**London**: After years of volatility, the electronic component distribution market is poised for stability, with analysts predicting modest sales growth and a return to normalcy as companies like Avnet adjust inventory levels and expand value-added services to meet evolving customer needs.
Distributors in the electronic component market are poised for a period of “ordinary times” after several tumultuous years characterised by significant fluctuations in demand and supply, along with wild price variations. The transition away from the previous extremes of demand will allow distributors to embrace a year that analysts have described as one marked by steady, low sales growth and manageable supplier-customer dynamics.
As the electronics distribution market begins to stabilise, it is witnessing a shift from years of high volatility that began in the early part of this decade. Analysts noted that the market was previously dominated by intense demand, significant shortages, elevated prices, and long lead times. Currently, leading distributors, while still managing high levels of stock in certain areas, report a gradual return to normalcy.
Ken Jacobson, CFO at Avnet, stated during a recent conference call that the firm is concentrating on reducing inventories in markets where demand has stalled. He elaborated, “We remain focused on reducing inventory levels where elevated. We continue to have ongoing conversations with our supplier partners on specific opportunities for inventory increases that we will only consider if there is a benefit to Avnet.” His comments reflect a broader challenge within the industry, which has had to navigate changing market conditions, such as oversupply and stringent contracts implemented during prior shortages.
The importance of the distribution market has been highlighted by analysts at Research and Markets, who emphasised its role in ensuring the seamless availability of components, thus alleviating bottlenecks in supply chains. They have also pointed out the ongoing difficulties posed by fluctuating raw material prices, regulatory challenges, and supply chain disruptions created by global geopolitical realities.
Looking towards the future, predictions suggest that the distribution market could experience approximately 8% annual sales growth starting in 2026. However, the forecasts for 2025 indicate a modest decline in sales for significant players like Avnet, which is expected to report $22.4 billion in sales for the fiscal year ending June 30, down from $23.8 billion. Despite the anticipated decrease, there is an optimistic outlook for fiscal 2026, where sales could rebound to $24.2 billion, aided by recovery within the Asian market and increased shipments to Original Equipment Manufacturers (OEMs).
CEO Phil Gallagher noted the industry’s gradual recovery, stating, “Based on the industry sources we follow and the suppliers and customers I speak to regularly, global inventory levels across the supply chain are slowly improving granted with pockets of oversupply in certain areas.” Moreover, he conveyed a broader consensus on anticipated growth rates within the industry.
Researchers have indicated that the global components market might see a compound annual growth rate (CAGR) of 7.2% from 2025 to 2033, with the total market size projected to increase from $390 billion to $758 billion. Although the electronics distribution sector represents less than half of this total available market, it is expected to experience significant growth. The sector alone is estimated to have increased to $156 billion in 2024, marking a rise from $143.9 billion in 2023, with further growth expected at a CAGR of 8.4% from 2023 to 2030.
As the electronic landscape evolves, distributors are increasingly expanding their value-added services. This has been particularly relevant as OEMs transfer more supply chain management responsibilities to electronics manufacturing services. Observers have noted that the changing nature of the component market has necessitated adjustments in service expectations, with companies now focusing more on product promotion, technical support, and development services.
Companies such as Digi-Key, Mouser Electronics, and Farnell have capitalised on their ability to ship products swiftly within 24 to 72 hours globally, solidifying their strategic positions in the market. Analysts recommend that further investment in technology, including blockchain for traceability, enhanced cybersecurity, and AI-driven analytics for better demand forecasting, will enable distributors to better position themselves in the ever-evolving market landscape.
As they prepare for anticipated growth, industry leaders remain keenly observant of market trends, adjusting their operations accordingly. Gallagher concluded optimistically, remarking on Avnet’s central role within the technology supply chain, “At times like this, we thrive from being at the center of the technology supply chain, helping our supplier partners to reach a long tail of customers and providing end-to-end customer solutions to satisfy their needs wherever they are on their product journey.”
Source: Noah Wire Services
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