FEATURE SUPPLY CHAIN MANAGEMENT
SUPPLY INTERRUPTED, BRIGHT FUTURE AHEAD
In 2017 German distributors reported record sales of 3.6 billion euros – and business continued to perform well in the first quarter of 2018. On the other hand, there is cost pressure, a risk of shortages and a global political situation that is becoming increasingly complicated. How are distributors experiencing this? Georg Steinberger, chairman of the board of directors of the German Components Distribution Association (FBDi) speaks up
he effect of foreign policy on the distribution business is somewhat overstated at the moment. While the automotive industry may potentially be affected by the threat of punitive tariffs, other industries are not likely to be. Ultimately, many products that Germany exports are of such high quality that they cannot be replaced on a whim. What could certainly contribute to unpredictability in the semiconductor market is the fact that more than half of the associated business is conducted in China nowadays. Consumer-driven companies such as Apple and major contract manufacturers such as Foxconn have considerable sway over the market. If demand for components among customers of this calibre rises hugely, this could certainly impact availability in Europe or America adversely. The supply situation of late has been very tense. But there are several factors responsible. Firstly, there is strong demand among customers in all segments, which is noticeable worldwide. A huge impact comes from the consumer business, i.e. PC, smartphones or tablets. The sector is currently undergoing a generation change, which has a massive impact on component demand, whether for semiconductors or passive components. Market researchers studying the
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business for passive components and semiconductors also expect demand to remain constant for the coming years. They believe that too little has been invested in new capacities in recent years. In light of the enormous capital expenditure required to construct new production facilities, this is somewhat understandable, as a new 300mm wafer fab plant can cost between 5 and 6 billion dollars. That said, the current shortage is certainly partly by design of the manufacturers.
6 SEPTEMBER 2018 | ELECTRONICS
Additionally, the numerous acquisitions over recent years have resulted in many components no longer being available as a result of the ensuing portfolio streamlining. The general view is that the effects of new investments are only likely to be felt next year at the earliest.
ANTICIPATED REVENUE FOR GERMAN DISTRIBUTORS FOR 2018? For the full year of 2017 companies registered with the FBDi in Germany reported a sales plus of 12% to 3.6 billion Euros and incoming orders of 3.91 billion Euros – a record result. In the first quarter of 2018 revenue rose by around 7 per cent. The general expectation is the growth to be in that ballpark for the rest of the year. FBDi has observed manufacturers increasing prices, which has accounted for part of the growth. However, we must also expect availability to limit growth somewhat. Growth in the mid-single digit sounds realistic against this backdrop. Topics of importance for distribution in
the near future on the technology side include the same topics of focus from recent years such as IoT. The IoT has since become part of the mainstream; Internet connectivity and data analysis is demanded in practically all applications in all vertical segments. This will surely remain a key topic that we will continuously need to address. Wherever we look, the share of electronics (and the
associated software) continues to rise. The problems surrounding intellectual property will also shape the market, and in this connection, so will availability. If a customer develops a design with a certain product today, in two thirds of cases it will be an exclusive product of a certain manufacturer. There are barely any second sources to fall back on. So once you have your design, it is basically a case of in for a penny, in for a pound, with real alternatives – unless you undergo a complex redesign. On the process side, we will see and
feel increased dynamics in further digitisation of business processes. The distribution model will change forever, with a lot of new opportunities in terms of services and interaction. In regards to the political arena, the
fundamental problem is that European unity, which the European Union is meant to symbolise, is being generally called into question. From an economic perspective, the EU is a blessing. It has achieved much in financial policy and international trade. The legislative processes in Brussels can be considered positive, because they harmonise the many individual processes. It is better to have a single body of international legislation as opposed to 28 law- making institutions all addressing the same topics. Instead of yielding every time populists questioning the existence of the EU, European politics should be focusing more on the virtues of European unity and not simply constantly saying “we’re Europeans, but...”. The basic rule of communication is that anything before a “but” is a lie. These politicians should stop “playing around” and stand up for Europe.
FBDi
www.fbdi.de T: +49 (0) 174 870 27 53 / ELECTRONICS
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