Electronics Production | January 01, 2009

Europartners’ Top 20 Global Acting Franchise Distributors

Approximate twenty three percent of the world total electronic components supply of 336 billion US Dollar is generated through distribution channels. This is a result of the 2008 published survey, the Worldwide Distribution Report 2008, edited by Europartners Consultants.
Reported by Ingo Guertler at Europartners Consultants Germany

A Historical Perspective on Today’s Market
To understand the electronic component distribution industry today it is important to appreciate the historical perspective and the evolution the industry has gone through, and it is continuing to go through.

In the 1980s virtually all distribution fir example in Europe was done on a local basis with franchises awarded to country based distributors to distribute products in their own locality. Most end equipment companies had their own design and manufacturing, usually within the same site, the larger companies would be supported directly by the component manufactures own workforce and the myriad of smaller companies supported via distribution. Typically only a small part of the manufacturers’ turnover was sold via distribution, around 20% on average for semiconductors and frequently a lot less in the passive and electromechanical area. Distributors were often seen by many within the manufacturers as “just” another customer, rather than as partners.

This led to the occasional clashes where once a distributor had built up a substantial and interesting customer, the manufacture would offer the end customers a direct account thus robbing the distributor of a significant part of their business, often with limited compensation.

The industry we see today has evolved tremendously in the last quarter of a century yet many of the concepts and ideas that underpin today’s ways of working have their roots in the market place described above.
The status of the distribution in the electronic industry has increased to a real partnership. The distributor today is the extended arm of the component manufacturer. Distribution today means not alone, selling products. Distribution today is providing solution to the markets like sophisticated logistic concepts, deep design in activities, in some cases also preproduction’s and more.

Tough, a lot of end customers see this extra service in the meantime as “State of the Art” without to compensate the benefit. The distribution market today is highly complex, sophisticated and continually evolving. Because of the worldwide networked markets in the electronics industry, globalisation is also required in the distribution.

The top twenty global acting franchise Distributors
The table below show the top twenty, global or regional acting distributors in the world without the Japanese companies.

Since years, Arrow, Avnet and Future have leaded the list of the top twenties. These three companies present the typical global acting distribution model and meet all the requirements of their global acting customer base. They are global present, they are broad liner’s and offer a very sophisticated logistic system.
WPG & SAC, a Taiwanese group has overtaken Future Electronics in the last year with a growth of 22%. WPG & SAC operates mainly in the SEA market and has his core business in China.

TTI Inc. and Digikey Inc. are newcomer in this business and gaining from year to year significant market shares. Both firm’s follow a different model’s, selling products to the market.

TTI Inc. is a typical niche distributor, a specialist for passive and electromechanic products, with sales offices and logistic canters around the world, providing strong engineering support to their customers.
Digi-Key provides total different, but successful model to the market. International Service from a from a single, geographically centralized location, without outside sale forces but a broad products portfolio is what differentiates Digi-Key from other electronic component distributors.

The Japanese distribution market with a DTAM of around 25 billion USD has to be considered separately. The Japanese market is a relative closed market and be served to ninety percent and more from domestic suppliers. Arrow the number one in the world, just recently purchased Nippon Denso Industry Co, a Tokyo-based, value-added distributor of electronic components with established design and engineering expertise to expands their presence and enhances their competitive position. Beside Arrow, Avnet and also Future Electronics have presences in Japan.
The ten biggest Distributors in Japan represent approximately ninety two percent of the Japanese DTAM.

Distributable Global Market
From 2006 to 2007 the DTAM (Distributable Total Available Market) grew at 6% to 76,8 and the TAM only by 4% to of 336 billion US Dollar for all in the study considered components, which includes active, passive, electromechanical and other components like LCD`S and Power Supplies.

The biggest free available markets for the Distribution are America, Europe and China, but 32% of the World DTAM is in Japan which is served to 99% only by Japanese Companies.

Regional wise the biggest growth were seen since 2003, in America with an average growth of 13%, followed by Japan with 12% and Europe with 10%. The Asian distribution market is mainly dominated by the Chinese market which grows since 2003 with average 15%. The Chinese figures have to be handled very carefully, because not all distributors report their figures and reported figures contain also other results, which normally do not belong to this study.

Future Outlook
Regarding the International Monetary Fund, the world economy will grow not more than 2.2% in 2009. The Institute of International Finance, Inc. is more pessimistic and see for 2009 a growth of only 0.9%. Two percent or point 9%, the outlook today for 2009 is not very encouraging. Because of the globalisation, all markets in the world are networked. If the USA consumes less, China will produce less consumer goods and Germany will sell less investment goods.
We will see in 2009 also for worldwide electronic industry a negative growth which will reflect also the worldwide distribution scene. How big the negative growths will by, no analyst is able today, to give the right answer. We guess, the first slow recovering of the market will be seen in the second quarter 2010.

For the big distributors with a strong financial background will the so called recession create no significant problems. Smaller companies with a less strong financial background will face problems. Consolidation, Take Over and Mergers in side the worldwide Distribution scene will be the result.

Also, what is already observed, a couple of big distributors, especially Japanese and US and maybe some European companies will extend their activities into markets in which they are not or less present today.

For more information, contact the author of this article: Ingo Guertler at Europartners Consultants Germany
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