Editor's Word
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ELECTRONICS MAY 2017 AN MMG PUBLISHING TITLE 170309_Logo17_ELECSRG_US.indd 1 3/8/17 11:09 AM editor’s word A cautious approach to mergers and acquisitions contents 4 Top 50 Distributors Report Over recent years I’ve seen a steady flow of press releases Another year of stagnant growth announcing mergers and acquisitions, firstly from device 6 Supply Chain Sustainability Start small to achieve big manufacturers and more recently from distributors. Over the same period I recall very few launches of new companies. 8 News Stocking control system micros Front cover – May 2017 Thus, I have to assume, regarding choice, the electronics Avoid supply chain disruption 12 Supply Chain page 12 industry is steadily getting smaller. Counting the cost of supply chain disruption There are many reasons why businesses want to sell or 40 Buyers’ Guide merge. At one end of the scale a small business owner may All the facts and figures to help you buy simply want to retire. In the middle ground businesses typically want a quick buy-in to a customer base, application area or technology group. At the opposite end of the scale some companies use mergers to go global in one move. Regardless of the reason, communicating both their reasons and the proposed customer benefits is essential. Let me explain why. In one of my businesses I have been happily working with one supplier for 12-years. Then, yesterday I get a poorly formatted HTML email announcing the business was closing ISSUE 60 following a merger with a competitor. Then, the second sentence explained that all will be OK as my current account May 2017 Vol8 No.5 will remain in place. Then, in the third sentence it announces Published 10 times per year by MMG Publishing US LLP any new business will be with the new company. Unexpected and confusing. MMG PUBLISHING US LLP It was so poorly written I assumed it was spam so I called the Normandale Lake Center 8400 Normandale Lake Boulevard company to be confronted by a technician who sounded like Suite 920, Bloomington MN 55437 they were in tears. At no point did the email or technician Tel: 866.364.0951 explain what the benefit of the merger would be to me: the Fax: 952.378.2770 customer. Printed in the United States © 2017 MMG Publishing US LLP For this supplier it could not be worse. It has finally given me the excuse I needed to spend some time shopping for a new supplier. Ouch! sourcingELECTRONICS sourcingELECTRONICSJon Barrett ELECTRONICS SOURCING NORTH AMERICA IS INDEPENDENTLY ELECTRONICS ABC AUDITED sourcing @electrosourcing www.electronics-sourcing.com/linkedin www.youtube.com/electronicssourcing Jan-Dec 2015 ELECTRONICS sourcing US LLP PUBLISHING ELECTRONICS ELECTRONICS ELECTRONICS Articles appearing in this magazine do not necessarily express the views of the Editor or the publishers. Every effort is made to ensure the electronics-sourcing.com accuracy of information published. No legal responsibility will be accepted by the publishers for loss arising from articles / information sourcing sourcingcontained and published. All rights reserved. No part of this publication may be reproduced or stored in a retrieval system or transmitted in 866.364.0951 sourcing any form without the written consent of the publishers. Cover image – ©shutterstock.com/alphaspirit ELECTRONICS ELECTRONICS sourcing sourcingELECTRONICS sourcing ESNA May 2017 3 ELECTRONICS ELECTRONICS sourcing sourcingELECTRONICS sourcing TOP 50 DISTRIBUTORS REPORT Another Year of Stagnant Growth But optimism rules in 2017 as demand increases for several types of electronic components, leading to longer lead times and rising prices Gina Roos, executive editor, EPSNews It was another challenging year in 2016 Once again, margin erosion was cited shortages for several component types for the franchised electronic components as the top challenge faced by the as we head further into the year. The distribution industry in North America. distribution industry. This was followed purchasing community needs to prepare The industry faced more of the same by mergers and acquisitions and for a different buying environment problems – shrinking margins, currency regulation and compliance requirements. where they don’t get the typical annual fluctuation, and supplier consolidation. cost reductions they expect with these In terms of growth drivers, providing types of components. Faced with these challenges, revenues technical information and samples for for the top 50 North American franchised new product introductions (NPIs) is a For the key findings of the top 50 North distributors fell by three percent, after big part of distribution’s service to its American electronics distributors survey, growing only 1.3 percent in 2015. The supplier partners. In fact, 37 of the top turn to page 24. The report ranks the industry had a five percent growth 50 distributors expect NPIs to be the leading distributors by revenue in North spurt in 2014 but in the prior two years biggest growth driver in 2017; the same America, along with their sales growth growth was stagnant. Global