01 Dec 2020 -
 General

A View from Astute MD, Geoff Hill on 2021 and Beyond

Covid has impacted the electronic component supply chain in 2020, how do you envisage the market will perform in 2021?

We’re maintaining a positive outlook for 2021 with an expectation of a hard bounce-back during Q2, particularly with news of the vaccine. We’re anticipating an industry-wide back-to-business response on two fronts: to stimulate and regain the momentum of some of the fast-growing industries that were already witnessing as well as reinvigorating the worst affected industries – automotive, aerospace, aviation, rail, industrial automation.

2020 began shakily, with component suppliers caught up in the U.S. Vs China tariff war. Covid-19 caused many Q1 factory shutdowns. Shipments were impacted globally by the limited capacity and the double-whammy of fewer freight runs and dramatically higher costs.  Market demand changed too: priorities were given to medical manufacturers, particularly ventilators, but the supply chain was volatile, so we needed to react quickly. Conversely, aviation, automotive and several other industries reduced their material needs. Demand has been affected, but it is still there, and we believe it will pick up.

Business owners have been challenged by COVID but we’re tackling the problems and knocking them aside. The constant shifting of expectations can be problematic but we’re a very agile business and well positioned to help in these situations. Astute’s MO is to overcome problems for our customers: it’s in our DNA!

Some trends will continue into 21 and beyond. Disruption and shortages of material are likely to continue. We’ll need to remain versatile and responsive: mixing short-term ordering to fill gaps with longer-term commitments put in place as production returns to normal. The period will be marked by shorter forecasting as customer demand fluctuates, and probably more urgency to make short-term decisions. We anticipate some lags as the component manufacturers vary production to meet the changing industry demands.

There is also a great opportunity for the UK electronics industry to focus on design and innovation. We see this as strategic for the country. 2021 will be marked by faster time-to-market cycles; accelerated design gives us a competitive edge. Volatility can create opportunity, and we’re ready to leverage these to benefit the UK’s economy.

There are still areas of stable growth – IoT devices, 5G, EVs, AI, remote working devices, but whatever happens the growth has to be organic and sustainable, otherwise we risk creating a false economy.

We expect M&As to rise throughout 2021: we’ve already seen deals for Nvidia to buy ARM, ADI combine with Maxim; AMD acquire Xilinx; SK Hynix acquire Intel NAND. Overall, this will decrease the number of available lines and we foresee a strengthening demand for last-term buying and obsolescence planning. Component manufacturers may hold back new products until they see more positive trends to inspire the confidence to progress application development and stimulate demand.

How do you envisage Brexit will impact your business and within the supply chain?

Brexit’s impact on our electronics distribution business will be minimal, as we’re highly experienced at global supply-chain planning. However, there may be some aspects which, try as we might, we can only minimise, e.g. shipping and short-term delays with custom processes.

We protect our customers by ensuring we understand and observe the latest changes within export controls, tariffs, trade agreements and geo-politics, and we advise them accordingly. UK and Japan have already signed free-trade agreement and we remain hopeful there will be many more deals struck at least at bi-lateral level in 2021, particularly within the Commonwealth.

What are the positive forces that will push the electronic component distribution industry forward over the next 12 months?

We live in a world increasingly defined by electronics with greater consumption every year. There’s no stopping the continuous innovation of the AI, IoT, 5G, cyber applications, driverless vehicles, wearable electronics, medical devices, consumables, satellites and even space travel applications.

Yes, it’s been a difficult year (understatement!) but the world will bounce back, and when it does it will bounce back hard.

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