22 June 2009
After the meltdown
How will demand for electronic components from Europe's industries change after the worst 'meltdown' in demand for a decade? And what does it mean for distribution?
The first two quarters of 2009 showed a downturn of more than 25% across all regions and expectations for the rest of the year are of the same magnitude (claims Henderson Electronic Outlook), so it appears a return to normal is almost out of the question.
From a macro perspective, Europe will certainly lose out to other regions of the world. Consuming 15% of global components before the meltdown, Europe's share will decline. The US market normally rebounds much faster and is more innovative in the short term and the Asian market – the workbench of the world – wasn't affected so hard, so sheer maths speaks against Europe as a long term strategic region for large scale or large platform electronics innovation.
The two bastions of Europe's electronics leadership and the largest TAM/DTAM contributors – automotive and industrial – are facing tough times; not because of lack of innovation, but because of lack of global demand. Many leading industrial equipment companies are part of the automotive or the overall electronic or industrial production food chains and are suffering from the reluctance of their customers and their customers' customers to spend money.
The broad industrial sector is, therefore, the last one where electronic components could play a role in innovative ideas for sectors such as lighting, environment, medical, measurement, energy, sensor technology, infotainment, automation and dozens of others.
Innovation has, in the past, been driven by a huge variety of companies in as many segments. But consolidation means big companies have moved their design and manufacturing to cheaper and faster growing regions of the world.
While European engineers are as smart as any, they may not find the same fruitful environment. Europe – more design heavy and less manufacturing driven – will probably see as many design starts as before, but these designs may only be manufactured here in prototype quantities. This leaves a smaller components market to be shared amongst the same number of participants (manufacturers and distributors).
How can the provision of demand creation, technical support and design help for engineers work under such conditions? The only meaningful answer can be through technically apt distributors. While suppliers may choose to regard Europe as 'sub strategic' and leave for bigger opportunities in Asia, distributors will not. Our market is Europe and our customers' fate is our fate.
This is why Avnet invests in Europe: Avnet acquired Abacus to secure its leadership position beyond semiconductors. Avent Europe's 300 application engineers, a comprehensive reference board strategy and vertical market segmentation may be well suited to win semiconductor designs – long proven by EBV, Silica and Avnet Memec – but customers also want a full portfolio of 'other' components – passives, connectors, quartzes, motors and more. So Avnet has created Avnet Abacus, the new IP&E specialist. And customers may want higher levels of hardware integration to concentrate on their core competencies. So Avnet has created Avnet Embedded – represented in the UK by Trident and TDC.
Europe's minor 'volume' role may become reality in a few years, but what will remain are innovative customers who need innovative support, aggregative buying power and fair and flexible partnership. They will find it in Avnet and its Speedboats, which are in it for the long run.
Author
Georg Steinberger, vp communications for Avnet Electronics Marketing Europe
Supporting Information
Downloads
18883\P41-42.pdf
Websites
http://www.em.avnet.com/region/europe
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