Arrow Electronics Inc. (NYSE: ARW), one of the industry's two largest distributors, reiterated today that the global supply chain's components inventory is approaching balance. Arrow's report, made during its Q4 2011 earnings conference call with analysts, comes on the heels of similar observations from Avnet Inc. (NYSE: AVT) and market research firm IHS iSuppli.
In 2011, Arrow's sales reached $21.4 billion, a record level for the distributor. Arrow's components business, which reached $3.4 billion in revenue in Q4 2011, represents the industry's major semiconductor, interconnect, passive, and electromechanical suppliers. As such, Arrow has a broad view of global demand trends.
Although some of Arrow's semiconductor suppliers believe the industry has hit rock bottom and is now beginning to rebound, Arrow executives were more cautious. "As these cycles happen, we come out [of a downturn] after our suppliers," said Arrow CEO Mike Long during the call.
"Having said that, we saw our book-to-bill ratio improve from Q3 to Q4 and is back at parity. That is a good thing. In terms of market stabilization, we are not sure if we are at an inflection point. Some of our customers aren't sure they are at the bottom; others are bouncing back. But I consider what our suppliers say as good news and I don't think we are that far behind them."
North America showed particular strength in Arrow's components sales, particularly in Q4. Long said: "We did see above normal growth, and as we look at the coming year, we are expecting mid to normal seasonality. We saw strength in aerospace and defense; lighting held its own; alternative energy didn't decline that much and the medical market showed a bit of a decline. However, those are still the four markets driving growth in North America and in the new year."
Arrow's Asia-Pacific components sales dipped a little during Q4 and, like its nearest competitor Avnet, is unwilling to forecast the market until after the Chinese New Year. Some of Asia's weakness is coming out of low-end handsets, said Long, adding that "it'll be another six weeks before we have a better idea what's going on [in Asia." Both distributors say Europe continues to lag the Americas and Asia-Pacific sales regions.