In a world of rapid technological innovation, the electronic components industry has become important than ever. Coping up with the electronics component demand, maintain quality and reliability, upfront market strategies, inventory management and reaching the last mile all comprising the electronic component distribution business to evaluate and assess newer strategies. To manufacture a readily available supply of electronic products that consumers now expect, the industry must continue to grow and be supported by effective supply chains. Advance technologies like Artificial Intelligence(AI), Machine Learning (Ml) and the Internet of Things(IoT) are deriving new mean of prospects and adapt to new behaviors and requirements of global customers. One crucial thing on the brighter side is the global advancement of technology which is creating a holistic demand for electronic components and helping electronic component distributors to compile a global blueprint. Another aspect that makes this story more pivotal than ever is the pandemic, bringing along the big names and companies to respond to the pandemic situation was inevitably important. Hence in an aim to unveil the potential of the electronic component distribution industry and trends foreseen in 2021 or say in this new normal, I tried to get alongside the best-in-the-business paving the new cognizance for electronic components distribution business. As leading electronic component distribution players, the collective voice of Tony Ng | VP| Business Development, APAC| Digi-Key Electronics; Tan Aik Hoon| Regional President, South Asia, Korea and Avnet United| Avnet and Anil Kumar Challyil |GTC Site Manager | Global Technical Marketing | element14 came across as more decisive, impelling and indeed ingenious. This is what the leaders had to say.
Key Drivers of Electronic Components Distributing Biz in 2021
There is always a light at the end of the tunnel! 2020 washed off many pre-determined strategies as we all became onlookers stranding to get everything normal. Moving away in a flick and determining to take the next step stronger, the electronic component distribution business certainly kept its tempo high.
Meanwhile, Tony from Digi-Key believes 2021 to be a recovery year. Elaborating further, he said, “We expect to see the growth of the distribution business of all technologies across multiple industries. The major automotive players in Europe and China are already feeling the pain of not getting enough semiconductors they will need in the coming months. Cloud-related hardware infrastructure and portable terminals remain strong, and they are well coupled by the new generation of chipsets for CPU and wireless applications supporting equipment upgrades. The continuous implementation of 5G infrastructure and related applications will trigger stable demand at least through 2022. With all governments’ money policies, research and development across industries will also be indirectly benefited. Tony indeed foresees a bright year to come!
Emphasizing the prevalence of AI and IoT, Aik Hoon from Avnet said, “As Artificial intelligence (AI) becomes increasingly prevalent, it is expected to become one of the catalysts driving the electronics components industry. IoT can bring data from millions of devices but we need to apply AI to IoT data to generate insights. AI is driving both hardware and software products, from custom chips to AI neural networks. Many companies are also designing AI-specific chips.” Talking about the stay-at-home economy, Aik Hoon foresees a robust demand for gaming, laptops, servers and other devices supporting remote work and education. She said, “We have seen a huge jump in the demand for electronic component needs. In automotive, the chip-reliant industry has recovered much faster than expected but was hit hard by a global chip shortage partially as a result of the stay-at-home economy. That said, the automotive electronics market is expected to continue growing. There is also a current boom in hybrid and electric vehicles which require even more components.”
Witnessing the market unpredictable, Anil from element14 cites, “The industry is expected to rebound and witness recovery in 2021. We see the automotive sector picking up pace in electric and traditional vehicles. COVID-19 has driven demand in the telecommunication industry due to remote working, online learning, home gaming, etc. With the pandemic currently showing no signs of slowing down, the telecommunication industry will continue to go strongly.”,
He continues “COVID-19 has also accelerated the need for touchless technology, resulting in wireless technology such as Bluetooth and NFC becoming increasingly popular. 5G will enable different levels of innovation across multiple market segments, including healthcare, autonomous vehicles, smart cities, and industrial automation.”
