Electronics distributors lose ground in 2008
Computer distributor specialists saw their sales drop 7%, but passive component distributors managed a 3% revenue increase despite the industry downturn.
By Gina Roos -- Purchasing, 4/30/2009 2:00:00 AM
Total revenue for the top 75 electronics distributors dropped $700 million to $28.2 billion in 2008 as the industry downturn in the fourth quarter resulted in declining component demand, lower prices and falling profit margins, according to Purchasing's annual survey of the electronics distribution industry.
Connector sales by distributors took the biggest hit on a percentage basis. Sales of the top 10 connector distributors declined by 33% to $1.2 billion.
Computer specialist distributors' sales sank 7% to $9.9 billion from $10.7 billion in 2007. Bell Micro Products, which generates all of its revenues from computer products, posted a revenue decline of 23.5%.
Semiconductor sales for the top 10 chip distributors in 2008 were $7.7 billion, about the same as 2007. However, the top 10 distributors for passive/electromechanical components managed a 3% revenue increase, recording $2.9 billion in sales, up from $2.8 billion in 2007.
Overall, the North American distribution industry remained fairly stable considering the general slowdown in the economy across most industry sectors. Only 14 of the top 75 distributors recorded sales gains in the double-digits in 2008, down from 35 in the previous year. Twenty-three distributors posted growth in the single digits while 38 distributors suffered sales declines, which are twice as many as 2007 when 18 distributors posted losses.
Sales of the largest semiconductor specialists were significantly impacted by the industry slowdown. All American, which derives most of its sales from semiconductors, emerged from bankruptcy in June 2007, posting a revenue loss of 40.5%. Jaco also posted a loss of 35%, estimated by Purchasing. In January 2009, Jaco completed sale of much of its component business to WPG Americas. Nu Horizons' sales declined 2.9%.
Demand continues to remain strong for catalog distributors. Mouser Electronics posted a sales gain of 23.4%, up from 13.6% in 2007. Newark reported a sales increase of 8.2%; Allied Electronics grew its sales by 4.6% and Digi-Key posted a slight gain of 0.6%.
Sales of the top two distributors were down slightly. Arrow's sales decreased 2.3% and Avnet's sales dropped 1.1%.
Although the majority of distributors cite a slowdown in the economy as one of their biggest challenges, several distributors, including Bisco, Flame, PEI-Genesis, Taylor and USI, announced North American branch office expansions in 2008. IBS, Mouser, Nu Horizons, PEI-Genesis, Powell, TTI and USI also reported global expansions.
The top two distributors continued their acquisition strategies in 2008. Arrow Electronics acquired Excel Tech Inc., Eteq Components, ACI Electronics LLC (ranked 31 in 2007), Achieva Ltd.'s component distributor business, Logix S.A. and Hynetic Electronics/Shreyanics Electronics. Avnet purchased Yel Electronics Hong Kong Ltd., Azzurri Technology Ltd. and Nippon Denso Industry Co. Ltd.
Other acquisitions in 2008 include Nu Horizon's purchase of C-88 AS in Denmark and TTI's acquisition of Mateleco in France. Hughes-Peters also announced two acquisitions—MPAQ in Texas and Leeds in Illinois.
Many of the small to mid-size distributors reported the biggest gains. Interstate Connecting Components (rank 41) led the pack with a 32.4% growth rate, followed by CDM Electronics (rank 63), whose sales grew by 31%. Other big earners among these distributors include Symmetry Electronics (rank 37), which recorded a sales gain of 30.4% and Hughes Peters (rank 31), which posted revenue growth of 30%.
Only five of the top 10 distributors reported growth. Besides Arrow and Avnet, Future Electronics, Bell Microproducts, Digi-Key, TTI, Newark, Nu Horizons, DAC and Allied all remained in the top 10, with no shifts in rankings.
In addition to economic conditions, distributors are troubled by a number of factors in 2009. These range from managing inventory levels and expenses in a depressed market to shrinking military spending and a lack of long-term orders. A big issue, cited by a few distributors, is the higher cost of components while customers continue to expect price reductions.
What are the biggest growth opportunities in 2009? Distributors are placing their bets on medical (28 respondents), industrial control (26 respondents), defense and aerospace (24 respondents) and energy technology (24 respondents).
Top 75 Electronics Distributors
04/29/2009Online buying continues to grow
05/06/2009Trends in distribution
05/16/2007
Now Playing: 