They say that hindsight is perfect! The high hopes I had a year ago for the year 2003 did not materialise. The strengthening of the rand to such high levels as we saw in 2003 was certainly not predictable, and bucked the trend the rand has followed for the past 30 years. The result of this for most component distributors was lower rand sales with no commensurate decrease in overhead costs. It is important to note, that unlike the automobile industry, where prices did not come down, in the electronics sector through tough competition, prices followed the spot exchange rate downwards.
Maybe the only positive for Avnet Kopp in all this is that we did actually increase the number of individual components we sold, but at a lower rand cost as stated.
With this background it makes predicting the year ahead a little bit more difficult. But there are some very clear signals in the global components industry that will have definite effects on us and our customers. The three year slump in the semiconductor industry is finally over. All major manufacturers of components have seen sharply increasing demand, and we, the distributors, have seen lead times stretch, with some components going into allocation.
Sure, this comes off a low base, with not much supply capacity added over the past years, in fact with many production facilities having been 'mothballed'. None the less, it is imperative for customers to be aware of these trends and to plan their demand for components accordingly.
Invariably, with lead times stretching we will see prices firm. We are seeing this gradually begin to happen. On top of this comes a weakening rand, which to date, is about 10% off its highs of 2003.
At Avnet Kopp we have streamlined our operations, and have focused on strengthening our sales team, to complement our competent team of field application engineers. We made a key acquisition last year, that of Analog Data Products, bringing the Analog Devices line to Avnet Kopp, as well as additional niche lines like Rabbit Semiconductors and Crystal Clear. ADP will remain a brand for Avnet Kopp and will primarily focus on our analog business, where we now have a comprehensive product line-up.
Avnet is recognised as a leader in supply chain management, and we have picked elements of this to offer our local customers, having implemented the 'POURS' sites. The importance of these logistic tools is once again becoming obvious to a number of customers, who recognise that a reliable supply chain is imperative to their production.
These trends, together with a strong market in Asia, and a recovering market in the USA and Europe, makes me optimistic that we will have a positive growth year here in the electronics sector in South Africa.
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