Connectivity Drives Chip Company Mega-Deals
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Amazon.com’s announcement that it has established a b2b site which, among other supplies, will be selling components has been met with skepticism from a number of decision makers in the electronics supply chain. The main concerns cited by participants in a LinkedIn discussion moderated by ERAI are traceability of parts and the possibility of defects.
Amazon has not responded to an inquiry regarding the origin of its components. It does not appear that parts are being sold directly from suppliers or through authorized distributors. Some devices are listed as “shipped from Amazon” and others from different sources. Electronics managers, particularly those in mission-critical industries such as medical and defense, say they would not risk acquiring parts whose provenance cannot be proven.
“One slip-up anywhere in the undocumented and unknown chain of custody, and it's a compromised product. So, unless you're a hobbyist or manufacturing nothing more important than Class 1 consumer goods, you should stay away from parts from any source that can't prove full chain of custody,” said a component engineer.
“We already have enough issues with the existing channels: recently one relatively well-known independent distributor ran into counterfeit/quality issues and was delisted by a Tier-1 EMS player,” said a high-tech business professional.
Professionals do agree that that the spot market is the most likely to feel an impact from Amazon.com/business. The spot market was intended for hard-to-find components that aren’t readily available through authorized channels. The spot market has evolved into a forum for selling and buying components that are considered excess by their owners. Many of these parts are factory-sealed or can be traced back to the original component manufacturer. However, unscrupulous organizations also participate in this market and counterfeit goods have been sold through the open market.
Buyers from Amazon do have the opportunity to choose their suppliers and buyers give the site generally high marks for its supply base. “Often product on that platform is coming from a vetted vendor with an established company. In the case of commodity products or items with significant appeal to the Amazon customer base the item will sell with Amazon itself as the vendor. This is unlikely to occur in the case of most components being purchased through distribution at this time. Certainly the online trading portals would be unlikely to replace the factory/distribution/independent channel currently in place.”
Industry participants are also realistic about the competitive market that is the electronics components industry. “In this global market place, components are sold by variety of different channels. Today it’s Amazon, tomorrow it could be Overstock.com. Where there is demand there will be supply,” concluded an operations executive.
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