2014 isn’t likely to be a banner year for North American electronics distributors. But many are hoping for moderate growth, with rising demand in markets such as medical equipment, lighting, energy, and consumer electronics. They also expect the Internet to continue to transform the industry, as more companies invest in Web-based resources and purchasing tools.
Most market outlooks call for steady, not stellar, growth. The World Semiconductor Trade Statistics (WSTS) December semiconductor market outlook calls for 4% market growth in 2013 to $304 billion, driven mainly by double-digit growth in memory products. WSTS predicts similar growth over the next two years, anticipating a 4% increase in 2014 followed by an expected 3% rise in 2015. WSTS says it expects wireless and automotive markets to grow faster than the total market while consumer and computer categories remain stagnant.
“We are optimistic about moderate growth in the electronic components industry in 2014,” says Steve Martin, executive vice president of sales at distributor Components Direct, an Avnet Company. Martin adds lighting and medical markets to the list of promising end markets for the coming year.
“The slow economic recovery globally [is contributing to slow industry growth] along with budget instability in core electronic component sectors such as military and aerospace,” he explains. “However, the industry is seeing a continued drive for more electronics within certain industries. Lighting, medical equipment as well as consumer electronics such as mobile devices continue to grow, which is boosting sales for many companies.”
Other distributors agree, pointing to the proliferation of electronics in just about every aspect of daily life as good news for companies throughout the supply chain.
Focusing On Energy, Medical
Marc Barnhill, chief trading officer for large independent distributor N.F. Smith and Associates, points to energy and medical markets as strong performers this year. The Houston-based distributor has long served oil and gas industry customers, which Barnhill characterizes as “extreme growth” areas this year.
“Energy and medical are two categories that we’re targeting heavily,” says Barnhill. “Being a corporation based out of Houston, the gas and oil segment is really close to us. That’s an area where we see extreme growth, and you want to be in business with people who are expanding rapidly.”
For evidence of that, look no further than the recent rise in domestic oil and natural gas production, which has increased by nearly 2.7 million barrels per day in the past four years, according to the Institute for Energy Research (IER). IER calls the growth “impressive” and expects the trend to continue. Other large distributors are honing their focus on energy markets in 2014 as a result, including connector specialist PEI-Genesis, which announced the creation of a new management position focused on oil and gas last year. A new oil and gas business development manager for North America is based out of PEI-Genesis’ Houston office and charged with expanding its work with harsh-environment and explosion-proof connector brands and explosion-proof cable assemblies.
Furthermore, distributors point to ongoing innovation and development among medical device and equipment manufacturers as key reasons for strong growth in the medical market in 2014. Industry researcher IHS said global revenue for consumer medical devices would rise 4% in 2013, followed by 5% to 9% increases over the next five years. Much of that growth will be in portable and wearable medical devices, such as hearing aids, blood glucose monitors, and blood pressure monitors. “Medical has huge margins, so there’s always a sense of urgency and opportunity there,” adds Barnhill. “There are opportunities for lots of [companies] there.”
For distributors such as Components Direct, which specializes in supplying obsolete and end-of-life electronic components, global expansion will complement its efforts to grow business in specific market segments such as medical and lighting.
“We focus broadly across all market sectors and will continue to seek growth by expanding our reach globally,” says Martin. “We have seen a growing consumer base in both Europe and Asian markets in 2013 and will continue to expand our reach into these markets in 2014.”
Web Investments Continue
Ongoing customer migration to the Internet is another trend that has Components Direct excited about the New Year. Martin points to the distributor’s continued investments in e-commerce and related tools as a way to home in on this growing opportunity.
“We are excited about the continued migration to the Internet for buyers of electronic components,” he says. “Design engineers, procurement professionals, and other stakeholders are going to the Web to research product, compare prices, download datasheets, and, ever increasingly, [to] transact purchases. As an authorized distributor, we are investing in our e-commerce platform and developing new tools and products to support this growing interest.”
Components Direct is not alone. There was a flurry of online activity among some of the largest electronics distributors toward the end of 2013 as companies sought to ease the research and purchasing process for engineers and buyers. TTI, for one, announced improvements to its Multi-Part Upload Tool that speed and ease the purchasing process. Visitors to TTI’s site can now copy and paste their bill of materials to initiate the upload process. Once the process is complete, buyers move to familiar options such as buy now, quote request, download a quick quote, or add to project list.
“Enhancing the multi-part upload feature allows our customers to manage their bill of materials more quickly and efficiently online,” says Kevin Schubert, TTI’s vice president of its global Internet business. “This enhancement supports our development efforts with the goal of providing ongoing improvements in efficiency and ease-of-use for our customers.”
TTI also updated its parts search function late last year with a feature that predicts keywords as the user starts typing—an intelligent search function that speeds the search process and reduces the number of clicks needed before finding the correct item.
TTI’s sister company, Mouser Electronics, also announced some online enhancements toward the end of last year. As part of an ongoing effort to expand its resource offering, Mouser added the Wireless Charging Technology site along with the Automotive Applications and the Computing Applications site to its customer resource library. The Wireless Charging site offers wireless charging semiconductor and passive components as well as technical articles and other resources on the latest trends in the wireless charging industry. The Automotive Applications site and the Computing Applications site offer similar resources for engineers working in those fields.
The proliferation of online tools and technologies also brings new challenges, though, as Martin points out.
“We expect the Internet to continue to be a strong influencer within the electronic component space. However, by opening the supply chain to a more global customer base, distributors will grapple with potential channel conflict as well as diverse and regionalized regulations and compliance procedures,” he says. “Distributors will continue to adapt by developing market-specific contracts, more rigorous export compliance processes, and customized tax and customs data.”