The electronics industry is one characterized by constant change as new business opportunities and end user needs are driving growth in new applications and new markets. As a result, the electronic components industry must adapt — even embrace — this change, as companies that don’t are in danger of being left behind. With this in mind, we examine some of the bigger trends that we expect to make an impact in 2014, and predict how these trends will affect the industry.
Increased confidence in the Internet
For components manufacturers and their authorized distributors, the Internet has allowed them to expand their reach globally, while at the same time driving down costs as more and more buyers begin to accept e-commerce platforms. This trend will continue in 2014 as the Internet provides distributors and suppliers access to global buyer populations in high-growth markets like China and India, while providing those buyers the ability to source product that meets their project and budget needs. This is especially important when searching for hard to find obsolete and end-of-life parts.
The coming year will present new opportunities for the electronic components industry to move the purchase process and supply chain management online to increase efficiency and alleviate downward pressure on margins. Forward-looking distributors are enhancing their Internet-based offerings with inventory tracking, product videos, and downloadable electronic datasheets.
Opportunities and challenges from diverse markets
Rapid changes in end user demand as well as vertical market needs such as technology changes, product lifecycles, and government regulations will trigger new requirements for the production, packaging, procurement, and fulfillment of components in 2014 among diverse industries such as LED and medical. Players up and down the supply chain – from manufacturers to distributors to service providers – are rethinking their business strategies in order to stay flexible and differentiate to capture a share of these growing market opportunities. Manufacturers and distributors will expand their focus on developing markets in Asia and Latin America to offset slower growth in North America and Europe. This market opportunity comes with challenges related to logistics, customer support, and counterfeits.). Successful supply chain participants will have to navigate regulatory diversity and meet standards certifications, and varying product lifecycles will require distributors to maintain a range of components and date codes, including obsolete and end-of-life components.
New battlefronts in the war on counterfeits and the gray market
As we outlined in a recent article, the war on counterfeits and the gray market took a new turn in recent years due to increasingly strict regulation from the US federal government. The 2013 National Defense Authorization Act (NDAA) holds Department of Defense contractors liable for counterfeit parts, implicitly encouraging buyers to source parts only from original manufacturers, and is serving a role model for other countries to take a tougher stance in the coming year:
· The European Union has adopted stricter inspection guidelines via an initiative called ChipCheck, a new inspection system to detect counterfeit electronic components. Although this is a step in the right direction, we predict that, in order to keep pace with the US and maintain its market share, the EU will more closely align its regulations with the NDAA in 2014 and beyond.
· Canada initially adopted a lukewarm stance to the problem of counterfeits, but this attitude is changing, and in March 2013, the Canadian Parliament proposed the ‘Combating Counterfeit Products Act’. We anticipate the law will make its way through the Canadian Parliament, enabling a united front against counterfeits in North America.
· China is starting to make concessions, such as agreeing to a joint operation with the US to seize more than 243,000 counterfeit parts, and we expect this to continue as the country faces a dual threat from counterfeits – against the country’s export business and its home markets.
The battle against counterfeits will continue in 2014 but the constructive steps taken against this issue in 2013 means that our industry is better educated and better prepared to deal with the problem.
These are just some of the trends we believe will continue to challenge the electronic components industry in the coming year, and all highlight the fact that older business models are no longer sufficient to meet the needs of this challenging and diverse industry.