Electronic Components & Semiconductor Wholesalers
Buy This Industry Report
Get more in-depth industry information with a First Research industry report containing business challenges, trends, executive insight, call prep questions, and so much more!
Increase Appointments
Engage Prospects
Build Your Confidence
Industry Overview
More than 15,000 wholesale distribution outlets of electronic parts and equipment operate in the US, generating annual revenues of $140 billion. Large companies include Arrow Electronics and Avnet. The average distributor has 20 employees and annual sales less than $10 million. The industry is rapidly consolidating and has a large international component. The 50 largest firms hold about 65 percent of the market.
Competitive Landscape
Demand for electronic components is driven largely by business and consumer purchases of computers and telecommunications equipment. The profitability of individual companies depends on business volume and correct merchandising, or stocking the products buyers want. Large companies have advantages through buying in high volume at discounted prices, more-efficient inventory management, and the ability to fulfill large customer orders. Small wholesalers can compete by offering specialized products or better service.
Products, Operations & Technology
Major products include semiconductors (computer chips); connectors; and electromechanical devices. Other products include disk and tape drives, computer subsystems, microwave and fiber optic components, transistors, diodes, power supplies, and switches. Computer chips account for about 55 percent of industry revenue. In some cases components may be very small and inexpensive. Most distributors operate a single distribution center, although big distributors such as Arrow operate dozens of centers serving multiple countries. Distribution centers are often larger than 200,000 square feet.
In addition to products, wholesalers offer services like purchasing; marketing; warehousing; packing, shipping, and delivery; customized packaging, private labeling; minor repair and refurbishment; "kitting" (simple assembly); and other end-user support services.
The product mix for most wholesalers is always changing, due to changing market demand. Products are generally bought from manufacturers under non-exclusive authorized distributor agreements that establish marketing relationships with manufacturers, provide for joint marketing programs, and are renewable for one-year terms. Cancellation notice is usually from 30 to 180 days. These agreements are very important to protect wholesalers against price changes and obsolete inventory. They typically require a manufacturer to credit the wholesaler if the manufacturer cuts list prices (which happens frequently) and to accept inventory returns for a specified percentage of product purchased.
The design and operation of efficient supply chain systems is crucial for wholesalers because of the large numbers of parts and customers they deal with, the rapid pace of technological innovation, and the threat of declining prices. Arrow buys from 600 suppliers and sells to 175,000 customers. Sophisticated computerized inventory systems and distribution operations are essential. Typical systems provide online real-time information about inventory levels, pricing, customer order status, and supplier orders; analysis of inventory turns by product, supplier stock rotation, order backlog, and rejected materials; and other quantity and quality measures. Automated materials handling systems using bar code labels are often used in distribution centers. Because of high computer system efficiency, sales per employee are often around $500,000.
