Electronic component distributors are a key node in the hi-tech value chain, as an increasing percentage of component supplier's revenue continues to be generated through this channel. This industry, which started off by trading surplus radio parts during the mid-20th century, is now a thriving and sophisticated business that supports the growth in the hi-tech industry largely by collaborating effectively with their value chain partners.
Innovation and short product lifecycles typically drive the hi-tech industry, so a quick and easy reach to diverse markets is critical. Component suppliers, as well as original equipment manufacturers (OEMs), depend on the distributor product lines, market reach and specialized services to accelerate time to market and improve efficiencies in their own supply chains. It is in this area of specialized services that distributors have enhanced their value proposition in the hi-tech industry. By partnering with suppliers and customers and understanding their constraints and limitations, component distributors have expanded their basic role, pro-actively structuring collaborative processes to bridge gaps across the value chain.
Traditionally, component suppliers supported their large customers directly and let the distributors handle the balance of their business. However, globalization pressures over the last few decades have placed design and production burden on OEMs that have responded by shifting production to EMS companies. Over the years, EMS players have, in turn, moved production overseas. This trend continues to grow, and component suppliers are increasingly taking the cost effective route of the distributor channel to keep up with their important customers across diverse markets. The consolidation of fragmented distributors into a few major players over the last decade and the capability to service the requirements of a number of small customers have contributed significantly toward their increased importance in the hi-tech value chain.
Handling this increase in volume by providing fulfillment and other basic distributor services is only one part of the supply equation. However as design and innovation are driving up the mix and complexity of products, many suppliers do not have the resources to directly support the technical demand chain requirements of a number of tier-two and tier-three customers. These requirements can include engineering and design-support, channel identification for product designs, and field technical support. Distributors, for their part, have continued to collaborate in order to represent their suppliers to a wider range of customers, and to support customer-specific requirements as well. This is also helping them to further establish their presence in the hi-tech value chain.
Design Win Process
If a supplier part is included in an OEM design project, it is referred to as a design win. Progressive distributors, backed by the huge investments in technical staff, collaborate with suppliers from the early stages of component design, eventually influencing customers to select components in their equipment design projects. For example, PC OEMs like Dell or Toshiba could use a different semiconductor chip in their design. Distributors then obtain approval and register the design with the supplier, which is referred to as design win registration. This allows them to claim incentives from the supplier whenever a part on their design registration is ordered and shipped to a customer. Component suppliers have come to depend on major distributors to track and increase design-win opportunities, and distributors with a good understanding of product functionalities across diverse markets and access to a wide range of customers are well suited to quickly recommend right parts to a variety of design requirements.
Innovation and Marketing Alliance