war, SARS and uncertainty about the economy," says Bob Willis, ECA president. "The industry is hoping that with more stable times comes an uplift in demand and revenue."

The Electronic Components, Assemblies & Materials Association (ECA) represents manufacturers and producers of passive and active electronic components, component arrays and assemblies, and materials and support services. It is a sector of the Electronic Industries Alliance (EIA), comprising more than 2,100 members that represent 80 percent of the $430 billion U.S. electronics industry. ECA members benefit from a dynamic link into a network of programs and activities in areas such as business and technical information, market research trends and analysis, access to industry and government leaders, technical and education training, and others. For more information, visit www.ec-central.org.