As for my own contribution to this issue, I recently spent a week at EDS 2010 in Las Vegas, which is a gathering of electronics distributors, manufacturers, and manufacturers’ representatives. This tradeshow is different from most. It has a small exhibit floor, but most of the action takes place in meeting rooms and hotel suites. We were there with our sister brand, Source ESB, meeting with distributors and manufacturers.
From my meetings, I was able to glean a good deal of information on the state of the industry from distributors’ and manufacturers’ points of view. And I can tell you that the overall perspective is very positive. Besides a company-specific interview, I asked everyone I met with the same series of questions. Here are some of the highlights of what I found out.
RECESSION VERSUS RECOVERY
Last year was a disaster for most companies due to the worldwide recession. But now that we’re in a recovery mode, I was wondering how strong the recovery really is. I found out that some companies weren’t hit as severely as others during the recession. But no matter how good or bad business was last year, business is booming this year. Most of the folks I spoke with did not compare this year’s results to last year, but to 2008, when some had their best quarters ever.
“Some people might say, ‘What recession?’ Twelve months never seemed so long ago,” quipped David Doherty, vice president of semiconductors at Digi-Key (www.digikey.com). He went on to say that from a design activity perspective and new customers coming into the market, 2009 was actually a successful year for Digi-Key. This is a sentiment I heard more than once at the show, and I’ve heard it through past recessions as well. In other words, when times are bad, engineering activity doesn’t stop. It continues. Companies in our industry, at least, want to be ready with new products when the recession finally comes to an end. This means working hard by creating new and possibly revolutionary products when economic times are at their worst.
In light of the recent Department of Commerce (DOC) study of counterfeit electronics (see “DOC Reports On Counterfeit Electronics”), we thought we would ask if this problem is affecting business in any way. Most everyone we talked to said yes. The problem becomes exacerbated when electronics manufacturers are struggling to keep up with demand.
We spoke with Robin Gray, executive vice president of the National Electronic Distributors Association (NEDA), about counterfeit parts. He pointed out that the problem is not new and is being addressed by his organization. “One of the ways that counterfeit product gets into the authorized supply chain is through return of product to distributors. So, NEDA has been very active in working with our members in developing policies regarding returns,” Gray said.
If you visit the home page of the NEDA Web site (www.nedassoc.org), you’ll see that its advocacy campaign for 2010 addresses the threat of counterfeit products. The page also includes a link to its guidelines on product returns.
We asked manufacturers and distributors alike about headaches in the supply chain. The answers for the most part boiled down to inventory and lead times. The distributors we spoke to said that they tried as best as they could to maintain inventory during the recession so they would be prepared for the recovery. But most said the strength of the recovery caught them by surprise and therefore are struggling somewhat to keep the supply chain going.
Of course, as inventory wanes, lead times for some products start to increase, which can put a damper on the economic recovery. But some manufacturers were bucking the trend of long lead times. I spoke with Ralph Waggitt, president and CEO of Advanced Power Electronics (a-powerusa.com), who pointed out that his company’s lead time for power MOSFETs was only 12 weeks, which he thought was a distinct competitive advantage.
I also spoke with Troy David, president of Keystone Electronics (keyelco.com), which manufactures components such as battery clips, fuse holders, and terminals. “So far, distributors have been telling us that we’re above average in our lead times,” he said. “We experienced a similar situation in 2001, so we knew the market would come back. We prepared for it and have been maintaining inventory at a strong level.”
While at the EDS show, we conducted a slew of video interviews. Check them out at Engineering TV (engineeringtv.com/pages/trade.shows).