I'm nostalgic for the electronics industry's vanishing middle class.
Though the pangs have been with me for some time, they intensified this month with the sale of Pioneer-Standard's electronic components unit to Arrow Electronics and Pioneer's subsequent decision to shut down its semiconductor distribution channel.
For $285 million, Pioneer's components business joins a pantheon--Kent, Marshall, VEBA, Wyle, et al.--whose brands have been dismantled or absorbed into their insatiably acquisitive rivals. Consider this: Approximately $5 out of every $10 that move through the electronics distribution channel are now controlled by the duopoly of Arrow and Avnet.
The trend is not new, of course. The semiconductor sector, for one, is swiftly breaking into camps consisting of huge, self-sufficient manufacturers and a sea of smaller fabless companies. The contract manufacturing industry also has endured bouts of consolidation and looks destined to evolve into a handful of mega-EMS providers and a passel of specialty houses that survive on niche applications.
From a business perspective, it isn't always clear what such centralization is designed to accomplish. Fewer distribution players, for example, hasn't resulted in an automatic reversal in sliding gross profit margins, and the concentration of wealth among distributors hasn't guaranteed success.
Business philosophies aside, what I miss most about the electronics industry, and distribution in particular, is the growing lack of debate. Each merger and acquisition robs the industry of another opinion as many of the market's most informed voices are muted inside a monolith that discourages dissenting views.
And there is another dilemma. The bigger the manufacturer, contractor, distributor, or OEM, the more able they are to sway the electronics marketplace. At the same time, the business plans espoused by the upper echelon of the high-tech sector have little in common with the vast majority of smaller companies working in the industry. And this includes the tens of thousands of EBN readers who work for companies with less than $50 million in annual revenue.
We recognize this stratification, and that's why we are pledging to re-double our efforts to serve that segment of the procurement industry whose day-to-day concerns may be light-years from the issues confronting the multibillion-dollar club.
But to do this and do it well, we need your help. I urge you to contact me and share your thoughts. What trends are affecting your professional growth? What are the problems that you and your colleagues spend your time discussing?
Collectively, small companies can influence the makeup and direction of the electronics supply chain. We're listening.