The Internet of Things (IoT) is everywhere, and the market opportunities are mind-boggling: 50 billion devices will be connected by 2020. The value of the IoT devices and services market will reach $7 trillion by 2020. The benefits to users are infinite. Is this the “killer app” the high-tech market has been waiting for?
The short answer is “yes.” Component suppliers, distributors and manufacturers of all kinds believe the IoT will drive exponential growth in the high-tech market over the next five years. Every link in the supply chain has the opportunity to capitalize on the IoT market if they are well-positioned to do so.
Electronics distributors hold a distinct position in the supply chain as they serve both component suppliers and end customers. Succeeding in the IoT, channel executives say, will require an alignment of suppliers, inventory and services. “Distribution is unique in that the opportunities are equivalent to the scale, scope and portfolio that a distributor can bring to the party,” said Alex Iuorio, senior vice president, supplier management and business development for Avnet Electronics Marketing Americas. “The more you can manage your customers’ overall needs, the more effective you will be.”
The channel is particularly well-positioned to support the IoT. Its solutions are component-intensive: microcontrollers, microprocessors, and sensors are required for almost every single device. There’s a low barrier of entry for designers: the core components of most IoT devices are familiar and relatively low-priced. “The underlying technologies – sensors and processors—aren’t new, but connecting them to the Internet is,” said Iuorio. OEMs of any size can jump right in to the market.
“Distribution can leverage multiple suppliers with various pieces of the solution that needs to be assembled in a unique way for each customer and to drive value from the IoT solution,” said Dan Casey, executive vice president for Future Electronics. “It will be a fascinating space to watch over the next few years as systems evolve and new applications pop up every day.”
Aligning the supplier base
Distributors are implementing a variety of strategies to capitalize on the IoT. America II Electronics, for example, is adding suppliers that that focus on the IoT to its line card. Traditionally a non-authorized distributor, America II has been securing franchises to become a “blended” reseller. “We are aggressively growing our franchise offering and are making the [IoT] a part of that supplier selection process,” said Brian Ellison, president of America II. “A lot of suppliers aren’t getting a good look at the second and third-tier customer base which we think is under-serviced. I think we are going to see more companies seeking [distributors] that are focused on IoT technologies.”
Just this week America II signed an agreement with CEC Panda Crystal Technology Corporation, a manufacturer of quartz-based timing devices used in the telecommunications, automotive, IoT, smart technology, and consumer electronic industries. Under terms of the agreement, America II will have global distribution rights to CEC Panda’s entire portfolio of quartz-based timing devices including crystal resonators, clock oscillators, TCXO, VCXO, OCXO and monolithic quartz filters. Their products are used in wireless, Bluetooth, Wi-Fi, IoT, GPS, and microprocessor-supported applications.
and supplier of M2M and IoT antenna and cable solutions. Avnet EM will now offer Taoglas’ extensive line of 3G, 4G, LTE and GNSS off-the-shelf and custom antenna solutions to device manufacturers and OEMs targeting M2M and IoT applications in the Americas.
Solutions, not just sales
Longtime authorized distributors such as Avnet and Future have been working with their suppliers for some time. By combining the various technology offerings on their line cards, distributors have been providing solutions to their customers in addition to component sales. “Adapting [components and services] to the next hot application is something we’ve been doing for quite some time,” said Iuorio. “Your best bet of getting to market quickly is the channel.”
The channel has a track record of helping OEMs get to new markets quickly, Future’s Casey points out. The same principal applies to the IoT.
“Future Electronics has proven that the right long term investment in a disruptive technology can lead to accelerated adoption and growth for customers that must embrace change,” he said. “Future Lighting Solutions was launched in 2001 and is a good example of bringing high power LEDs to thousands of customers globally. The high power LED was a disruptive technology and is now prevalent in many lighting appliances and has been a significant growth engine for Future Electronics.
“The same investment is being made to support our suppliers and customers involved in the IoT space,” Casey added. “IoT will require full solutions for many customers providing them with expertise on collecting data, moving it, analyzing it and providing an easy and effective user interface every step of the way. By working closely with our existing partners, expanding our technical support and design centers and establishing a flexible and dynamic 3rd party eco system, Future is prepared to support our customers’ needs whether it be sensing things, performing actions, moving data, connecting products enabling safe and secure networks etc.”
Customers are also looking for partners that provide a wide breadth of services. The IoT relies as much on the network as it does on components, said Iuorio. “At Avnet, we facilitate connections from sensors to servers. Avnet offers hardware, software and services capabilities across the total value chain.”
At the same time, distributors try to match their solutions with individual customer needs. Some of the companies likely to thrive in the IoT are businesses nobody has heard of yet, Iuorio points out. “OEMs should ask themselves ‘does our distributor have the right product portfolio? Do you have the right products and market leadership? Do you communicate with your customers and have an interest in their success?’” What can you do to support those companies? Iuorio asks. “You have the right products; the right applications and the right solutions,” he concludes.
Room for expansion?
The distribution channel has a few other aces up its sleeve in regard to the IoT. Distribution primarily serves small and midsize OEMs that don’t get direct support from suppliers. Many of these companies are innovators. “This is the ‘sweet spot’ for distribution,” said America II’s Ellison. “There are a lot of products available from our component suppliers that are applicable to their business.” The channel reaches a customer base that suppliers normally wouldn’t target for IoT applications, he explains.
“We are definitely seeing diversity within the IoT customer base,” Ellison said. “There are companies in the appliances market; medical; traffic control; lighting; POS systems and security. We touch them all.” “We are seeing [IoT development] everywhere,” added Iuorio. “We are seeing it in industrial, automotive, consumer and in mobile communications.”
In spite of all this, a report recently released by EMS Flextronics found a significant gap between what business leaders recommend regarding the IoT and what is happening within their own four walls. Two thirds (66 percent) of business leaders polled believe an IoT strategy should be a high priority, but just 44 percent report that is the case at their company. That may be one of the reasons Future includes “customer education” among its IoT service offerings. “Future will continue to educate customers, listen to their needs and recommend the best competitive solution that will provide them a solid platform for the future,” said Casey.