revenues of as last year. Expansion into new markets, rates, sales breakdown by component the top 50 North American distributors value-added services and acquisitions category, and percentage of sales from also fell in 2016. Sales dropped by two also are expected to fuel growth this value-added services. The report also percent, impacted by macroeconomic year in the channel. reveals which distributors hold the conditions and currency exchange rates. largest NA market share by component About 47 percent of their global sales The distribution industry saw the first category -- semiconductors, passives/ comes from North America. signs of a turnaround during the latter electromechanical devices, interconnects, part of 2016 with demand spikes across and computer products. By component category, the top 50 a few sectors. Lead times started to NA distributors saw semiconductor stretch for several types of passive The report also provides sales by sales drop by five percent in 2016 components, connectors and memory customer segment, which doesn’t compared with the previous year, devices in the second half of 2016. This fluctuate year to year. The top while interconnect, passive and was due to a few reasons including distributors still derive more than half electromechanical (IP&E) component production capacity expansion strategies (55%) of their revenue from OEMs. This sales increased by 1.5 percent. Computer at component manufacturers coupled is down slightly from 56 percent in 2015. product sales slumped by six percent. with increased demand. Longer lead Thirty-four percent of their sales comes times are expected to continue from electronics manufacturing service The overall distribution industry saw an throughout 2017, which is pulling prices (EMS) providers and the remaining 11 electronic component sales decrease of upward. percent from other types of customers. 1.5 percent in 2016 compared with the These include MRO, retail, R&D, design previous year, according to the ECIA. For example, contract prices of PC DRAM service companies, brokers, cable While display sales increased by three modules, which increased by nearly assembly houses, and other distributors. percent, interconnect and semiconductor 40 percent on average, sequentially, in The percentages are based on responses sales each fell by about one percent, the first quarter of 2017, is expected to from 40 of the top 50 distributors. passive components dropped by 2.6 continue upward in the second quarter, However, five of the top 10 distributors percent, and electromechanical devices according to DRAMeXchange, a division did not respond to this question. decreased by 4.4 percent. of TrendForce. The market research firm also reported that capacity expansion by You’ll also find which distributors had Due to continued sluggish growth, memory device suppliers won’t have an the highest productivity levels, based on fewer distributors invested in additional impact on the market until the second sales per employee. Only two of the top resources in 2016. Only a few invested half of 2017. DRAMeXchange analysts 10 distributors made the top 10 ranking in personnel, offices or warehouses in reported that increased demand for in productivity. North America. In addition to Arrow and mobile DRAM squeezed the industry’s Avnet, only two other top distributors production capacity for PC DRAM, The full report starts on page 15. reported acquisitions. Some also leading to supply issues. expanded globally into Japan, Korea, Hong Kong, China, India and South While increased demand is good news Africa. for the channel in 2017, buyers may face 4 ESNA May 2017 Sager ESNA 130 Anniversary.qxp_Layout 1 1/20/17 1:09 PM Page 1 It All Started in 1887 as a Small Boston Storefront Selling Speaking Tubes. 130 years later, Sager Electronics has grown into a leading North American distributor of interconnect, power and electromechanical 130 electronic components. Acquired 5 years ago by TTI, Inc., a Berkshire YEARS Hathaway, Inc. company, Sager continues to operate with the same dedication to its core values – integrity, service and adaptability. 1887 - 2017 Celebrating 130 Years of Distributing Confidence® © 2017 Sager Electronics, 19 Leona Drive, Middleborough, MA 02346 • 1.800.724.3780 • www.sager.com 1 Recent steps in the Start small to sustainability movement are aimed at taking smaller companies, even startups, achieve big on along for the ride. Here are five sustainability key steps to getting started Supply Chain Sustainability • By Victoria Kickham ustainable procurement is gaining find opportunities to act on them. Product steam; the profile of corporate social disposal and recycling are good examples. responsibility issues is increasing and Rau explained: “Identify what customers care Sthere’s a growing list of guidelines, about. This is critical and more do-able for “ standards and regulations that address small companies in terms of setting that vision economic and environmental issues. You might and strategy.” Sustainable think that it’s purely the domain of the largest companies in the electronics supply channel.