In just four years, the number of publicly held North Amer- ican electronic component distributors has fallen from 13 to seven.
Who's left? All American, Arrow, Avnet, Bell Micro-products, Jaco Electronics, Nu Horizons, and Richardson Electronics. In the private sector, some of the biggies like Future Electronics, the Memec Group, Sager Electronics, and TTI Electronics are still standing.
This year alone, one major player, Pioneer-Standard, and one midtier distributor, Reptron, fell victim to the consolidation trend. And that's likely not the last of it,
especially for those companies that are trying to make a go of it without establishing a presence in Asia. As the distribution industry evolves into an oligopoly, concerns about unfair competition and price gouging are understandable.
But in the latest deal, at least, those concerns are not justified. Several small OEMs and EMS providers said they are worried that finding competitive pricing on parts and services may be getting harder. But the industry's reaction to Jaco's acquisition of Reptron's distribution business earlier this month isn't likely to turn out the way many expect.
Although Jaco's purchase will expand its customer base and linecard, it still doesn't give the distributor the clout to influence the market in a major way.
As analysts said, the $10.4 million deal was too small to have any meaningful impact on the market and pricing. And in today's oversupplied environment, it's still a buyer's market for just about everyone.
In fact, analysts are concerned, for instance, that the channel is actually carrying too much capacitor inventory.
The distribution sector's M&A activity, accelerated over the last few years by the inventory-driven recession as well as the need for distributors to beef up their linecards, is likely to continue.
However, price gouging shouldn't be the key issue. If consolidation allowed distributors to raise prices over the years, it would have shown up in their gross profit margins. If you look at the numbers, margins have been falling steadily for years.
For small OEMs and contract manufacturers, the real challenge should be to monitor any signs of change in customer service and the ability to command the attention of the surviving distributors.
Getting the attention of your distributor may take some effort. But it's important to keep reminding your channel partners that collectively, small manufacturers can influence the supply chain.
E-mail comments to Ismini Scouras at email@example.com.