EDS Showcases Versatility, Creativity Under Pressure
The annual distributors’ gathering was back on after a virtual year. Companies reported a great year despite pandemic and supply chain disruptions.
After two years of digital presentations in 2020 and 2021, the Electronics Distributors Show (EDS) resumed its annual Las Vegas rituals this year. Meeting in person from May 9-13, 2022, more than 400 electronics distributors, manufacturers, and suppliers from around the globe gathered to share insights, do business, and compare notes on an industry that has weathered significant turbulence during the pandemic but emerged reinvigorated by new technologies, new products, and new processes that design resilience into operations.
This year’s hot topics centered on distributor strategies and supply chain management approaches that helped companies continue to meet unrelenting customer demand. Distributors reported that their customers continue to have significant and growing needs for interconnects despite ongoing shortages of chips and other components. Meanwhile, new products always generate excitement, and distributors are on the vanguard of innovation and change. Suppliers from around the world, including Amphenol LTW, AirBorn, Allied Electronics & Automation, ARROW, AVNET, Bel Fuse, Bulgin, Carlisle Interconnect Technologies, Digi-Key Electronics, HARTING, Harwin, Hirose Electric, ITT Cannon, LEMO Connectors, METZ CONNECT, Mill-Max, Molex, NorComp, PEI Genesis, Phoenix Contact, Powell Electronics, Samtec Inc., SCHURTER, SV Microwave, TE Connectivity, Weidmüller, and Würth Electronik discussed the products and technologies they predict will rise in the coming years.
A longtime EDS tradition, the TTI family of companies, including TTI Inc., Mouser Electronics, Sager Electronics, and the Exponential Technology Group (XTG), hosted an information breakfast that remarked on the events and successes of the two years that have passed since the last EDS gathering, and presented a broad view of the distribution world from the perspective of some of its largest companies.
CEO Mike Morton reported that TTI Inc. set record sales numbers of $7.7 billion consolidated global sales, with growth of $2 billion last year alone, with the connectors as a standalone category representing 42% of sales. Furthermore, the company anticipates that in the next two or three years it will reach $10 billion — a bright future. Even so, the company faced parts shortages, pandemic disruptions, and the war in Ukraine, as well as the passing of founder Paul Andrews during the company’s 50th anniversary year of 2021. Yet business continues to be brisk as electronic technologies become ever more integrated into our lives.
John Drabik, president of TTI Americas, said, “The supply chains in our industry have been in chaos for the last few years. We have been hit with multiple challenges. But we’ve thrived the last few years, and I think that’s really a compliment to this industry, our resilience. We’ve been through some really trying times, but we’re all having a spectacular year.”
Glenn Smith, CEO of Mouser Electronics, said, “Mouser is focused on engineering new products and small production customers to bring value all through the entire design chain.” However, he noted that inventory has been a challenge, especially with shortages, mainly of semiconductors, originating in Asia. “We’re focused on solving customers problems. We’re trying to help them solve engineering problems, delivery problems, integration problems, everything the engineer needs.”
To that end, TTI is adding employees and warehouse space, implementing processes related to compliance and global trade management, and identifying product lines to meet anticipated future needs. Michael Knight, the president of XTG, noted that these strategies will serve the distributor and its customers as the global economy continues to absorb new blows related to the COVID pandemic and its reverberations in the labor, supply chain, and materials markets.
Forecast for the electronics industry
“This year is particularly stressful given all the conflicting reports in the news, all the conflicting things that we’re seeing from our customer base and seeing in the component supply,” Knight said. “One of the reasons why we’re nervous is because of all the headline news, especially around the stock market. So, I want to get that out the way right up front. The Dow pre-COVID was approaching 30,000; you guys realize it’s still well above that, right? Right now, we’re at 52-week lows for the major indices and we’re still well above pre- COVID, so there’s a reset going on. I think resets are good, they’re healthy, they’re inevitable. But this is not a crash. That’s my conclusion. We fall in this trap of equating what’s going on in the stock market with what’s going on in the real economy. Fewer companies today actually make up the stock market and a lot of what’s going on in our industry is not visible because they’re not publicly traded companies. Private equity is driving a lot more of the industry today than public markets. And the private equity guys are very bullish on technology.”
Economy Knight aimed to reassure his audience that the industry and economy is responding positively despite all challenges. “Omicron visited us in the first quarter, and that’s still actually causing problems. And of course, the chip shortages are dragging us down a little bit. But when you look at all the rest of the economy, it’s actually doing quite well.”
Cutting through the headlines, Knight offered reassured confidence that the U.S. economy will continue to grow through at least 2024. “We do not anticipate a recession until 2026. Our forecast for U.S. GDP calls for general slowing growth trends accumulating relatively flat GDP around early 2023. If we pull back for a moment and look at the rest of the world, same story, great numbers in 2021, building on it in 2022, apart from France and Brazil. By the time you get to 2023, 2024, everything’s in expansion territory. The IMF thinks the global economy and global GDP rally will grow 3.6% this year, a little bit down from where they started the year. When we started the year, nobody really believed that Russia was going to invade Ukraine. So that’s been factored in. But the 3.6 is on top of 6.1%. Last year, just unbelievable numbers.”
