Even in the most challenging of economies, electronics companies design new products. Component makers and distributors that assist OEMs with their designs stand to benefit from high margins or volume orders once an item reaches mass production.
Catalog distributors that specialize in low-volume, high-mix design and engineering orders, such as Mouser Electronics, weather market volatility better than their peers. In 2020, Mouser grew its Europe, Middle East and Africa (EMEA) business 4 percent in the midst of the Covid-19 outbreak, Brexit and a host of other market disruptions.
“It doesn’t matter where you look – there is one challenge after another,” said Graham Maggs, Mouser’s vice president, EMEA marketing. “There are always challenges that you don’t recognize such as the Suez Canal. The number of ships that were blocked coming to the EU was phenomenal. There is easily a month’s worth of ships that need to be cleared through Customs.”
EMEA has generally lagged the Americas and Asia-Pacific markets in rebounding from the worst of the coronavirus pandemic. One of the biggest differences between the U.S. and Europe is that the economic setback last year was much higher in the euro area, according to CNBC. Whereas the U.S. economy contracted by 3.5 percent, the euro zone economy shrunk by almost twice as much.
Overall, the electronics market experienced a healthy Q4 2020 and a very good Q1 2021. Mouser’s design-focused EMEA business expects a very robust 2021. “Things have gone crazy,” said Mark Burr-Lonnon, Mouser’s senior vice president for global service and EMEA and APAC. “Our bookings show a significant increase from last year.”
Catalog distributors have ready-to-ship inventory of all parts listed for sale. Mouser is authorized by more than 1,000 suppliers and carries more than 1 million part numbers. Design orders are not cost-sensitive, so catalogs are a profitable business.
What has led this recovery is not just high automotive demand, said Maggs. “Healthcare continues to be a focus, 5G hasn’t even reached mass production yet, and IoT has allowed the development and design – whether it be industry or manufacturer – of any number of sensor-based products. This more than anything has enabled us to gain share because of our breadth of suppliers and inventory.”
Overall, Mouser’s EMEA business expanded its account base (16 percent); buyers (12 percent) and lines shipped (9 percent) in 2020. The European Semiconductor Industry Association reports EU semiconductor sales grew 6.8 percent year-over-year in February. Revenue reached $3.48 billion; sensors, discretes and MOS microcomponents were the top drivers of this growth.
Germany, Austria, Switzerland and Central Europe did exceptionally well in Q1, said Maggs. “There are areas that didn’t see an improvement last year and this year, as well as a decrease in the UK. Some of that is due to Brexit.”
Mouser’s business has not been impacted by Britain’s action as it ships components from the U.S. to the UK and Europe. “Our issue was mainly the workload Customs brought in to make sure the paperwork was correct, and it did create a backlog,” said Maggs. Mouser has increased its EMEA personnel, sales offices and customer support in the past year, according to Burr-Lonnon, including:
- A new Customer Service Centre
- Warehouse automation advancements
- Expanded UK and Swedish offices
- Additional resources throughout all EMEA offices
- Development of online tools and resources
However, a component shortage is wreaking havoc throughout the electronics supply chain. A semiconductor shortfall, first cited by the automotive industry, has expanded to encompass interconnect, passive and electromechanical (IP&E) devices.
“The 5G rollout in Europe coincided with automotive chip demand,” said Maggs, “so it’s not just semiconductors. It’s MLCCs and other components used in multiple applications.”
“Mouser focuses on new products which is a key part of the value we add and our strategy to differentiate ourselves from the rest of the industry,” Burr-Lonnon added. “The only thing design engineers are interested in are new products, so we make sure we continually offer new product introductions.”
Mouser is also well-positioned to ride the industry’s digital transformation accelerated by the global pandemic. Catalog distributors have excelled at e-commerce, but factory closures, quarantines and logistics disruptions have required deeper levels of collaboration among supply chain partners -- and more technical support.
“Designs start on the web,” said Burr-Lonnon. “Customers may get engaged with [volume] distributors later on, but most engineers start with Mouser and one other guy. Only a few companies really drive the uptake of new designs.”
“Covid has pushed people to do things a different way -- more customers are buying and managing their orders online," he added. "We would have gotten there but Covid pushed us there faster."
Automotive companies, which generally order directly from semiconductor suppliers, have reached out to catalog companies to secure chips, said Burr-Lonnon. However, volume distributors hold significantly more inventory. “Automakers may be realizing they could use the type of services offered by a distributor,” he added. “Manufacturers can’t always accommodate sudden spikes in demand. The number of cars automakers produce may go down, but the percentage of electronics in those vehicles is going up.”
While catalogs are largely shielded from demand highs and lows, supply chain disruptions can delay deliveries and pressure service operations. The electronics industry has become so accustomed to running lean that it takes time to work through bottlenecks, said Maggs.
“Companies are running so lean in their processes – which usually work very well – that if one or two things go wrong there is a knock-on effect on everything else. What we have been seeing is one disruption after another and no matter how hard we work to correct our processes; it still takes time to work through these things.”