3. Analog, test, distribution wars break out, intensify
The industry lives with unrelenting competition. I see three sectors that are taking it to new heights: analog, test and distribution. This is due in part to single-digit industry growth, which means that the only way a company can drive sales is to take market share from others. Hence, wars break out. The analog semiconductor industry is one of the most profitable and diverse segments of the chip business, but we have seen consolidation (TI buying National). We’ve also seen moves to integrate multiple analog parts into one to reduce the analog bill of materials (Maxim) and the rise of modularization of subsystems (CUI and Vicor in power electronics, for example). These moves concentrate buying power.
How will these wars shake out? Will 70 percent gross margins in analog be a thing of the past?
Another war has broken out in test for similar reasons. Test and Measurement companies have launched incredibly powerful new scopes that are needed in systems with high speed processors and diverse communication protocols. This has forced Agilent, Tektronix, Rohde and Schwartz and TeleDyne LeCroy to attempt to out-innovate each other with touch screens, speed and cool software. However all this shakes out, it’s a boon for designers.
The third battle is in the world of distribution, where what was once a fairly simple business model has morphed into one of online tools, supply chain analytics, reverse logistics, design support and global reach. In an era of global supply chains and the risk they entail, distributors have a vital role to play in how systems get built (see below). This intense market competition is wonderful for the design community and it always has the unintended consequence of spawning new businesses.
What do others see coming?
TI's $6.5 billion gamble
Test & Measurement DesignLine