Sharing a report, Anil added, “The world is shifting towards clean, eco-friendly energy sources. The IEA forecasts that the renewable electricity capacity will rebound in 2021 as delayed projects are expected to come online. Currently, India is the third-largest producer of solar energy in the world.”
Ready-To-Go Strategies and Collaring with Rapid Innovations in Product Development
Talking about their expertise in this rapidly changing technology world, Aik Hoon affirms, “As a global technology solutions provider and a distributor, Avnet is uniquely positioned to guide businesses to use the best and most effective parts from the world’s best suppliers and also offer customers an end to end solution.” Furthermore, Aik Hoon talks about product life cycles as it gets increasingly shorter. In this scenario, she believes, “Businesses need to be quick in introducing new products to the market or risk being superseded by their competitors. Avnet has been supporting our suppliers and customers in demand creation. Our extensive ecosystem of experts supports customers at every stage of the product lifecycle. We offer design, product, marketing and supply chain expertise to help companies reduce the time, cost and complexities of bringing their products to market.”
On the other hand, Tony seconds on the question elaborating, “Digi-Key can’t agree more in this area. To maximize customer innovation, Digi-Key continues to invest in enlarging our product portfolios. In the past two years, we have increased 200 franchised lines, 1,100,000 searchable parts, and 300,000 SKUs for immediate purchase. Digi-Key now offers more than 11.5 million components, with over 2.6 million in stock and available for immediate shipment, from over 1,500 quality name-brand manufacturers. All of these investments are designed to enable innovation and making parts ready-togo when customers need them.”
Lastly, Anil underlines the importance of R&D, adding, “The rapid pace of innovation in electronics technology creates a constant demand for newer and faster products and applications. This demand puts a greater emphasis on R&D to keep changing their input components to suppliers having innovative and latest product roadmaps at competitive prices. Multiple alternatives will help them to mitigate losses, shortages, and cost escalations.
Elaborating on disruptive technologies such as Artificial Intelligence, Nanoelectronics, IoT, Cloud computing, Advanced Robotics, 3D printing, and Wearables, Anil believes these technologies are changing the face of many OEMs’ manufacturing focus. Talking about element14, he said, “element14 can offer new and expanded services as an absolute value-add to our customers in new markets at a pace never seen before. Our websites, Community, and various resources help provide the most up-to-date information about our suppliers’ latest product trends. Members can easily access datasheets, design notes, example schematics, and example codes to start their research. They can build prototypes with ready evaluation boards, processor boards, and modules available in stock. Manufacturers have moved up the value chain to concentrate on more technically advanced industries or products. Success in the future of manufacturing requires an agile process including research, technology, innovation, and training targeted towards getting better-differentiated products to market more swiftly. As OEMs increasingly outsource product design and manufacturing to strategic partners, they can reduce overall costs. They can focus on expanding into new lines of business and revenue opportunities. Avnet and element14, as value-added component distributors, offer advanced design and testing services. A component consultancy based on the latest trends, the supply of sub-assemblies of processor and connectivity solutions for customers to deliver more sophisticated products at unprecedented speed with accuracy – while simultaneously controlling costs.”
Coping Up With Digital Transformation in Electronic Component Distribution Biz
Sharing about Digi-Key’s major initiatives to lead in this digital transformation era, Tony quotes, “Digital transformation remains a major topic for Digi-Key to focus its investments for the years to come. In 2020, we launched connectivity solutions in India and multiple APAC countries. Our B2B customers can easily automate their daily quotation and order entry process with us via the API portal. Even for small businesses without the IT resources, they are also encouraged to utilize our online tools like BOM and Quote Manager or even reach out to our sales reps to explore alternatives to process their frequent POs with us faster and more accurately, as long as they have a standard order format.
Tony talking about the Indian market cited, “We also launched online scheduled orders for the India market in INR. Together with potential credit term support, we enable our customers to plan better and buy more conveniently. Digi-Key continues to explore ways to make doing business with us easier for our customers.”
