Component distributors put up a grand show at the 2022 Electronica Trade Fair in Munich and were, arguably the soul of the event.
They were impossible to miss. Bright lights of varying colors adorned their stands.
The booths were bigger. Food and drinks flowed freely. Fun and gaming activities ran non-stop. It looked like a festival, rather than an industry exhibition but as they were being feted, customers and other guests were simultaneously courted, welcomed, and educated about product offerings and services.
Exhibitors and attendees were glad to be back at the biennial event, which had been cancelled in 2020 because of the outbreak of Covid-19. By number, semiconductor suppliers from all over the world outnumbered any other group.
The co-location of Electronica 2022 with Semicon Europa, the trade fair for semiconductor equipment and materials, resulted in the overwhelming presence of enterprises focused on the chip sector, including research firms.
Still, distributors stole the show. One could say, as usual.
The November 2022 event was different, though. Almost celebratory.
All the leading component distributors were out in full force, highlighting their offerings, hosting suppliers and visitors, and helping to reinforce the idea that the industry was ready and eager to resume hosting and participating in the international conferences, seminars and other physical events that had been interrupted by the pandemic.
The distribution booths were packed with visitors. The companies demonstrated offerings utilising a variety of media, including video, and had product demos and gaming events for customers and suppliers.
Digi-Key expanded its main booth and added service stations at Hall B, including a booth for live interviews and product demonstrations held with more than 30 of its biggest suppliers. Companies fielded included Analog Devices, Eaton, Laird Connectivity, Littelfuse and Wurth Elektronic.
At another booth, Digi-Key presented its history, using objects that highlighted its beginning in the 1970s. Attendees could take a visual walk through the company’s history and see its growth into the multi-billion-dollar enterprise it has become. As usual, visitors to Digi-Key booths could participate in a variety of games, to while away the time or enjoy the digital games electronic companies were offering gamers.
The company’s technical and service employees were at hand to guide visitors and provide information on components and sub-systems from Digi-Key’s more than 650 suppliers.
“It’s a great time to be in the electronic component industry,” said Digi-Key president and chief operating officer, in a pre-event statement. “The Internet-of-Things is enabling innovations that we may have only imagined before and turning them into reality.”
It is certainly a good time to be in the electronic component distribution business.
The recent painful supply shortage experienced by OEMs and electronic manufacturing services (EMS) providers proved a boon for component distributors. They benefitted from previous investments in component inventory, automation, and additional warehousing.
Efforts to shore up their supplier-base, which most of them accelerated over the last 5 years paid off.
As they scrambled for parts in 2021 and through the first half of 2022, OEMs and contract manufacturers opted for second sources and alternatives to preferred parts where available. This favored distributors that added to inventories and suppliers during the pandemic.
As a result of the strong demand for components over the last couple of years, distribution has enjoyed unusual growth, despite initial shutdown of some manufacturing facilities during the pandemic.
All the different tiers of distribution grew strongly over the last year. The biggest and medium-tier distributors benefitted more, though, because they had the resources to invest in component stocks and warehouse. As a group, sales of the leading distributors grew at a double-digit clip in 2021 and most were still expecting solid expansion as 2022 ended.
Concerns about a global economic weakness did not faze distribution executives who reported that demand for inventories remained strong entering 2023.
Take Mouser Electronics.The company is poised to report 2022 revenue of $4.1 billion, more than double the approximately $2 billion it had in 2020, according to Mark Burr-Lonnon, senior vice president of global sales and services at Mouser.
“When we look back at the last years, the last two have shown growth that we never expected,” said Burr-Lonnon, in an interview with the media. “There is not much in the market that has been bad for us. We are in great shape as we go into 2023.”
Mouser executives cheerfully hosted customers and visitors in their Hall C3 booth—shared with TTI—at Electronica, delighted with the company’s performance and prospects for the year ahead. In addition to the traditional drinks and snacks, the company offered visitors games and prizes. Many of the players who participated in the company’s “spin-to-win” game bagged all kind of prizes, including development tools and test devices.
Mouser benefitted from actions previously taken to boost inventory ahead of the pandemic and through it, according to Burr-Lonnon. The company added to its warehouse space to increase storage capacity and automated the stocking process for easier and faster access. This helped to improve overall performance and productivity, he said.
“We put a lot of automation into the warehouse,” Burr-Lonnon said. “We want to get the inventory out as soon as possible.”
Canada-based distributor Future Electronics took the Electronica show one step further. The company flew the green flag at the show, to demonstrate its commitment and service to efforts to improve the environment.
Future’s theme for Electronica was “Empowers A Greener Future.”
The company said it wanted to focus on innovations, products, and services that support the push for green or renewable energy and power efficiency.
“As a leader in the industry, Future Electronics is spearheading the global trend for green-minded tech, recognising how innovation and creativity can make a positive difference toward a greener future,” Future said, in a release following the close of Electronica. “The company looks to continue making ‘green’ a focus for the start of 2023, expecting their leading role in the industry brings a constructive impact to business partners, customers, and audiences alike.”
Even as they were celebrating the end of another growth year, distributors at the Munich event remained mindful of challenges ahead.
The supply chain shortages the industry went through has not ended, they said. True, some semiconductor suppliers have reported lower demand and are taking steps to curb capital expenditure. A few even announced lower revenue forecasts for the second half of 2022 and the first half of 2023.
However, distributors said the market remains fluid. Inventory shortages persist for certain components especially parts for the automotive industry. Lead times have started shrinking but even this is uneven, according to industry executives.
“It is all about mix now,” said Digi-Key’s Doherty, in a discussion with the media at Electronica. Our mix is not where we want it to be. We have a lot of some products, but we are still waiting for others to arrive to get to that historic, high stock rate. This should start to occur throughout 2023 first and second quarters.”
Whatever happens in 2023, distributors said they expect to apply lessons learned during the recent inventory shortage. Even though many are entering the new year with more inventory than in the last several years, they do not see this as problematic because the industry is expected to keep growing.
As they hosted customers at Electronica, distribution executives said they were also patrolling the halls to meet new suppliers, review their products and discuss the possibility of adding these companies to their supplier list.
“We’ve put a lot of efforts into getting inventory right, making sure we are building new warehouses to put more inventory and adding new services to our website, and support around the world,” said Mouser’s Burr-Lonnon. “We are in great shape as we go into 2023 from an inventory standpoint. We are going into 2023 with two-times the inventory that we had going into 2022.”