Industry analysts predict that the electronic component supply business in South Africa is set to undergo a shake up for the better, following a major investment into the domestic market by Global component distribution specialist Memec.
Founded in the UK in 1974, Memec set out from the very beginning to provide a unique service to the new technology start-up companies that were commonly neglected by established distribution channels. Founder Dick Skipworth recognised that new technologies were the lifeblood of the electronics industry and took his vision for a radically different approach to semiconductor distribution to Harris Semiconductor. At the time Harris was at the forefront of memory technology and the demand for PROMs (programmable read only memories) was about to explode. The company prospered, as OEMs rapidly came to value and rely on the fledgling company's focus on new semiconductors and, in particular, on its expertise in programmable technology, a reputation it still enjoys.
In 1991 with total revenue of $3,1 billion, Memec was acquired by German conglomerate VEBA AG as the pivot for its ambition to establish a global technology division. In 1999, with total sales in excess of $5,47 billion, VEBA Electronics was sold and broken up, presenting Memec with an opportunity to regain its corporate independence.
Today, Dick Skipworth is again Chairman of an independent Memec but the management of the company is in the hands of a young and talented management team headed by CEO David Ashworth. The group is the largest nonlisted semiconductor distributor in the world, operating in 42 countries via its Impact Memec, Insight Memec and Unique Memec divisions. In 1999, the last year for which fully audited figures are available, Memec reported collective sales exceeding $1,8 billion, maintaining a 27 year record of success through both the up and down cycles of the global semiconductor industry. Year on year sales have consistently exceeded the industry averages, resulting in compound growth over the last 21 years of over 30%.
The Memec business model
The Memec approach to the semiconductor business remains largely at odds with the megalithic, pile-it-up and ship-it-out approach of the large American distributors. The company specialises in providing innovative technology from both new and established suppliers, together with the design-led technical services essential to develop the demand for their products, particularly in fast-growing sectors such as telecoms and datacoms. In compliance with a founding philosophy, unchanged for nearly 30 years, each of the three global Memec trading division has its own core grouping of franchises, often complemented by country-specific lines. By restricting each of the three line cards to a carefully selected line-up of complementary, non-competing advanced technology lines, Memec is able to ensure that the management, sales and field applications engineering teams in each division are able to acquire and develop the in-depth knowledge necessary to deliver the technical expertise and product understanding that manufacturers need and customers deserve.
A dedicated management team closely interfaces with the (largely, but not exclusively, American) component industry, tasked with identifying at the earliest possible stage, developers and manufacturers of innovative technologies and establishing mutually advantageous partnerships. To ensure the necessary marketing focus, start-up lines are first propagated in an Incubator Division until revenues grow to around $1 million, at which point they are transferred to the main line card and a line-dedicated Product Division Manager appointed.
A line-dedicated product division is a self-contained business unit with the Division Manager responsible for his or her own administrative and technical teams and P&L accounts. This strategy has resulted in a current, combined global line card, comprising some 170 of the industry's most innovative and fastest growing designers and manufacturers of electronic technology.
Memec moves into South Africa
Memec's initial steps into the African continent were made in September last year with the acquisition of Cape-based Multitech Electronics Corporation (MEC). According to Hugh Rudden, Memec's CEO Europe, whose remit includes South Africa, the decision to acquire MEC was strongly influenced by the business philosophy of the family owned business which "closely mirrored that of Memec itself". Memec's move into the South African electronics industry represented a major investment and commitment, Rudden continued. "I am confident that this move will prove to be a big success and major contributor to all parts of the South African technology supply chain".
Using MEC as a secure foundation, Memec lost no time in restructuring the business along its own unique divisional business model, establishing and opening offices of Impact Memec, Insight Memec and Unique Memec. The old MEC facility in Cape Town was the obvious choice for Memec's new local headquarters, from where Craig Hemmes, former MD of MEC and the new country Director of Insight Memec, looks after Memec's South African corporate affairs. All administrative functions for the three divisions, including finance and human resources are administered from here. "Centralising these operations enables the trading units to operate with minimum overheads", said Hemmes. "Memec has also retained the former MEC Logistics Centre in Cape Town which is already servicing the inventory requirements of all three divisions".
Technical support
Among the many features that differentiate Memec from other component distribution operations is the focus the company puts on technical support for electronics engineers, particularly during the all-important design process. Services offered range from simple product information and recommendations for system design, to software installation and training. The company's strong focus on technical competence is apparent from the breakdown of Memec's international personnel structure: More than two thirds of Memec's global payroll are qualified electronics professionals and in face-to-face contact with the customer. The Memec standard personnel ratio is one field application engineer to every two technical sales people. Memec's famed OEM Class technical competence is assured by recruiting top quality design talent from industry and developing the skills they have acquired into a specific technology expertise. Engineers are frequently returned to their manufacturer's R&D facilities to hone and develop their skill and expertise.
State-of-the art silicon demands equally advanced hardware and software development tools: Memec Application Engineers are also expert in the very latest analog and digital design tools which speed complex designs and help engineers to get their product to market ahead of the competition.
Fulfillment services
The time, effort and money that a Memec division invests in assisting customers to get the best from the technology it supplies would, of course, be wasted, if it did not offer customers an equally advanced fulfillment service with the flexibility to meet all their production requirements. Five centralised ISO9002 certified Distribution Centres, strategically located in the USA, UK, Japan, Hong Kong and Australia handle the group's global storage and logistic requirements using the very latest materials storage, handling and quality procedures and in line with Memec's uncompromising service to customers, they all operate a Total Quality Management (TQM) policy. Standard services include Kan Ban, JIT and auto-replenishment deliveries, product bar-coding, kitting and full tractability after dispatch. Some Centres also offer value added services such as device programming, tape-and-reeling and custom code marking, services which Hemmes expects to offer to South African customers soon.
Services for contract manufacturers
Recognising the growth in the Contract Electronic Manufacturing (CEM) sector, Memec has extended its fulfillment services to meet the unique requirements of these companies. Leveraging the Global Memec enterprise, CEMs are provided with a seamless local service with access to Memec's $500 million inventory, via a global Wide Area Network supported by state-of the-art EDI, Internet and Intranet communications. Surely the best of all worlds?
Asked to comment on how they see Memec impacting on the domestic South African electronic industry, Hugh Rudden and Craig Hemmes were united in their belief that it could only be for the better. "South Africa is between five and seven years behind the rest of the world in adopting new component technologies" said Hemmes. "The technology Memec supplies, together with its unique value-added services could enable the domestic engineering community to 'leap-frog' over the current technology and become among the earliest adopters of the next-generation. And according to Rudden, Memec research indicates that there is no shortage of design and engineering talent in South Africa. "It is my belief that early contact with the local office of Unique Memec, Insight Memec and Impact Memec could make a major contribution to putting the South African electronics manufacturing and design industry on a par with the rest of the world", he said.
For further information contact Memec, (021) 674 4103.
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