Anil talks about element14’s investment and strategies for digital transformation, he said, “element14 is a pioneer in online component distribution. We have invested heavily in this area for the past few years. We are well poised to take advantage of and lead the digital transformation process. element14 has recently rolled out new website functionality to further enhance user experience as there is a growth in the use of online channels and services and there is a clear roadmap of further developments to continue to enhance the experience. The enhancements provide element14 customers with increased flexibility and ease of use when identifying and buying components for new product design, production, and testing.”
Adding on their customer support and services, Anil said, “Customers expect seamless 24/7 service for consultancy on component suggestions, solutions to technical queries, placement of orders, and supply chain tracking through email, phone, and chat. An efficient E-commerce platform, mobile tools, depth and breadth of stock inventory, order and delivery tracking are a must for distributors.”
Aik Hoon takes us through an overview of Avnet’s digital transformation capabilities aimed to enhance customer experience. she elaborates, “Avnet is continuously strengthening our digital capabilities to enhance customers’ experience. E-commerce is an encompassing part of the way we do business, and Avnet has a sizeable digital footprint. Our enhanced digital portal offers customers 24/7 e-commerce expertise to our expansive list of products and services. It is the first source of information for stock and price details for all our customers. Even before the buying happens, customers use our online communities such as element14 and hackster. io to do preliminary research for the products, technologies and seek help using various tools like live chat, or community groups online. Through Farnell, we also fulfill small-volume (or catalog) orders in addition to large volumes. These enable our customers to get their required components with ease, and empowering them to design and test out their ideas or prototypes much quicker.”
Demand & Supply Critical for Electronic Component Distributors?
Tony emphasizing their sales and customer-retention strategy said, “There are many reasons why customers keep coming back to Digi-Key. Two years ago, 2019 was kind of a year of correction of industry cycles and 2020 had the pandemic causing fluctuated demands, but that has not stopped Digi-Key from investing. With the additional franchised lines, searchable parts, and stock-keeping units (SKUs) for immediate delivery, Digi-Key is better equipped to support our customers for their business needs.”
Whereas Aik Hoon believes “Demand far exceeds supply at present. The challenge is to gain more visibility on our customers’ forecast numbers and longer-term requirements to allow us to plan better. Even with a proper forecast, many raw materials like minerals are in shortage and are difficult to procure. But with this visibility, it will mitigate the risk and loss of business opportunities for both customers and suppliers.”
Lastly considering advanced supply chains in this new normal, Anil had to say, “The impact of potential disruptions such as COVID-19 are reduced by clear communication and guidance for industries in the broader network of “essential supplies”, yet the experience of the pandemic has taught us that we need a future supply chain that is more resilient and greener, with a strong capacity for innovation, whilst satisfying required regulatory regimes and taking into consideration risk, ethics and security needs.
Key Sectors Driving the Demand For Electronic Components in the APAC Market
According to Anil, “The automation industry, IoT, machine learning, and medical are key sectors driving the APAC market.
- The automation software market is projected to reach $7.0 billion by 2023, due to the increasing penetration of digital marketing and social media in APAC, especially by the populace under 40.
- The APAC Internet of Things (IoT) market is expected to expand at a compound annual growth rate (CAGR) of 29.3% between 2018 and 2025 to reach a size of $424.2 billion by the end of the forecast period with the study sizing spending across the entire IoT value chain including chips, modules, sensing, connectivity, enablement platform, system integration and applications.
- The machine learning market value in Asia-Pacific is expected to reach USD 10.00 Bn by 2023, expanding at a compound annual growth rate (CAGR) of 51.3% during 2018-2023.
Asia Pacific Medical Products Market Share was valued at around USD 4.9 billion in 2019 and is estimated to show around 7.5% CAGR from 2020 to 2026. The growing geriatric population, increasing number of disabilities and rising investments in healthcare infrastructural development are significant factors that boost regional growth. The ever-growing ageing population experiencing mobility issues in the region is one of the major factors propelling the demand for wheelchairs and increasing the overall market growth.”
