Thanks to a 54% jump in computer sales and a 20% spike in interconnect sales among the top 10 companies, electronics distributors saw revenue shoot up 15% in 2007. It was the largest increase since 2004, when revenue shot up 17%.

But spoiling the party was a drop in semiconductor sales, due largely to falling prices for memory and microprocessors.

Moreover, only 35 of the Top 75 distributors reported sales gains in the double-digits in 2007, down from 65 in the previous year. Twenty-two distributors posted growth in the single digits. Eighteen distributors posted sales decreases, which is significantly higher than six that reported sales declines in 2006.

Those were among the major findings in the most recent Purchasing survey of the electronics distribution industry.

The survey also revealed that Arrow took first place in the list of the top 75 distributors for 2007. Its 26.5% sales increase put it ahead of the 2006 leader Avnet, whose sales jumped last year by 16.9%.

But it was Avnet's acquisition of Access Distribution that catapulted the top 10's computer sales. Adding Access' $2 billion in computer sales to Avnet's balance sheet shot the total computer sales for the top 10 to $10.7 billion in 2007. Included in that number was Bell Micro Products' sales growth of 20.8%. All of its revenues come from computer products. In 2006, computer sales for all distributors dropped by nearly 8%.

Among other key findings from the survey:

• Electronic component revenue grew 9% from $19.3 billion in 2006 to $21.4 billion.
• Sales of passive/electromechanical components by the top 10 distributors of those products increased 4% to $2.8 billion.
• Large distributors such as Arrow and Avnet had double-digit revenue gains in 2007, although much of that growth was due to systems sales. Other distributors such as TTI, Digi-Key, Mouser and Allied, which primarily sell components, also had double-digit growth rates for components.
• The drop-off in semiconductor sales caused Nu Horizon's and Jaco Electronics' revenue to decrease 5.2% and 2.6%, respectively. All American Semiconductor, which also derives most of its revenue from semiconductors, emerged from bankruptcy in June 2007, posting a huge loss last year. Nu Horizons and Jaco still posted increases in global sales for 2007.
• Independent distributors lost some ground over the previous year in global sales although seven of the top 10 independent distributors reported sales increases. Three reported sales losses. Commodity Components once again led the pack with 50% growth, followed by Chip 1 Exchange USA, a newcomer to the top independent ranking, with 15.7% growth. The remainder experienced single-digit growth.
• Demand remains strong for catalog distributors. Mouser Electronics posted a sales increase of 13.6%, though significantly less than the previous two years with growth rates of 33.3% and 35.3%. Digi-Key posted nearly 10% growth and Allied Electronics' sales grew by 14.0%. Newark's sales increased by 3.3%.
• Several smaller distributors that experienced declines in 2006 bounced back in 2007. JRH Electronics increased sales by 21.3% in 2007. Its sales declined 10.3% in the previous year. Gopher posted a slight gain of 1.9% after posting a loss of 3.6% in 2006. House of Batteries also recouped its 3.4% decline in 2006 with a significant sales increase of 20.6%.
• Interconnects, passives and electromechanical components specialist TTI, which was acquired by Berkshire Hathaway, increased sales by 8.1%.

While distributors were concerned with making too many investments in sales offices in 2006, this changed in 2007 with several distributors including A.E. Petsche, Bisco, CDM, Cumberland, Flame, Marsh, PEI-Genesis and USI reporting North American branch office expansions in 2007. PEI-Genesis, TTI and USI also reported global expansions.

There were also acquisitions in 2007. Arrow Electronics acquired U.S.-based Agilysys' KeyLink Systems Group, Japan's Universe Electron Corp., UK's Centia Group Ltd./AKS Group Nordic AB, and India's Hynetic Electronics/Shreyanics Electronics.

In addition to its acquisition of Access Distribution, Avnet acquired ChannelWorx, Acal, Magirus Enterprise Infrastructure Div., Betronik Div., Flint Distribution Ltd., and Azure Technologies.

Other acquisitions include Bell Microproducts' purchase of Prosys Information Systems; and Master's purchasing of Klaus Radio.

Once again, many of the small- to mid-size distributors reported the biggest gains. URS Electronics (rank 70T) led the pack with a 34.9% growth rate, followed by Electro Enterprises (rank 37), whose sales grew by 34.0%. Other big earners among these distributors include Edge Electronics (rank 30), which recorded a sales gain of 33.3%, and USI (rank 34), which posted revenue growth of 32.4%.

Other big gains were enjoyed by PEI-Genesis (rank 17), with 30.2% growth, followed by ACI (rank 31) with a growth of 27.5%, Symmetry (rank 44) with an increase of 27.3%, and Powell Electronics (rank 20) with an increase of 25.6%. Taylor Electronics (rank 63), a newcomer to the Top 75 ranking, posted a sales gain of 26.2%.

Small- to mid-size distributors often enjoy strong growth because they specialize in certain products or service specific industries. For instance Astrex grew its sales 11% to $29.2 million in 2007. “We are planning for 10% growth this year,” says Frank Stalzer, president.

Astrex is a connector distributor that does 65% of its business with military/aerospace customers and offers value-added services such as connector assembly, kitting and consigned inventory.

“We benefit from our size. We are niche focused, specialized and we have a lot of different customers so we don't rely on any one to drive our sales,” says Stalzer. “Our top 10 customers represent only 12% of our overall business. In our case we are the proverbial mile wide and an inch deep,” he says.

Stalzer says although Astrex is small, it competes with larger distributors. He says one reason it can compete is because it is small and can react quickly to customer requests.

“It doesn't take an act of Congress for me to go into my assembly area and re-arrange work-order production to accommodate a request for customer,” says Stalzer. He says a large distributor may have a much more “regimented system for how they conduct their valued-added services.”

Nine of the top 10 distributors reported growth, with four out of the 10 reporting double-digit sales growth. Avnet and Arrow switched places this year, with Arrow in the number-one spot. Future Electronics, Bell Microproducts, Digi-Key, TTI, Newark, Nu Horizons, and DAC remained in the top 10 with no shifts in positions. All American slipped to number 22 from number 10, opening up the position for Allied Electronics, which ranked number 12 in 2006.

In the loss column, Smith & Associates sales fell 26.2% and Converge's sales dropped by 18.9%.