Insights into the semiconductor recovery based on the performance of world’s top four distributors

May 24, 2023

Global economic fluctuations have led to sluggish demand in the semiconductor end-market. IC distributors, previously experiencing a surge in performance, are now observing a gradual decline in revenue and profit levels.

The operational performance of Top global IC distributors serves as a crucial indicator for assessing the state of the global IC market.

The article will analyze the most recent Q1 financial reports of the top four global IC distributors: Arrow Electronics, Avnet, WPG Holdings and WT Microelectronics. The objective is to offer semiconductor professionals valuable market insights.

▸The performance of IC distributors exhibits variations in their operational outcomes.


Out of the top four global IC distributors, only one company (Avnet) recorded revenue growth in Q1 year over year .

Avnet reported a sale of approximately $6.5 billion in the first quarter of 2023, showing a year-on-year growth of 0.4%. Specifically, the sales revenue of the electronic components business increased by 0.7% to approximately $6.1 billion.

Arrow Electronics, WPG Holdings, and WT Microelectronics all witnessed declines in both sales revenue and operating profit. Specifically, WPG Holdings experienced a significant year-on-year decrease of nearly 30% in revenue and a decline of over 50% in operating income.

Arrow Electronics and WT Microelectronics saw a revenue decline of 4% and 6% respectively, with operating income decreasing by 17% and 34%.


▸ Regional performances differ: sales declined in Asia, while Europe witnessed an increase.


Upon observing the sales of electronic components in various regions for Arrow Electronics and Avnet, it is evident that both companies encountered notable declines in the Asian region, with sales decreasing by approximately 10% to 20%.

arrow-avnet 2.jpg

(Data source: company financial report, WIND / chart drawn by Cytech Systems)

Arrow Electronics reported,first quarter 2023 global components sales decreased compared to the year-earlier period primarily due to lower demand in certain markets and continued normalization of shortage market activity. Sales in the Asia/Pacific region decreased 18.9% due to softer demand and lower volumes in most verticals, and sales in the Americas region decreased by 4.6% mainly due to normalization of shortage market conditions. This was partially offset by 16.6% growth in sales for the EMEA region due to an increase in most major verticals, particularly industrial and defense.

▸The short-term outlook appears pessimistic, but the long-term prospects are optimistic for diversified growth.


The semiconductor industry is facing inventory adjustments as the supply chain is impacted by factors such as global economic fluctuations, inflation, and events like the Russia-Ukraine conflict.

With ongoing inventory management issues in the first half of 2023 since the adjustment started in the second half of 2022, the semiconductor industry faces a significant challenge of maintaining positive operational growth in Q2. This is further compounded by the uncertain improvement in global economic conditions and limited downstream demand.

Looking ahead to the second quarter of this year, all four major distributors have made conservative financial forecasts.


The short-term market outlook is gloomy, but it is anticipated that market conditions will improve in the second half of the year after overcoming the low point in Q2.

the Chairman of WT Microelectronics, recently stated that although the period of semiconductor inventory adjustment will be slightly extended, the industry situation will not worsen further. Currently, the PC industry has reached the end of its correction phase, and there are expectations for a rebound in mobile phone demand in the second half of the year. Overall, business performance in the second half of the year is anticipated to be better than the first half.

Referring to the latest forecast from research firm IDC, it is projected that global smartphone shipments in 2023 will decrease by 1.1% to 1.19 billion units. IDC believes that the real market recovery is not expected until 2024, when a year-on-year growth of 5.9% is anticipated.

Smartphones and PCs have a major share in the distribution business. With the understanding that a complete recovery will require more time, and considering the gradual diversification of downstream applications for distributors' revenue, the stabilization of consumer demand will not impede growth.

According to Gartner ,the PC, tablet and smartphone semiconductor markets are stagnating. These high-volume markets have saturated and become replacement markets devoid of compelling technology innovation.

In the future, there will be many more but smaller end markets. End markets will be more fragmented, with pockets of growth coming from multiple different sectors in the automotive, industrial, IoT and military/aerospace sectors. The automotive semiconductor market is forecast to grow 13.8%, reaching $76.9 billion in 2023.

According to Gartner's forecast, the global semiconductor revenue is expected to reach $532 billion in 2023, indicating an 11.2% decline compared to the previous year. However, it is projected that in 2024, the global semiconductor revenue will rebound with a year-on-year growth of 18.5% to reach $630.9 billion. The semiconductor industry holds potential for development in both the near future and the medium to long term.


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