Electronic Component Industry Analysis

4794 words 20 pages

The electronics distribution industry is inherently a volatile one because it is based on technologies that are constantly evolving and improving as time passes. The industry has already survived three major technological revolutions and can probably be expecting another one in its long-term future. These "revolutions" usually concern the refinement or replacement of a component that is fundamental to all electronic circuitry. While demand for related component parts remains relatively stable, the revolutionized component becomes a high demand item (product growth) and all other circuit design considerations will revolve around it. This in turn causes an increased focus on the item in the distribution industry, and the
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Also, each of the above listed components is usually available in many different variations which serve diverse purposes in electronics technology. For these reasons, distributors' inventories are usually quite diverse in terms of both line breadth and line depth. On the growth dimension, the industry has remained relatively healthy. Although it is subject to abrupt product revolutions as discussed above, these upheavals can also be quite healthy. When a mainstay product has reached its maturity, distributors welcome a technological revolution that throws the industry back into a growth stage and increases sales. The key objective here is to remain in touch with developing technologies. The ability of most participants to do this has kept the industry growing since its early beginnings. According to Electronic News' Distribution Trends , December 7, 1987, the industry grew in 1987 16.2% up from 6.0 billion to 6.97 billion, and can expect to grow another 10 to 15 % for the calendar year 1987 (please see EXHIBIT 1 for a recent history of industry revenues and growth rates). An average of the growth rates for 1987 for the top 50 American distributors indicates an even higher growth rate of 25.8%, revealing the power that large distributors are gaining in the market. And the numbers do not appear to be deceiving. Executives at the leading corporations are somewhat confident. According to Tony


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