Key Note estimates the total value of the UK electronic component market at £5bn in 2000. This represents an increase of 53 percent on 1996 figures, but growth in the value of the market has not been consistent year-on-year. The greater part of the growth that has occurred since 1996 was achieved in
1999/2000. During 2001, Key Note estimates that the total value of the market fell by 5 percent to around £4.75bn. The check on growth experienced by the market in 2001 is unlikely to be a long-term feature of this sector.

Electronic components manufacturing is a small sector within the overall electronic engineering industry, and can be segmented into active and passive components. Active components include: integrated circuits, discrete semiconductors, electronic tubes, optoelectronic components and flat-panel displays. Passive components include: capacitors, resistors, wound and ceramic components.

The strong overall growth in the electronic component sector since 1996 has been driven by a number of factors. The growing stability of the world economy has provided increased demand for components. The strength of emerging economies in the Pacific Rim and Latin America is opening new geographical markets. Between 1996 and 2001, there has been the development and increasing market penetration of products heavily dependent on electronic components, including personal computers, electronic networks and CD players.

2001 witnessed a pause in the growth of the value of the components market, due mainly to supply outstripping demand during the year. Throughout 2000 and early 2001, established major suppliers ramped up production capacity — especially of semiconductors. On a global basis, Asian economies, notably Taiwan and South Korea, created new manufacturing capacity in order to secure a foothold in a lucrative and expanding hi-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 is either unable, or unwilling, to reduce manufacturing capacity in the meantime.

Key Note expects the value of the electronic component market to remain static in 2002, as demand catches up with supply, and then to increase by around 10 percent to 14 percent in the period to 2005. This growth will be driven by an increasing reliance on electronic equipment in industry, commerce and the home. New products, not yet imagined, will appear, while other products will disappear, but the impact of electronics on the lives of people everywhere looks set to grow for the foreseeable future.