Maybe it is true to say: “The future is not what it used to be” – source unknown to me. Since 2001 the electronics industry, and distribution in particular globally, has found itself in somewhat of a slump.
In South Africa, we have the added impact of the strengthening of the rand, which had the effect of drastically reducing the costs of electronic components - unlike our friends in the motor industry, who somehow bamboozled us into believing that it would be bad for us if car prices came down. They now brag of how stable they have held their prices!
The mere fact of prices coming down would not have been a problem if overhead costs would have reduced accordingly, but obviously that was not to be and many companies - distributors and manufacturers - had to take the necessary steps to reduce costs. In addition, our industry has the quirk of constantly reducing ASP (average selling prices). One gets new devices, more powerful than their predecessors, at reduced prices. For example, chip capacitors and resistors over the last four years have come down in price between 10% and 20% per year. In a market not growing at this rate, it makes it hard to show real growth, unless you have a very vibrant electronics industry, or you somehow manage to gain market share.
Manufacturers on the other hand, had to cope with cheap imports, often to such an extent that they could no longer compete. Their own products, due to the strong rand, were not as competitive in export markets as they previously were. That might all sound a bit negative, however I would call it a realistic assessment of the SA environment we all live in - let this not be confused as a 'risk' assessment! There is a positive side to this.
The truth is that many businesses in South Africa were not competitive and had very poor productivity. Those businesses that have tackled this, will certainly reap the benefits in the year ahead. Companies here have shown innovativeness and sought out niche products for niche markets.
For Avnet Kopp, we enter 2006 with our usual optimism. In 2005, Avnet Inc. acquired Memec on a global basis and we have integrated the Memec business successfully into our company. We have added some key new lines such as Linear Technology, Pulse, Kemet, Nordic, SMSC, EDT, Cirrus Logic, Sanyo, and Zarlink. We have the added Memec staff on board, are busy training them on our systems and on our entire product list and will be raring to go in the New Year. Our focus will remain on adding value to what we offer our customers.
For all distributors, as well as for our customers, we depend on the state and well-being of the general economy in South Africa, and to some extent of the strength of our currency. And I believe that we face positive opportunities in the year ahead.
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