Executive Summary

Key Note estimates the total value of the UK electronic component market to have been worth £3.61bn in 1996. This represents an increase of 43.8% on 1992 figures. However, growth in the value of the market has not been consistent year-on-year. The greater part of the growth that has occurred over the last 5 years was achieved in 1995, when the market grew by 29%. During 1996, Key Note estimates that the market grew by just 1.5% in absolute value. In real terms, this represents a decrease of around 1%. However, the stalling of growth, as experienced by the market in 1996, is unlikely to be a long-term feature of this sector.

The electronic components market is a small part of the overall electronic engineering industry. The strong overall growth in the electronic component sector, since 1992, has been driven by a number of factors. The growing strength of the world economy generally, over this period, has provided increased demand for components. The strength of emerging economies in the Pacific Rim and Latin America is opening new geographical markets. The same period has witnessed the development and increasing market penetration of products heavily dependent on electronic components, including: personal computers, electronic networks, fax machines and CD players.

In 1996, there was a pause in the growth of the value of the components market, largely due to supply outstripping demand during the year. During 1995 and early 1996, established major suppliers had vastly increased their production capacity on a global basis, especially of semiconductors. Asian economies, notably those of Taiwan and South Korea, created new manufacturing capacity, in order to secure a foothold in a lucrative and expanding high tech industry. The long-term nature and sheer scale of the investment required to establish new manufacturing capacity, particularly in high value active components, has made it difficult for companies to close, or mothball, this excess capacity. To some extent, the industry is in limbo, waiting for demand to catch up with supply and either unable, or unwilling to reduce manufacturing capacity in the meantime.

Key Note expects the value of the electronic component market to grow by 5.3% in 1997, as demand catches up with supply and by between 14% and 16% annually up to 2001. This growth will be driven by an increasing reliance on electronic equipment in industry, commerce and the home.

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