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December 10,  2013 
Editor's Note 
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 Consolidation Ahead for Fractured $48B Market

 

Molex Inc., one of the world's biggest makers of connectors for a variety of markets, including automotive, communications, consumer electronics, industrial, medical and networking equipment, has been absorbed by Koch Industries Inc., a conglomerate with limited presence in the industry. While Koch is keeping the current management of Molex in place, it is certain to implement changes intended to increase sales and boost profitability at the connector manufacturer. (See: Molex Will Change Under Koch But How Much?).

 

The greater impact of Koch's shift into electronics lies ahead. Prior to the Molex transaction, Koch had more than $110 billion in revenue and employed approximately 60,000 people. Molex alone will jack up Koch's payroll by more than 35,000 people. Will Koch wield the axe or concentrate on becoming a bigger player in electronics, using Molex to accelerate the consolidation of the $48 billion connector market. Within years, Molex's market share could rise above 10 percent from less than 8 percent today. This means some of today's smaller players in the interconnects, passives and electromechanical (IP&E) market could become acquisition targets for Koch and other major conglomerates.

 

The electronics industry is used to constant flux, though. One of the more wrenching changes taking place in the market and one that will affect a large swath of the supply chain is occurring in the communications market. Nokia Corp., once the world's biggest vendor of wireless handsets and still a big player, is getting out of the business after agreeing to sell its devices and services division to Microsoft. So, what will Nokia do once it closes the transaction as expected in the first quarter of 2014? The company plans to focus on the mobile infrastructure equipment market but considering its history of morphing from a wood pulp vendor to a rubber company, then TVs, radio and mobile phones, it shouldn't surprise anyone if Nokia - flush with cash from the Microsoft deal and IP licensing - targets other potentially lucrative fields in and outside of high tech. (See: Nokia: The Next Chapter Begins).

 

In other news of significance to the industry, Micron Inc. is vaulting to the No. 2 position in the embattled DRAM market following its acquisition of Elpida Memory Inc. The transaction also helped make Micron the world's fourth largest semiconductor company by revenue and will contribute towards what the chipmaker hopes would be the end of the DRAM arms race. (See: Micron Stabilizes, Predicts end of DRAM 'Arms' Race).

 

It's not just the big guys that are driving news in the electronics supply chain. Smaller companies are also in the spotlight. Many components distribution are reorganizing operations to better understand and respond to customers' needs. PEI-Genesis, for example, is making expansion plans for China after staying on the sideline initially but as EPS managing editor Barbara Jorgensen points out in a recent blog, there isn't a perfect time to enter the Chinese market. Each company must go at its own pace, Barb noted. (See: PEI-Genesis Prepares for Expansion into China and It's Never Too Late For China).

 

At the components level, some suppliers continue to emphasize the importance of the Western market by investing more in the region despite ongoing shifts in manufacturing to lower cost Asia Pacific and Eastern Europe. Ametherm, a supplier of thermistors and other components for circuit protection, believes so much in the American market that it doubled the size of its production facility in Nevada, as Gina Roos, EPS executive editor notes in a report. (See: Ametherm Thrives in Nevada).

 

Ken Bradley, a veteran of the electronics market and one of my favorite writers on industry issues, kept the theme of change alive in a blog posted this week. Ken, who's seen and experienced firsthand what happens when enterprises fail to promptly respond to change, focused on Agilent Technologies' recent decision to split itself into two enterprises. The company had done this before but rather than wait for its leadership in two key segments to be eroded, it decided to lead the change it sees coming. Agilent's action, according to Ken, is a good example of how companies can anticipate and respond to the unknown. (See: Becoming & Staying a Leader: the Agilent Way).

 

There's more for our readers at www.epsnewsonline.com. We also want to hear from you. Post a comment at the site or send your response to me at bolaji.ojo@epsnewsonline.com.
 

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Bolaji Ojo 

Editor in chief & publisher

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Molex Will Change Under Koch But How Much?   

