Distributors and manufacturers of electronic components met in Las Vegas this spring for the 2013 Electronics Distribution Show. Global Purchasing was there to take the pulse of the industry, interviewing executives from our 2013 Top 50 Distributors list for their update and outlook. Ed Smith, president of Avnet Electronics Marketing Americas, shared these insights:
Global Purchasing: Many distributors at EDS talked about the very slow growth the industry is experiencing now and whether or not it's a trend that's here to stay. Did you hear similar concerns? What's your take on this?
Ed Smith: It’s been slow growth for sure, and I don’t see any major thing changing that. But there are parts of the industry [that are doing well]. Lighting is one. You also have services that people are getting into that are doing okay; for us, integration services are doing well because [data] storage is getting hotter and hotter. Automotive is hanging in there, and so is avionics.
Global Purchasing: Along those lines, there was discussion at EDS about what the "next big thing" might be that will spur growth in the electronics industry. Can you point to any emerging markets or technologies that look promising to you?
Smith: Clearly, the cloud and storage is on the tip of everyone’s tongue, so that’s going to drive some growth. Beyond that, I don’t see a “next craze” today. I would say it’s going to be more electronics in what I would call relatively normal things—your refrigerator, [for example]. And I think more of your typical tasks are going to become “smart” tasks. Things we typically thought of as not electronic will turn electronic.
Global Purchasing: You point to automotive and avionics as brighter spots amid the sluggish economic recovery. Do you see that trend continuing? Are there any other glimmers of hope on the horizon?
Smith: I think the strength continues in automotive … Even if the car industry was to flatten out, there’s just a lot more [electronic content in cars today]. So I think automotive has a long way to go; cars will continue to get more and more complex.
In avionics, [airplane manufacturers] are just doing so much with the electronics—besides what the pilot gets, which is all kinds of new radars, computers, and computer programs. Every system [on a plane] has a set of computers these days. So I think planes will continue to have more electronics. And we help a lot of these customers. Also, the federal government will spend money getting planes safer and more directly to airports [with better, more advanced air traffic control systems]. So it’s a promising area.
And again, storage and the computing market has been really strong and it will continue to be strong.
Global Purchasing: Do you see “re-shoring” trends taking hold? Are you seeing increased business because of it?
Smith: I think what’s happening is, companies are saying, “I have certain products that are worth building in Asia and certain products I need to build in America [because] it’s not worth the logistics cost to build them in Asia and ship them back.” I think you’re starting to see people build products over in China that stay in China and Asia, for example. More and more, they’re building in multiple locations. Manufacturing strategies are much more sophisticated today than they’ve ever been. We have customers that want us to ship the same part to multiple contract manufacturers, but they don’t want us to ship until the day before it will be built … I don’t know if I’d call it on-shoring or re-shoring, but there is clearly an increase in manufacturing [in places such as] Mexico. Some may view it as on-shoring or re-shoring; I think there’s just less going out and more being built in the regions where it’s being consumed.
Global Purchasing: What are your greatest concerns from a supply chain perspective for the remainder of the year?
Smith: Clearly, natural disasters are on everyone’s mind because, in our industry, we’ve had enough of them over the last couple of years … There’s been one issue after another. So, clearly there is always a concern there. I also think you have a second concern: because business has been flat for so long in the Americas and down in Europe, [if a sudden increase should occur] I‘m not so sure you have the inventory in place to handle a quick, dramatic increase. It’s not likely you’re going to see that, but it could happen.
Ed Smith is president, Avnet Electronics Marketing Americas, a business region of global technology solutions distributor Avnet, Inc., which ranked number one on Global Purchasing’s 2013 Top 50 Electronics Distributors list, with sales of $25.2 million.