Prices and lead times from Absurdistan?

Consolidation and its consequences for purchasing - some opinions

“The manufacturer defines the timing, not us.”

The wave of consolidations among manufacturers and their sales channels is having an impact on the purchase of components in many ways. To this there were contrasting opinions from the Forum participants.

Bernd Enser, VP Automotive Market Segment
of Sanmina, also speaks about price reductions in the short term. In the medium term, however, he expects price increases due to the consolidation of manufacturers. “Overall the number of mergers among manufacturers has increased and these manufacturers are now deciding how they want to structure their market and distribution channels. The manufacturers define the timing not us”, summarizes Johann Weber, CEO of Zollner Elektronik. In this context, he also points to the significantly shorter life cycles of components – especially passives. “More and more PCNs and discontinued lines are difficult to manage for long-term industries such as railway technology and aviation. At the same time, more and more components have to be designed that actually come from the consumer world or the entertainment industry.”

Markus Balling, Managing Director of productware, also does not yet see any major effects of the manufacturers’ consolidations. But: “What is more dramatic in our opinion is the way the distribution landscape at key manufacturers is developing. What the result of all this will be is questionable. Many manufacturers now only have one or two distributors on board. That price competition  will suffer we definitely consider to be a problem.”

“We are noticing an increasing number of discontinuations from semiconductor manufacturers after mergers followed by price increases after consolidations,” summarizes Dr. Peter Schmitt, Business Director of CCS. “The dynamics are like a summer storm, you don‘t really know where it‘s going to hit.”

Jörg Neukirch, Managing Director of Neways Germany, anticipates a price reduction in the medium term despite market power consolidation on the manufacturer side. As manufacturers streamline their distribution networks as a result of consolidation, administrative overhead is reduced and processes become leaner. Although discontinuation of products has to be expected, the fact that manufacturers divest themselves of unprofitable products will reduce costs for the manufacturer. “We find it positive that the semiconductor market is consolidating, because this distributes the volume among fewer manufacturers which in turn helps us to source product directly in some segments”.

1. Prices and lead times from Absurdistan?
2. Multi-source, smaller designs and rolling forecasts
3. Consolidation and its consequences for purchasing - some opinions