As product design becomes increasingly complex and time-to-market cycles shrink, OEMs are relying more than ever on the distribution channel to ensure they get the parts they need when they need them.
Electronics distributors are stepping in to help find difficult-to-source parts. What sets distributors apart from other sources of supply and their evolving role in the market? Let’s explore.
Benefits of partnering with a distributor
Electronics distributors, sometimes called independent distributors or open-market distributors, fill a niche that direct factory and franchise lines can’t. Instead of providing parts from a single manufacturer, they build a global network of trusted suppliers and match their inventory with OEMs who need parts. Distributors’ wide networks allow them to find the best prices and lead times around the globe—and pass those savings on to their customers. This also helps insulate OEMs against market disruptions. If one of their suppliers is delayed due to geopolitical tensions or natural disasters, for example, a distributor has many other options to explore.
Distributors can be helpful to companies that don’t meet the volume requirements to buy directly from manufacturers. And when you work with a distributor, parts can flow in both directions. If you find yourself with surplus inventory, a distributor can help you find a buyer for maximum return.
Distributors complement direct factory and franchise lines by providing a channel to source obscure, end-of-life, and hard-to-find parts. Take large-node components (65 nm and higher), which are now legacy parts, for example. As demand for these parts steadily declines, manufacturers stop making them and they become more challenging to find—but they’re still needed in high-reliability industries like automotive and defense & aerospace. Sourcing them is even harder in high-reliability applications, where indirect sources may not be equipped to meet the industry’s stringent regulatory and flow-down requirements. Electronics distributors are well-positioned to fill gaps in the supply of these large-node parts.
Distributors’ evolving role in the industry
Once a relatively new concept, electronics distributors have become a critical part of mainstream electronics sourcing strategies. They currently make up 10 to 15 percent of the $160B semiconductor distribution market, and their presence will likely continue to grow. Their global networks have made them indispensable during times of market disruption, and many industries rely on their ability to source legacy and hard-to-find parts.
For example, automakers have long used distributors to source their EOL components, and other industries are catching on. Highly regulated industries like medical, automotive, telecommunications, and defense & aerospace will likely rely more on distributors going forward and treat them as key partners in their supply chain strategies. Electronics distributors have proven invaluable during EOL market imbalances, and they’re starting to play a bigger role in the day-to-day supply chain.
Recent events have shed light on one of the semiconductor market’s greatest weaknesses: its overreliance on Asian countries, especially Taiwan, for component manufacturing. The electronics industry has begun to realize the risks of having much of its supply chain concentrated in a single geographic region. In response, companies are looking for ways to mitigate risk and bolster their supply chain’s resilience. Partnering with independent distributors is a strategic option to mitigate that risk. Distributors are expected to take on an increasingly prominent role in the global electronics market in the coming years.
Sourcing only through factory or franchise lines not only limits opportunities for cost and lead time savings, but also opens you up to the risks of sole sourcing. Electronics distributors provide another avenue, which is especially valuable for OEMs in need of legacy or hard-to-find components. By partnering with the right distributor, you can better protect yourself from the market’s ups and downs while ensuring a steady supply of the parts you need.
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