Labor Knight noted that the labor market is tight, which is pushing up wages. “We’ve seen this year increases of about 5.6% in average wages for the employee base in North America. That’s a big challenge for all of us.”
Materials Shortages of materials used to manufacture components continue to be an issue.
Logistics Labor shortages and equipment tie-ups continue to add costs to supply chains.
Security “What we’re spending, especially in the areas of cyber security, is crazy, and not going to slow down anytime soon.”
Price Gouging “So let’s be honest, there’s gouging going on in the total economy. And gouging is probably a little too harsh of a word; I would say, this is catching up. It has been a buyer’s market for a long time. It is now a seller’s market. And we’re making up for some lost grounds.”
Climate Concerns “I’ve talked in the past about the weather impact on costs, the weather impact on our business, and I think that’s only going to get worse, unfortunately.”
Regulation “There is a growing trend to regulate tech. Big Tech has been painted as, as something evil, unfortunately. So, this is something that it’s going to have some impact.”
Politics “We are so interrelated and intertwined our economies, and one of the things that we’ve learned the last couple of months in what Russia is doing in Ukraine, is that even in that part of the world, there are a lot of inputs into our supply chains. When you attack one country, in essence, you’re attacking yourself. One of the things I’ve seen the last couple of years that I find very disturbing is this move to nationalism. I really hope at some point that turns back around because globalism is where it’s at. It’s good for all of us. Nationalism is sub-optimizing, and ultimately not great. My opinion.”
Interest Rates “All the talk about inflation and the Fed starting to crank up interest rates — I do think this is a good thing.”
Semiconductors “There is exponential growth happening in the semiconductor market that I do not see slowing down anytime soon. In fact, I do not see it slowing down. A couple of blips, we’re going to have some shocks, and we’re going to get right back on track. For the first time, semis had broken the half-trillion mark, and I think you can make a reasonable argument that they will reach a trillion by 2028, certainly by 2030. Today, they make up 22.5%, with 23% of the global GDP tied to the digital economy. And of course, semiconductors are the DNA of the digital economy. We are under-investing in something that is absolutely critical to our success.”
Logistics “Our current supply chains, which are about 50 years old, were built to optimize costs, not resiliency. They were sensitized to labor rates, not disruption rates. And it’s holding us back, we are trying to grow exponentially on infrastructure and processes and thinking that was built around a linear concept. We need a digital supply chain.”
Inflation “I’m actually very confident we’re on top of inflation, I think we’ll see disinflation, going into 2023, which is going to help consumers. And that’s one of the main factors behind this belief that we’re not going into recession.”
Scorecard Each year, TTI reflects on its past forecasts and predictions. “In 2020, we knew all about COVID at this time, if you remember, but we also thought, ‘A month and this will all be over. So overall industry revenue will be down but not as much as GDP.’ Of course, that happened in 2020. If we look at my 2021 predictions, this time last year, I talked about cost inputs going up, lead times, etc. In hindsight, all pretty obvious stuff. Are we going to have a soft landing or are we going to have a hard landing? I’m a soft landing guy, a very gentle landing that I don’t think we’re going to notice. It doesn’t mean we’re not going to have hard landings out in the future. The one big thing that underpins my view of the future, though, is just how resilient not only the U.S. economy, but the global economy has been, even faced with everything. So I’m with ITR: No recession until the back half of this decade. Headwinds and uncertainty are going to hold the US GDP growth to 3%. Without it, I think we would have been closer to 5% this year, which is pretty spectacular.” Despite the challenging environment, it’s clear: The electronics industry is thriving.
Connector Supplier will keep an eye on this forecast and see how it turns out. EDS 2023 is scheduled for May 16-19, 2023.
To learn more about the companies mentioned in this article, visit the Preferred Supplier pages for Amphenol LTW, AirBorn, Allied Electronics & Automation, Avnet, Bel Magnetic Solutions, Bulgin, Carlisle Interconnect Technologies,Digi-Key Electronics, HARTING, Harwin, Hirose Electric, ITT Cannon, LEMO Connectors, METZ CONNECT, Mill-Max Mfg. Corp., Molex, Mouser Elecronics, NorComp, PEI Genesis, Phoenix Contact, Powell Electronics, Sager Electronics, Samtec Inc., SCHURTER, SV Microwave, TE Connectivity, TTI Inc., Weidmüller, and Würth Electronik.
- New Report Examines Performance and Outlook for the European Connector Industry - July 11, 2023
- Show Report: 2023 Del Mar Manufacturing Show - May 9, 2023
- 2022 World Cable Assembly Market on Track for Continued Growth - October 4, 2022