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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 percent 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 percent. During 1996, Key Note estimates that the market grew by
just 1.5 percent in absolute value. In real terms, this represents a decrease of
around 1 percent. 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 dependant 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 percent in 1997, as demand catches up with supply and by between 14 percent
and 16 percent annually up to 2001. This growth will be driven by an increasing
reliance on electronic equipment in industry, commerce and the home.
Text © 1997 Key Note
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Last updated by Duncan Nottage 5th March 1999