The electronics supply chain, in one year, saw a level of disruption that once took decades to achieve. The 1990s were known for frenetic M&A activity in the channel; 2019 will be marked by breakups.
In one fell swoop, a major chipmaker dropped six of its channel partners. Global distributors decided to form their own group. A hostile takeover is underway in China, and trade, tariffs and boycotts took a toll on supply chain partnerships. The backdrop to this is the first U.S. manufacturing contraction in three years, and a merger that changes the face of the passives component market.
These are among the events that shaped electronics supply in 2019:
Texas Instruments and the channel
In an unprecedented move (to date), Texas Instruments dropped six of its distributors, including global partners Avnet Inc. and WPG. TI once was very distribution-friendly: it didn’t practice shelf-sharing prohibitions against competitors; it incentivized distributors for design wins and carried a generous distribution roster. About two years ago, TI discontinued its incentive program, then drastically pared its fulfillment channel in 2019.
“Over the past several years, we have been evolving our distribution network to better align with our strategy to establish closer, more direct relationships with our customers,” TI’s spokeswoman told EPSNews. “As we build these direct relationships, we won’t have as much business flowing through the distribution channel and will require fewer distributors.”
TI’s products account for roughly 10 percent of Avnet’s sales, which reached $19.5 billion in fiscal 2019.
Global distributors and the ECIA
The Electronic Components Industry Association has been the center of channel advocacy and standards-setting for decades. It was formed in 2010 through the merger of two industry groups: The National Electronics Distributors Association (NEDA) and the Electronic Components Association (ECA). In August three of the industry’s biggest distributors – Arrow Electronics Inc., Avnet Inc. and Electrocomponents plc – withdrew from ECIA to form the Global Electronics Distributor Association (GEDA).
The move is a blow to ECIA in several respects. Membership fees are scaled by size of the organization, and collectively, the three distributors represent $50 billion in global revenue. The distributors also post their inventory on ECIAauthorized, an exclusive aggregator for the authorized channel.
The new Arrow/Avnet/Electrocomponents consortium reportedly will be more distributor-centric than ECIA.
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