Avnet Q2 revenues soar 34% year on year. Arrow Electronics revenues leap 39% year on year. Is the distribution sector in clover?
“Business is great,” confirms Marie-Pierre Ducharme, Vice President, EMEA Marketing, Mouser Electronics. “Every manufacturer we speak to, all our competition, everyone’s business is growing, some more, some less. We should just enjoy it because who knows what is coming.”
The consensus is that business started to pick up late last year.
“It started with memory in December,” recalls Geoff Hill, Managing Director, Astute Electronics. “Now order intake is through the roof, it’s a good position to be in. There’s strong applications across the board and getting stronger.”
“We were reluctant to be highly positive,” says Ducharme, alluding to previous panic buying and price increases driven by memory. “We were thinking is it just high demand we see in Q1 and then it is going to decline again. Now after this first half and talking to many people, I think this is real demand and I think we will see a very good 2026. We have people who are confident that it is going to continue through to 2027. Others are not so sure. Who knows?”
Says Steve Rawlins, CEO, Anglia Components: “The market has really changed since January. We’ve had two years of misery driven by EV and over capacity, and now the market has done a full turn.”
“We are in the biggest semiconductor boom ever,” proclaims Nigel Watts, CEO, Searching for Silicon. “I’ve read 30-40 reports in the past two weeks, and we are now looking at a $1 trillion dollar business that will grow to $2 trillion by 2030.”
He contrasts that against 2024’s global semiconductor market of $550 billion: “It’s the first time in history that the semiconductor sine wave graph has become a buzz saw.”
The caveat is that a huge percentage of this growth is driven by AI/data centre demand, which in turn is hoovering up memory, with a knock on impact on other electronic components.
That has led to a volatile market where, says Hill, “pricing and availability can change overnight.”
Avnet has seen the lead time environment shift.
“Component lead time trends are increasing across many product categories,” CEO Phil Gallagher commented recently. “We have seen lead time extensions in over 50% of the product categories we track, traversing semiconductors and interconnect, passive, and electromechanical, with stability being reflected in the balance.”
Lead time shifts are not confined to components supporting data centre and AI builds.
“They are now spreading to a broader set of products supporting diverse end market applications,” said Gallagher.
Prices are also trending upwards. “During the March quarter, we have seen price increases across a few suppliers and technologies, most predominantly related to memory,” Gallagher remarked. “We expect to see additional price increases over the next several months, the majority of which are being driven by increases in the underlying input cost of components.”
Rawlins doesn’t see price rises across all components. “It’s happening on chip capacitors and electrolytics, but it is not happening on resistors, film, or tantalum capacitors. On semiconductors it is MOSFETs, microcontrollers, and obviously memory. It is memory that is dragging in all the chip capacitors, all driven by AI.”
“Lead times are going up, not drastically longer, but we do see trends differing across technologies,” says Ducharme. “Semiconductors are driving our growth across Europe, but memory is the driver behind semiconductor growth.” She sees added impetus from embedded systems, passives, and connectors, noting that connectors have been growing nicely in the past couple of years, even in the downturn.
For Mouser, a key factor has been a return to growth for the market in Germany.
“We had three years of decline in Germany and that represents 22% of our business, so it makes a big difference that Germany is finally growing again,” says Ducharme. “Last year Spain, Portugal, and Poland were extremely strong and that has continued into this year. Nordic countries are also growing at a faster pace than the rest of Europe. We have dug into that a little bit more and it seems there is a lot of design activity happening there. With Spain and Portugal both countries having benefitted from government projects to boost the electronics industry.”
Hill also picks up on the design activity: “Customers can’t get enough of our franchise electronics business. We pursue engagement and advice, and help get the technology proven into customer designs. We now have 20 engineers to support customers, both field applications engineers and technical development engineers and we are looking to recruits at least eight more.
“We stock all the evaluation kits for our lines to work with customers on designs and then position our inventory dependent on the outcome.” Though, as Hill warns: “You have to remember design cycles are long, still typically two years.”
