A growing challenge I see in the greater electronics industry sector is the stranglehold by an antiquated business model. It was just a few years ago distributors were dragged into the current century through no means of their own.
E-commerce was already a trillion-dollar segment yet the ‘Sears catalog’ distributors were stagnant, barely using technology to deliver ‘advanced electronics’ components.
Adding insult to injury, distributors invested minimal amounts just to try to stay current. Its no surprise today they are still trying to move away from the past and re-invent, while seeing erosion to their market share and distribution model.
Looking at 2017/2018 electronics book-to-bill (projections) and backlog, you would notice a down trend as per tracking OEM growth and the electronics supply. This trend shows a nonlinear downtick in revenue tracked (erosion) next to contract electronics manufacturing services (EMS) and even OEM demand.
Yet today there exists large components demand.
So how much of the component flow is already bypassing distributors and going directly to semiconductor firms?
Accompany this with recent ad/marketing spend from the semiconductor industry and you see an offensive push to get their names out from under the shrouds placed by OEM NDAs.
How difficult would it be for semiconductor firms to outsource logistics solved today by distributors, to someone else, who then drop ships directly to EMS providers, or OEMs?
How will the supply chain look if OEMs apply pressure to purchase direct from semiconductor firms? What would the supply chain look like if semiconductor firms want more brand recognition?
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Electronics distributors lose control: pressure to innovate increases
These two forces have already begun with the use of reverse engineering firms and whether its covert, or not, the primary way semiconductor firms often achieve recognition is post, reverse engineering when a third-party publicly releases the electronics product tear-down.
Things get more interesting when you take into consideration the largest, original teardown analysis firm (iSuppli) was purchased by IHS, and IHS does not publicly release this often-useful information.
See the connection?
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