European Comeback for Local Distributor

In this article Anglia's CEO, Steve Rawlins, argues that local distributors are fuelling a new era of demand creation within the UK electronics design and manufacturing community.

After Decades of consolidation, during which local distributors have been swallowed up by global players, gone out of business or struggled to win big-brand franchises, things are changing. Due to the shear breadth of their product offerings, large distributors are naturally focused on order fulfillment. Thus, component manufacturers are seeking new ways to capture the 'mind share' they desire.

The collapse of Eurodis and disappearance of the Memec Group as an independent organisation have limited component manufacturers' routes to market via distribution. Some distributors focus on specific markets, but many component makers want to access a wide range of generic 'industrial' customers. Although much high volume manufacturing has moved off-shore in the last few years, in Europe 's largest markets, Germany and the UK, thriving customers can be found in mid-tier OEMs and EMS providers. Markets such as security, medical, instrumentation and industrial automation are strong throughout Europe, often because lower volumes make it economical to keep design and manufacturing local. However, mid-sized OEMs and EMS companies have also suffered, often finding it difficult to secure visits from some distributor's sales or field applications engineers because their business is small.

This has been good news for local distributors that have been able to develop a solid base of customers across many industrial sectors. For example, Anglia supports such companies by phone and in person, even offering the services of a design team to complement their own resources, where needed. In the last two-years, semiconductor manufacturers have started to realise there is a wealth of untapped potential customers in the UK (and elsewhere in Europe) who like working with local distributors.

A little over a year ago, Anglia signed Power Integrations. The company manufacturers high-voltage analogue integrated circuits for power conversion applications and does not presently use global distributors. In the last 12-months Anglia has more than doubled Power Integrations' UK customer base and has identified 450 new potential customers.

The security sector has been particularly important for new business opportunities. To support demand creation work for Power Integrations' products (and others) Anglia has committed to building a design lab and EMC test facility in Wisbech that will open later this year.

Suppliers who have franchised large international distributors are also turning to local distributors to broaden their customer reach and create product demand, particularly where product design-in cycles are long and expensive. Lattice Semiconductor's European distribution manager, Michael Buckley, recognised the need for local distribution to complement global distribution. The challenge was to find distributors prepared to put in time and effort when the return-on-investment in the FPGA business can easily be 18-months to two-years. Lattice has a long-standing and successful agreement with MSC in Germany and signed Anglia in the UK and Comprel in Italy last year.

Michael said: "Anglia was chosen because of its diverse customer base, commitment to invest in the enormous learning curve to take complex FPGAs to market, and because of the company's sheer enthusiasm for the task."

A year down the line, Anglia's design wins for Lattice Semiconductor are only just beginning to emerge but over 200 new opportunities have been identified and registered, so the investment in field was in discussions with many of its present franchised semiconductor suppliers for several years before signing deals. With a long track record of success in passive and electro-mechanical components, only ST Microelectronics (among the larger semiconductor companies) had taken the plunge to work with us at an early stage. Our annual business together is now worth some $12 million.

By the end of this year, we will have signed seven new semiconductor lines in a 24-month period, more than in the company's previous 34-year history. We'd like to think this is entirely due to our own promotional efforts. However, I sense a change in thinking within the semiconductor industry. There's growing recognition that distributors with a strong local following and ability to invests in sales, marketing and engineering to promote technically complex products, can bring a new tier of customers to the table: customers that have slipped under the radar screens of other distribution networks.

European distributors that survived (and applications engineers, sales engineers and training is about to pay off. Microchip is expanding its sales channels to increase access to customers and improve technical and commercial support. Microchip franchised Anglia in April, adding to its network of global and regional distributors.

Microchip's senior sales channel manager for Europe, Ken Millar, said: "We wanted to have a strong push into the 16-bit market in particular, following the expansion of our dsPIC DSC family to over 65 products. Anglia were set a target for design wins with 16-bit devices and has already exceeded this by over 30 per cent despite only holding the franchise for a matter of months. Their ability to find new accounts has more than lived up to our expectations."

It is interesting to note that Anglia even prospered during the industry's consolidation process and now face a bright future with leading semiconductor names beginning to take them seriously.

The last word goes to IDT's director for Europe, Pietro Polidori: "IDT believes that local distributors offer a different approach, skills and expertise that complement those offered by the global players. We have implemented this mixed model within our European distribution network, choosing the right combination of global and local partners in each country, which we believe gives us the best of both worlds. In spite of a relatively short shared history, Anglia has proved to be another great choice for the UK".

This article was originally published in Electronics Sourcing Magazine, January 2007.