DMASS Embraces AI to Combat Market Contraction

DMASS, the European component distribution market, is predicted to experience a slowdown in 2024. In Q4 2023, consolidated sales dropped by 17.3% compared to the same period in 2022. The semiconductor sector saw a decline of 18.5%, amounting to €3.1bn, while IP&E components experienced a decrease of 14.3% at €1.35bn.

This decline follows a record-setting year in 2023, where consolidated sales reached €21bn. Semiconductors played a significant role in this growth, increasing by 4%, while IP&E components declined by 7.7%.

Hermann Reiter, the chairman of DMASS, acknowledged that the strong performance in the first half of 2023 helped mitigate the impact of the slowdown. He stated, "Distribution revenues in 2023 were driven by orders and sales brought forward from 2024, which inflated the results significantly. Now, we are facing a market contraction that aligns with long-term growth averages. Our hope for 2024 lies in the overall market upside generated by the hype around AI, which could positively impact the entire market. However, this effect may only occur towards the end of 2024. Distributors must now focus on assisting customers in developing new markets."

Among the DMASS membership, only Turkey and Romania experienced growth, while Germany and Austria saw a drop of 18%. The most significant decline was observed in Israel, with a 27% decrease. Reiter emphasized that while the downward trend was anticipated, other factors remain unpredictable. He stated, "The challenges and opportunities in this market have become less readable than in the past. Today, the dynamics are influenced by political and technological factors that are inherently disruptive, potentially in both directions. Despite this unpredictability, we firmly believe that distribution will continue to serve as a stabilizing and balancing force in the market."

As the European component distribution market prepares for a slowdown in 2024, industry players must adapt to the changing landscape. While the decline in sales is concerning, the previous year's record-breaking performance provides some cushion. Distributors must now shift their focus towards assisting customers in exploring new markets and capitalizing on the potential growth driven by the hype around AI. Although the market dynamics have become less predictable due to political and technological factors, distribution remains a crucial element in stabilizing and balancing the market.