Distributors expect sales growth will continue in 2022 according to Electronics-Sourcing article, but acknowledge that growth will not be as robust as last year. Some predict mid-to-high single-digit growth, while others say double-digit growth is possible because durable demand and tighter-than-normal supply conditions will continue in 2022.
While component demand won’t be as strong as 2021, distributors say high single-digit to double-digit growth is possible.
Some distributors reported more than 40 per cent sales growth in North America in 2021 because of surging component demand, higher prices and double-ordering of some parts by buyers fearful that their companies production lines would shut down because of a lack of components.
Component demand grows in industrial and automotive segments
In more traditional segments such as industrial there are subsegments that are using more electronics. “Industrial is one of our largest segments and is very diverse,” says Avnet CEO Phil Gallagher. “There’s explosive growth in power tools that are more portable and in smaller form factors,” he said. “Even in those traditional segments, creating smaller and more energy efficient products is the priority.” Such products and capabilities require more chips and other components.
“We continue to see the need for sensing and connectivity across many applications,” said Gallagher. Industrial IoT such as factory automation is an area of opportunity, he said.
Another key segment is automotive. “Automotive is consistently evolving,” said Gallagher. It is also unique in that the demand for components in that industry is rising regardless of the pandemic due to increased consumer demand for electric vehicles and other advanced systems, he said.
“There are more components in an automobile than ever before for driving systems, computer systems, LiDAR, etc.,” he said. He added that commercial aerospace is experiencing spikes in demand that parallel the automotive industry due to demand for infotainment, energy efficiency and small form factors.
Distributors say while demand will remain strong in 2022, macro trends such as 5G, Internet of things (IoT), artificial intelligence and electric vehicles will result in strong component demand for years. Dave Doherty, president and COO of Digi-Key said wireless connectivity, industrial automation and electrification of vehicles will help drive innovation beyond 2022.
“We view IoT as a key industry trend that has driven significant growth that will continue to do so in 2022,” he said. Demand from nearly every industry vertical continues to drive significant interest and investment in IoT development and implementation, according to Doherty. He noted over the last year, there was a surge in new product introductions in every industry from automotive to medical, industrial automation to consumer devices and everything in between, driving business across the board.
5G, IoT, AI to drive growth
The growth rates for “5G, IoT, AI, and electric vehicles are all up into the right,” said Burr-Lonnon. Such technologies will continue to result in more products and applications that will need electronic components. Burr-Lonnon said while 5G has been talked about for years, it is still in its infancy and will grow over the next several years. “It is still nowhere near where it is going to be,” he said. The same is true with IoT and artificial intelligence.
Once those trends fully develop, it will result in more components because of the need for sensing and conductivity in equipment used by those segments.
Because of continuing strong demand, supply conditions will likely remain tight in the first half of 2022 and may continue longer. “All indications are supply conditions will be “tough for the buying community all the way through 2022,” said Burr-Lonnon . “If buyers get relief next year, it could be in the September timeframe.”
Doherty said he was “hopeful” that in 2022 “we will see an uptick in supply and trust that our partners are doing everything in their power to ensure they can meet demand.” Digi-Key works closely with its suppliers to ensure the availability of inventory “throughout this high level of demand,” he said.
Michael Long, chairman, president and CEO of Arrow Electronics, said market intelligence makes it “increasingly clear that supply will remain short of demand through the better part of 2022.” He noted severe supply chain bottlenecks have increased, “leading to widely reported production slowdowns in certain industries.”
At the same time there has been “robust demand from sectors such as transportation, industrial, communications, computing and data networking”, he said.
Buyers will likely face higher prices. “There is no more year-over-year cost reduction on parts like there used to be,” said Long. He noted that costs for raw materials, transportation, handling and labor are up. “These costs are real. These costs are permanent and these costs will be charged for.”