Can electronics distributors rebound in 2003?
Staff -- Purchasing, 5/15/2003 2:00:00 AM
The distribution industry was hard hit by weak demand, excessive inventories and sinking component prices for a second consecutive year in 2002. Computer product specialists saw the worst decline, but there was plenty of misery to go around.
Sales of active components among the top 10 distributors totaled $6.6 billion, down from $10.9 billion in 2001. That's a decline of 39.4%. Computer product sales fell dramatically to $3.4 billion, down from $6.2 billion in 2001. That's a drop of 45.2%. Passive/electromechanical sales posted $1.9 billion in sales, down 24% from $2.5 billion in 2001.
Many of the largest semiconductor specialists saw big sales declines in 2002 but not at the -30-50% levels reported in 2001. Those who reported the biggest decreases include Memec, whose sales dropped 26.2%, and Reptron, which reported a sales decline of 19.8%. Other semiconductor specialists saw losses but at a much smaller rate of decline. Jaco's sales fell 17%, All American's dipped 14.4% and Richardson's fell 6.2%.
The top distributors also felt pain. Avnet's sales slipped by 33.2% while Arrow's sales fell 21.5%.
Most broadline and other specialized distributors are still experiencing weak demand from key customers coupled with steadily falling prices for most components. Forty-two of the top 75 distributors experienced sales declines in the double digits but that's an improvement over 54 who reported a decline in sales in 2001. CAPSCO Materials Management reported the biggest decline of 40.7% over the previous year. Others who experienced a big drop in sales include Components Center, whose sales fell 27.3% and XP Foresight whose sales slipped by 22%.
PURCHASING's survey finds that 62 of the Top 75 distributors saw sales decrease in 2002. That's a slight improvement over 65 of the top 75 distributors that reported a decline in sales in 2001. Only eleven distributors in 2002 posted flat or higher sales in 2002, but that's comparable to ten in 2001 that recorded higher sales.
A big indication that the distribution industry struggled last year is found in the large contraction of revenues. Revenue among the top 75 fell 22.4% from 2001 to $20.4 billion, recording a second consecutive year of double-digit declines. This is the lowest revenue reported by PURCHASING magazine's survey of the Top 75 since 1996. The survey shows that the average rate of decline among the top 75 was 9.7%, compared with an average drop of 24% the previous year.
Once again Bell Microproducts was the only top 10 distributor to post double-digit sales growth. Bell recorded a sales increase of 24.1%, which is slightly better than last year when it grew its sales by 23%.
A few of the other top distributors struggled with revenues over the past year. Though Avnet keeps its number one position in North American sales, the distributor posted a 21.5% drop in revenue to $5.1 billion. Similarly, Arrow remains in the number two slot with $4.2 billion in North American revenue, although the distributor's sales fell 33.2% in 2002.
Pioneer-Standard Electronics Inc., Future Electronics, Bell Microproducts, Memec, TTI, Newark InOne and All American Semiconductor stayed in the top 10 although a few shuffled positions. Pioneer-Standard, ranked number three, switched positions with Future Electronics, ranked number four. All American Semiconductor slipped one position to number 10 from number nine the previous year. Pioneer-Standard Electronics completed the sale of its electronic components division to Arrow Electronics in March 2003.
Digi-Key Corp., ranked number nine, moved into the top ten rankings from number 11 in 2001. However, Reptron Electronics lost its position among the top ten, slipping from number 10 in 2001 to number 11 this year.
While mid-sized to smaller distributors also struggled to retain sales growth in 2002, seven of the eleven distributors that posted sales growth are smaller distributors.
Chip-Tech Ltd., new to the top 75 list, posted a 32.3% growth rate, followed by Marsh Electronics which grew sales by 14.2%. Other sales gains were reported by PEI-Genesis, which posted revenue growth of 7.2% and Airtechnics, which saw sales grow by 5.6%. A.E. Petsche increased sales by 2.9%; Interstate Connecting Components reported a sales increase of 2.8% and Kensington Electronics grew sales by 1.5%.
Independent distributors also struggled to keep sales from declining significantly last year. While three of the top independent distributors experienced losses in the double-digits, two of them were able to grow their sales slightly. Resilien, new to the top independent list this year, led the pack in sales losses with a decline of 26.4%, followed by Commodity Components, whose sales fell by 25% and Converge, whose sales shrank by 20.5%. The two winners were Classic Components, which reported a sales increase of 1.8% and America II, which posted a 2% increase in sales.
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