Do you need to find your way around the electronic components market because your regular suppliers don’t have the stock you need? The international market for the supply of electronic components is complex and articulated.
There are many different types of suppliers and different types of sourcing contracts to choose between. These include direct relationships with electronics manufacturers, buying from official distributors, sourcing from independent distributors or brokers, as well as buying retail from resellers, dealers, or shops.
Each category comes with its own advantages and disadvantages and it is these that usually dictate the customer’s choice of supplier.
However, in a market where supply experiences as many ups and downs as the electronic components sector, it is quite normal for customers to have used a combination of different types of suppliers at some point in their production cycle in order to secure the items required to complete the manufacture or assembly of their specific products.
This article examines three types of suppliers that can be found in the market, and explores some of the pros and cons associated with using each of these.
Semiconductor fabs design, brand, and manufacture their own devices. They release new technologies onto the market and phase out older products when demand for certain products begins to decline, or when they introduce new technologies or designs.
Due to the quantities they need, original equipment manufacturers (OEMs) often qualify to buy directly from the component and device manufacturers at highly advantageous prices in order to incorporate them into their own products.
However, frequently the OEMs are not timeously informed about planned obsolescence of product lines by the fabs, or may not contemplate the redesign of their own products to accommodate the newer devices and they therefore often find themselves having to scramble around to identify a new source of supply for the older or discontinued components that they need.
Or they may not contemplate the redesign of their own products to accommodate the newer devices and they therefore often find themselves having to scramble around to identify a new source of supply for the older or discontinued components that they need.
Official distributors buy directly from the manufacturers. Consequently, they are the recognized points of reference for resellers, dealers and retailers. They can usually be relied upon to create a constant supply of specific devices through their official and direct connection with the parent company, which is regulated by a contract. However, their supply chain is not necessarily always the fastest, since they need to coordinate supply and demand across multiple geographies and industry sectors.
Since the official distributors add a substantial markup to the price to cover their overheads, warehousing and logistics costs, the customer pays more for the components than they would if they were able to purchase them directly from the manufacturers.
This may force customers to buy much larger quantities of devices than they may need, with all the related increased costs of transport, storage in the customer’s premises, insurance, and obviously the inconvenience of having cash flow tied up in excess stock.
Brokers are neither manufacturers nor part of the officially appointed channel. They have no connection with any specific brand. They may be “specialized” in procuring hard-to-find or obsolete devices, but they may just as easily be fly-by-night opportunists looking for a quick and easy way to make some money by brokering a deal between a desperate customer and a warehouse with old stock to dispose of.
Unfortunately for customers, purchasing outside the authorized channel generally involves greater risks, usually of reduced technical and after-sales support, and particularly of potential gaps in product traceability, not to mention the likelihood of falling into the hands of unscrupulous parties selling counterfeit or fake products.
This is when it becomes really important to know how to find your way around the electronic components market.
As in any industry characterized by variations in supply, when demand increases, the market naturally heats up and the prices offered through the grey market can begin to fluctuate wildly.
Therefore, when you as the buyer find stock “available” on broker sites online, you should always carefully check the device codes, the quantities, and the offer dates to form a clearer idea of the actual levels of stock that are probably available. If you find numerous offers for very similar quantities, device codes, and offer dates, then it is highly likely that none of the brokers have the stock physically, and that all of them are merely marketing the same set of devices from the same source.
Brokers are usually most interested in trying to get the maximum profit from every transaction, and therefore will frequently exploit the customer’s desperation to have the specific devices at any cost.
That said, however, there are frequently situations in business that force you to turn to brokers as a last resort to save a production run, or to clear a warehouse of unfinished products. If this is the case, we strongly recommend that you stick to working with a small group of brokers and that you check in with them regularly in order to minimize the risks to your business of encountering dodgy operators.
Independent distributors can be found in the supply chain between the buyers and the major manufacturers or their official distributors.
They are usually able to offer their buyers genuine electronic components in the specific quantities required at more advantageous conditions than the official distributors are permitted to offer.
For instance, they could get you a certain quantity of authentic Infineon devices, such as BCR420U, FZ1200R12KE3, IPD90R1K2C3, or SFH350V, in very little time.
In contrast to brokers, independent distributors are committed to building solid relationships with their customers, based on the open sharing by the buyer of their specific price and delivery objectives and by the independent distributor of the market intelligence gathered during the scouting process for a reliable, continuous supply of the electronic components and devices sought.
As a result, they usually offer testing services on the products found to ensure their authenticity and validity, and warranties on their functionality, as well money-back guarantees on any devices found to be non-compliant or disfunctional.
When necessary, they can also provide escrow services to safeguard the customer’s money for specific orders.
Now that you know more about how to find your way around the electronic components market, you are in a better position to make an educated decision.
If you are looking for alternative sources of specific devices or electronic components with guarantees of reputability, authenticity, functionality and reliable after-sales support, you should seriously consider forming a long-term relationship with a professional independent distributor like Electronic Partner – for the long-term success of your business.
Contact us today to find out how we can help you.