IP&E Components: ASPs Fall, Sales Improve

Distribution component sales in North America increased by 2.4 percent in the first quarter of 2016 compared to the fourth quarter of 2015, according to the latest report from ECIA. This translated into an increase of 3.2 percent for interconnect products and 6.5 percent for passives. However, electromechanical sales were down 2.3 percent.

For all product types - interconnects, passives, electromechanical devices, semiconductors and displays - the book to bill was 1.04. Lead times also were stable in the first quarter. More good news is that manufacturing is up for the second consecutive month, according to the latest report from the Institute for Supply Management.

In the first quarter of 2016, 40 percent of distributor component sales came from interconnect (17%), passive (13%) and electromechanical (10%) (IP&E) devices. The breakdown remains the same as 2015.

When compared to the first quarter of 2015, total component sales were down three percent, according to ECIA. For IP&E products, sales for interconnect products were up 1.4%, electromechanical down 13.7%, and passives down 5.4%. Semiconductor sales were down 1.3% and display sales were up 9.5%.

Sales of passives/electromechanical (EM) devices in 2015 increased slightly to $4.5 billion or 17 percent of total revenues, up slightly from $4.2 billion or 16 percent share in 2014, according EPS News’ top 50 North American Electronics Distributors Report. Interconnect sales remained flat at $2.3 billion in 2015 or eight percent of share.

The IP&E market continues to be hurt by lower margins and lower average selling prices (ASPs) in 2016. There is a continued squeeze on ASPs, which shows no sign of slowing down, said Michael Knight, senior vice president, TTI Americas, during his presentation at EDS earlier this month.

ASPs were down 11 percent for capacitors, six percent for resistors, and two percent for both electromechanical devices and connectors in 2015 compared to 2014, said TTI.

However, IP&E component manufacturers continue to ramp up new product introductions, targeting higher reliability markets such as medical, industrial, and automotive/transportation. These products typically yield higher ASPs. In fact, several IP&E component manufacturers, targeting these applications, along with products with unique features, expect to grow their sales higher than industry projections, which is pegged at around 2.5 to 3.5 percent growth in 2015.

As an example, ERNI Electronics expects 11 to 12 percent growth in the U.S. this year, according to Kevin Oursler, ERNI’s director of marketing and business development, thanks in part to new product introductions. Eighty-five percent of its sales in the U.S. is through the distribution channel.

ERNI plans to target three key markets – medical, industrial and automotive – in 2016. This also includes LED lighting for automotive applications.

EPS News’ top 50 North American Electronics Distributors Report, which ranks the leading distributors by revenue, sales growth, and sales breakdown by component category, finds that many specialists, deriving either all or the bulk of their revenues from IP&E devices, and those that are targeting specific vertical market segments, experienced the biggest sales gains in 2015.

Two of the three top distributors that achieved double-digit increases in revenue in 2015 are interconnect specialists. Electro Enterprises (No. 17) grew its sales by 12.3 percent, and derives 70 percent of its sales from interconnect products, and Air Electro (No. 33), which grew its sales by 10.1 percent, derives all of its sales from interconnect products and focuses on military/aerospace applications.

Sherburn Electronics (No. 43T), which led the top 50 in sales growth, posting a revenue increase of 14.8 percent, derives the bulk of its sales from IP&E products, led by electromechanical devices.

The top distribution leaders for passives/EM sales, led by TTI, include Digi-Key, Avnet, Mouser and DAC. Leaders for interconnects include DAC, TTI, Avnet, Digi-Key and PEI-Genesis.

Value-added services helped drive sales in 2015. Distributor product services range from connector, cable, terminal block and switch assemblies to design services and kitting. There are also a few specialists that provide battery pack assembly, configurable power supplies, and enclosure modifications.