Rawlins is eyeing many design opportunities in analog, especially as industry consolidation narrows customers’ options. He too is in the engineering recruitment business and laments the shortage of analog engineers.
“We are flat out at the moment and in a big recruitment mode for more salespeople and engineers. The trouble is all the universities are turning out digital engineers, but not analog engineers.”
Rawlins also thinks that analog engineers are less inclined to move: “They all seem to be 50 years old, and I’m not seeing that group being replaced by new energy. Once they find a position, they stay there.”
Looking at specific market sectors, Rawlins cites medical as “very strong and military of course, especially in drones, and of course they are disposable products that have to be replaced.”
Aside from AI, a market which is inhabited by major OEMs, Rawlins is pinning hopes on the new iPhone. With its seamless display (virtually no crease) he thinks “it could be the next killer product.”
Rawlins worries that could exacerbate component allocation, as well as swelling interest in Chinese-manufactured cars. “Of our other markets, security, closed circuit TV, and contract manufacturers are all growing.”
Hill says he is “seeing lots of interest in AI. There are lots of people discussing it; I go back to the embedded world exhibition in March where there was lots of interest in our Axelera AI line of purpose-built AI processors. NVIDIA is expensive so customers are looking for alternatives.
“It could be the golden goose,” smiles Hill.
Mouser is seeing momentum in medical and industrial applications, according to Ducharme, alongside robotics and aerospace and defence.
So what should customers be doing in this turbulent market?
“Well,” says Ducharme, “customers know us for our real-time availability and stock on the shelf. That is the core of our business, without that we are not growing. We have inventory replenishment systems that ensure when lead times lengthen, we order more stock. When customers look at our website, we have everything customers see there.
“It’s funny because customers look at the website and see we have 200 of a specific product. Then they call us and ask, ‘is that what you have on the shelf?’ In addition, we say ‘yes this is real time information!’”
But Ducharme cautions: “I think availability will become more key as lead times go up and some products might have challenges and go on allocation. Therefore, the message is that Mouser is in good shape. We have the inventory on the shelf and customers can come and find what they need.”
“Allocation is real,” asserts Rawlins, “and if customers don’t act, they are not going to get any inventory. At the very least they need to place a forward order. All of our major customers have done that, as well as some of our SME customers. If customers don’t do anything they are going to have a problem.”
Hill is concerned we are looking at a new norm for supply chains, whether that is geopolitical upheavals, Trump tariffs, or rare mineral shortages. He recalls that during and post-COVID-19, companies panicked and packed their shelves with product.
Caution is now the watchword. Says Hill: “Now cash is king, procurement orders are taking longer to be signed off, the longest I have known. Buying policy is being dictated by financial directors.”
That said, Hill is confident: “Astute loves a storm. We have global sourcing solutions, and our own test laboratories to support that business. Astute Integrated Solutions is getting more and more involved with customers who want help with a total supply and fulfilment service.”
The latest quarterly report from DMASS adds a note of caution.
“The positive trajectory from late last year continues, supported by firm pricing, but concerns over availability and pressure on supply chains are increasingly visible,” says Hermann Reiter, Chairman, DMASS Europe. “Global instability, including regional conflicts and shifting energy markets, adds uncertainty to industrial momentum without overshadowing the underlying growth potential. What we see in Q1 is a market that is moving forward, yet still shaped by structural dependencies and uneven regional dynamics. Demand in Europe remains closely linked to industrial applications rather than the AI driven surges seen in the US and Asia, which makes our progress steadier but also more exposed to external shocks. The challenge now is to maintain this momentum while strengthening resilience across the entire value chain.”
Ducharme concludes: “The market is good for everyone. There are still a lot of uncertainties, and internally we find forecasting has become impossible with people across the globe who take decisions that impact the industry.
“So 2026 is going to be good,” Ducharme tells me. “I’m trying to find a good tag line, but that’s your job!”
Asked at the recent Hardware Pioneers MAX exhibition in London about the component distribution market, one distributor, who shall remain nameless, responded: “I’m in paradise.”
This article originally appeared in the July/August issue of Procurement Pro