On the heels, keeping its crisp, Tony noted, “Automotive, 5G and computing infrastructure are three of the biggest sectors we see right now key sectors driving the APAC market.”
Re-emphasizing AI/ML & IoT as key drivers, Aik Hoon said, “AI and machine learning are gaining prevalence as businesses turned to AI to gain insights into data that is growing exponentially. This is further amplified during the pandemic as we strive to make sense of more data to keep people safe at schools, workplaces and public areas. Avnet has been providing design chain services and technical expertise to our customers to facilitate their product development in the areas of AI, IoT, machine learning, embedded vision, autonomous driving and so on to better serve the community.”
She continues, “Covid-19 has also accelerated automation in various sectors as a means to reduce human interaction. In the area of food delivery for instance, Avnet supported a startup in China with the development of an unmanned delivery vehicle. We provided support to the customer in system architecture, device selection, design support on both hardware and software. In addition, we also helped them to implement AI design and system optimization. During the Covid-19 outbreak, this unmanned delivery vehicle has been deployed in Hunan’s science park to provide truly contactless delivery of meals.”
“There was an uptick in demand for unique SaaS solutions for healthcare requirement. Before the pandemic, contact tracers were not something we would have thought of developing. Now it has become a necessity and Avnet supported the design of the hardware as well as the firmware for the contact tracing device and gateway which work together as an ecosystem. Remote patient monitoring and virtual care are also on the rise” adds Aik Hoon.
Strategies and Importance of Indian Market
The concluding words from Tony highlighted, “India is an important market to support our continuous growth in APAC. As the market continues to grow, we also continue to learn how to serve our customers better in the country. We are exploring solutions from daily service support, bringing parts to customers’ doorstep, and making payment easier. We will continue to grow alongside our customers.”
Anil sums up stating, “The world’s fastest-growing industry, Electronics System Design and Manufacturing (ESDM), continues to transform lives, businesses, and economies worldwide. The global electronics market is estimated to be over $2 trillion and India’s global electronics manufacturing share grew from 1.3% in 2012 to 3% in 2018.
Technology transitions such as the rollout of 5G networks and IoT drive the accelerated adoption of electronics products. Initiatives such as ‘Digital India’ and ‘Smart City’ projects have raised the demand for IoT in the market and will undoubtedly usher in a new era for electronic products.
- India is expected to have a digital economy of $1 trillion by 2025
- India’s electronics market will be one of the largest in the world and reach approximately $400 bn by 2025
- India’s ESDM sector is expected to generate $100 – 130 bn in economic value by 2025
100% FDI is allowed under the automatic route. Electronics for defence can attract FDI up to 49% under automatic route and beyond 49% through government approval.”
Lastly, Aik Hoon pins on the importance of the Indian market by sharing her concluding words, “India is an important market for Avnet. We are committed to supporting the government’s “Make in India” initiative such as in developing smart cities. We have been working closely with the local companies to develop smart, market-ready solutions that address their IoT needs, ranging from thermal sensors, e-meters, to improving logistics and developing a smarter tracking system.
For instance, Avnet worked with a local module manufacturer and provided them logistics and design support to secure a major design in a smart street light project. The project calls for the installation of 1lac plus smart street lights. Avnet also worked with various design houses to create smart horticulture solutions. Whether it is BLE or wifi-based solutions – Avnet has deep expertise in providing support to the customer. We also developed a system in India that converts and uses solar energy to run agriculture pumps, delivers maximum power to the motor depending on solar energy, while offering maximum protection to the motor and the drive. Recently, we collaborated with Infineon Technologies to support their ‘Infineon Solar Pump Motor Drive Challenge 2021′ in efforts to encourage affordable and reliable solar-powered irrigation systems for farmers that are designed and manufactured locally in India.
As more and more EMS move into India, a distributor with a strong global supply chain network such as Avnet with presence in the country will also boost investor confidence to know that there is supply chain stability.”