Don't hold your breath if you believe Molex Inc. will not change at all or only superficially following its acquisition by Koch Industries Inc. The new master is in the house and more than the furniture will be shifted around. Koch targeted Molex because it sees an opportunity to improve operational performance, jack up sales and squeeze more profits out of the company. It will do whatever it sees necessary to achieve these goals, including reorganization, management reshuffle, further acquisitions and brand extension into new markets.

Continue Reading . . . 

 

Ametherm Thrives in Nevada        

Ametherm, a U.S. manufacturer of thermistors and other electronic components for circuit protection, has doubled the size of its manufacturing plant with the purchase of a 36,000-square-foot facility in Carson City to meet increased demand. The privately-held company manufactures all of its circuit protection devices at the new facility, which now serves as its new headquarters, and a smaller plant in Carson City. Ametherm expects to hire about 10 to 15 new employees as a result of the expansion. Continue Reading . . .  

 

Nokia Corp. is charting a new future. Only those who haven't researched its history will look at the recent challenges and write off the Finnish company. Nokia is not new to change; it's first logo spotted a fish. (See below). It's going through a wrenching evolution right now but the current reorganization is being layered on a long history of self-renewal the company has gone through since it was founded by a mining engineer as a wood pulp mill in 1865. Continue Reading . ..  



After more than a decade of savage pricing pressures that devastated margins and profitability at suppliers combined with wild demand-supply swings, the semiconductor DRAM market appears to be finally settling into a more "normal" trading pattern, according to an executive at Micron Technology Inc.  Continue Reading . . .  

 

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News 

Although the company announced the split in September, the Board and senior management team at Agilent Technologies impress me for giving their shareholders and employees such a great Christmas gift. As announced, this great company will split into two separate units; one focused on life sciences and the other on test and measurement.Continue Reading . . .    

Market conditions have changed in the power semiconductor market in 2013, and this is good news for suppliers. The market is expected to grow in the single digits in 2013, although some application sectors will grow faster or fall below the total market, said Victoria Fodale, senior semiconductor market analyst for IHS. Some power semiconductor manufacturers expect higher growth of about 10 percent for discrete devices particularly as more customers address power efficiency in their end products. Continue Reading . . .   

One of the things we at EPS are trying to do is shine a spotlight on companies that may not get a lot of press. I've spoken to a number of such companies recently and an interesting trend is emerging: these companies are only now seriously evaluating China. Continue Reading . . .     

Hardware was the foundation of the electronics industry but over the last decade software has taken over the furnishing of the household. Where hardware innovation once defined winners and losers, the reverse is the case today. The high-tech business names on the tips of everyone's tongues today - aside from Apple Inc. - aren't the likes of Cisco, Dell, Hewlett-Packard, IBM or Intel but social media and marketing enterprises like Amazon, Facebook, Google, LinkedIn, Pinterest, Sina (Sina's Weibo.com is really big in China, trust me) Twitter and Zynga. Continue Reading . . .      

The Complexity of Managing Materials Reporting

In a simple example of a chip capacitor used in a majority of electronic products today, SGS shows how complex it can be to identify and report on the materials used in an electronic component. This is a growing challenge for electrical and electronics suppliers and manufacturers as they need to deal with growing demand to be accountable for every molecule of material contained in their products, which may impact the health of the environment, consumers and workers responsible for the manufacturing of products, and for the recovery, recycling and disposal of end of life products, said SGS. Continue Reading . . .  

Purchasing and the Date Codes Tool

One of the responsibilities for purchasing is to maintain a strong supplier relationship by providing critical feedback to the supplier from time to time. When there is a problem with a shipment or a sub-par performance of the product shipped, then the buyer should be in contact with the selling agent to determine the best and most timely solution to the problem. Continue Reading . . .  

Semiconductor Industry Set to Grow 5% in 2013

The numbers are rolling in for the global semiconductor industry in 2013, and they look good, according to several market research firms, thanks to a strong rebound in memory devices. Several market analysts peg growth at approximately five percent in 2013. Continue Reading . . . 

News Wire 
 

Vitesse Ends Soft 2013

Future Carries Littelfuse's UltraMOV


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