One of the most exciting trends in high tech is the continued growth of the Internet of things (IoT) market.
This explosion in global connectivity will continue to transform the ways in which we live and work, creating opportunities for different kinds of players along the electronics supply chain. Many believe that distributors are in a strong position of influence as they sit between original equipment manufacturers (OEMs) and IoT customers, both of which are seeking guidance on how to maximize investment in the burgeoning market.
In this article, we discuss how electronics distributors are impacting IoT adoption through their deepening relationships with OEMs, as well as highlight a few of the biggest headwinds and tailwinds facing these players going forward.
Electronics Distributors Influencing IoT Through OEMs
Distributors are reacting to rapid IoT growth and optimistic forecasting in several ways.
First, they are building expertise around IoT technology so that they can work more collaboratively alongside OEMs. Like distributors, manufacturers also see tremendous future opportunity in IoT, however, they often need help understanding what parts and components should be incorporated into new designs. As a result, distributors are educating engineers and participating in the design process more closely than ever.
Second, distributors are bolstering their product lines in order to provide their manufacturing partners with the essential components they need for IoT devices, including integrated circuits, diodes, and sensors. With expanded product lines, distributors are able to empower OEMs to build new devices in line with consumer and enterprise demands.
Symmetry Electronics and Avnet are two examples of distributors that are building technical expertise and expanding organizational capacity to capitalize on growth in IoT adoption. Recently, Symmetry added four major product lines from MediaTek, Ethertronics, Digi International, and MPS. Avnet has gone as far as to add a consulting service for customers so they can understand the potential benefits of IoT technology and build out implementation roadmaps.
As more distributors go down this path, there will be increased alignment in the electronics supply chain, resulting in operational efficiencies and huge cost savings. Additionally, a close partnership between distributors and OEMs will help IoT technology fulfill its potential of bringing different industries closer together through devices that are constantly communicating via cloud-based networks.
Looking Ahead: Headwinds & Tailwinds Facing Distributors
There are a number of headwinds and tailwinds facing electronics distributors going forward as the industry prepares for widespread IoT adoption.
On the headwinds side, recent component shortages have forced long lead times and price hikes throughout the supply chain. Fortunately, many distributors do carry additional stock and can help OEMs get through production in the short-term, although this is not sustainable. Reports of one-year long supplier lead times are not uncommon for certain components, putting a strain on electronic manufacturing of all kinds.
Consolidation among suppliers also poses risk to distributors and manufacturers, as product lines can get dropped through M&A. Additionally, OEMs lose contracting leverage when they have to negotiate with larger, consolidated suppliers.
On the tailwinds side, increased internet usage, technological innovation, and lowered barriers to entry for OEMs are all contributing to IoT device growth and adoption.
In both developed and developing countries, consumers and businesses see tremendous value in the Internet of things. Wearable fitness devices and smart homes are two examples of ways in which IoT technology is already being used widely by millions of people. There are also many examples of devices helping poorer communities address extreme poverty.
Low-power wide-area networks will also enable thousands of devices across wide geographic areas to connect to the internet without consuming much power or data. As global internet usage increases, smart cities will become a reality with IoT technology serving as the foundation upon which connectivity is established.
Today, it is also easier now than ever before for startups and OEMs to produce IoT devices as funding is more accessible and development times are shorter. Crowdfunding platforms like Kickstarter and Indiegogo allow design teams and smaller companies to participate in the space and high-quality components can be acquired without significant capital.
Overall, the tailwinds outweigh the headwinds, allowing distributors and manufacturers to approach and plan for the future with cautious optimism.
What Do You Think?
Over the next 5-10 years, the Internet of things is going to bring people, devices, and industries closer together than ever before.
How else might electronics distributors shape the future?
What other tailwinds and headwinds could be on the horizon?
Let us know your thoughts in the comments below!