“In a few years’ time, only 20-30 chip manufacturers will survive”

27 November, 2016

Avnet’s vice president of communications Georg Steiberger explained Techtime how the changes in the global semiconductor market forced the global component distributer to adopt new strategies, and how this led to the Premier Farnell and Hackster deals

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Avnet’s vice president of communications Georg Steiberger explained Techtime how the changes in the global semiconductor market forced the global component distributer to adopt new strategies, and how this led to the Premier Farnell and Hackster deals

Georg Steiberger
Georg Steiberger

Global component distributer Avnet acquired San Francisco based Hackster. Avnet announced the acquisition will be completed by January 2017. The amount Avnet will pay for the San Francisco firm was not disclosed, but the strategy that led to the deal is evident: to gain better accesses to startup companies.

Hackster operates an online hacker community that help engineers and enthusiasts to develop electronic components. Hacksters web site is operated by some 300 technology experts, and is keeping touch with a wide community of over 200,000 so called makers and hobbyists/ In fact, the latest deal is another step in a new strategy that led Avent to acquire Premier Farnell for 850$ million.

We’ve finally managed to acquire Farnell…

In the electronica 2016 fair held this month in Munich, Techtime Avnet Europe’s Vice President of communications, in an effort to understand the company’s strategy, and the rationale behind its latest acquisitions. “Actually, we’ve tried to acquire Farnell a few times in the past, but it never materialized. We made yet another offer in July, and we were thrilled to finally sign the deal in October”.

“Farnell is to continue its independent operations, while we build bridges between it and Avnet. We want the folks at Farnell to keep developing new ideas, some of which to be later mass produced by Avnet”.

What are the challenges standing before component distributors?

Steiberger: “We have to build an electronic bridge between the customer and us. As for supply chains – the EDI systems have to communicate one with the other. The problem is, that this doesn’t always work… we have over 10,000 substantial customers in Europe, but only 5% of these customer have EDI systems. One of the biggest challenges in to improve communications with these customers and generate more automatic orders.

Avnet's wearhouse in Arizona
Avnet’s wearhouse in Arizona

Avnet’s Israeli team – Alon Ada and Tal Segma, led by Dani Koren, explain that a new trend is developing around electronic communication systems: “Some of the customers today upload their acquisition requirements to the website, and ask the distributor to update their system and hand in proposals to their websites. This is a new and developing trend. Ant we try to try and mediate between our systems and the customers systems – and by this, save massive amounts of work time”.

Steiberger: “We started experimenting with operations like this with several customers, and I expect these solutions to be integrated into Avnet’s communication systems in the near future”.

How do the big mergers in the industry affect you?

Steiberger: “this trend has many, sometimes contradicting trends. For example, when the semiconductor market stagnates, companies buy other producers, in order to cut expenses by synergy. Another way to increase profitability is to reduce the distributer’s margin. For Example, Texas Instruments has reduced the Distributors Bonus.

“Sometimes, a major merger enlarges the distributor’s portfolio, and sometimes it decimates it. Especially, when a distribution agreement with another distributor is already in place, and the acquired company is added to the existing agreement. Today, there are some 100 substantial chip producers worldwide. I believe that in a few years, only 20-30 independent manufacturers will survive. But, on the bottom line – the number of products does not change considerably, and in the end of the day, it’s what dictated the scope of activity”.

Posted in: Deals and Investments , Electronic Components , News