April 21, 2005

Last year marked a turnaround for the distribution industry as it gained back some lost ground over the previous three years. Showing significant increases in component sales, the top distributors grew sales by $3.2 billion over 2003. After suffering from revenue decline over the past three years, computer product specialists saw strong gains in 2004 as well.

Semiconductor sales of the top 10 distributors increased 15.6% to reach $8.9 billion, up from $7.7 billion in 2003. Computer product sales posted another big increase as sales rose 20.9% to $5.2 billion, up from $4.3 billion in 2003.

Passive/electromechanical sales didn't do quite as well, most likely due to near margin pricing for many commodity parts over the past year. The top 10 distributors for these devices posted $2.4 billion in sales, up from $2.0 billion in 2003, for a 9.1% increase.

Many of the largest semiconductor specialists saw much bigger sales increases in 2004. These include Memec, whose sales jumped 17% in 2004, compared with only a 2.5% in-crease in 2003. All American also posted big numbers, increasing sales by 31.4%. Another winner was Nu Horizons, whose sales increased by 27.0%. Others, who primarily derive their sales from ICs, also posted some gains including Richardson, whose sales rose by 7.7% and Dependable Component Supply, which reported an increase of 3.6%.

However, one semiconductor specialist saw a decline. Jaco Electronics posted a sales drop of -1.5%. Yet, the distributor expects the flat panel display sector to help grow its sales over the next year as its new in-house integration center comes online in 2005. The distributor also sold its contract-manufacturing unit Nexus Custom Electronics in 2004.

Catalog distributor Digi-Key also saw a big jump in sales, with a 28.2% revenue increase.

The company attributes its success to increases in volume and global sales.

The top distributors also won back some sales ground. Arrow's sales grew 23.7% to take the top distributor crown from Avnet. Avnet posted a 9.6% gain in North American revenue. slipping to the number two position. Arrow has been in the number two slot since 2000.

Most of the good news for distributors came during the first half of 2004, because sales slowed in the second half for many. Thirty-eight of the Top 75 distributors reported sales increases in the double digits, compared with only 16 in 2003. Only seven reported sales declines, which is a significant improvement from 22 distributors that reported sales declines in the previous year. Seven distributors experienced flat growth in 2004.

Those who reported the biggest declines tend to be small to midsized distributors. The Bergquist Company reported the biggest decline of 21.4% over the previous year. Others who experienced a big drop in sales include ESCO, whose sales fell 18.7% over the previous year, and Rad Mil-Aero, whose sales slipped by 17.6%. ESCO has filed for Chapter 7 bankruptcy.

Yet, many of the smaller distributors reported the biggest gains. California Eastern Laboratories led the pack with a 55.6% growth rate, followed by catalog distributor Mouser Electronics which grew sales by 45.7%. Other big gainers include NRC Electronics, which posted revenue growth of 39.8%; House of Batteries which saw sales increase by 39.1%; A.E. Petsche which recorded a 33.3% increase; Surface Mount Distribution, whose sales grew by 30.8%. Bisco recorded a sales increase of 28.5%; Flame Enterprises reported a sales gain of 24.4%; Simple Technologies' sales grew 22.9% and Universal Semiconductor saw sales rise by 22.2%

PURCHASING's survey finds 61 of the Top 75 distributors saw sales increase in 2004. That's a tremendous increase over 41 of the Top 75 distributors that reported an increase in sales in 2003. Only 14 distributors posted flat or lower sales in 2004.

A big indication that the distribution industry has come out of its three-year slump is the growth in revenues. Revenue among the Top 75 grew 16.8% from 2003 to $22.2 billion, recording a gain after three consecutive years of declines.

This year, all of the top 10 distributors posted increases in revenue, with seven recording double-digit sales growth. This is an improvement over the previous year, when only two of the top 10 experienced double-digit growth and two recorded sales declines. The leader was All American with a 31.4% increase in revenue.

Future Electronics, Bell Microproducts, Memec, TTI, Newark InOne, Digi-Key and All American remained in the top 10 with no shifts in positions. DAC slipped to the number 11 slot, moving Nu Horizons to number 10.

Independent distributors had a more difficult year and struggled to maintain sales growth in North America . This may be a key reason why two of the top independent distributors from last year—Consumer Electronics, and Resilien—chose not to participate in this year's ranking.

While four of the top 10 independent distributors who responded experienced losses, three of them grew their sales in North America . Newcomer Horizon Technology led the pack in sales with an increase of 62.2%, followed by Smith & Associates with a growth rate of 60%. The other big winner includes Converge whose sales grew 23.4%.

In the loss column, Advanced MP's sales dropped by 20.2%. Classic Components' sales dipped 15.4%, and America II's sales shrank by 8%. Both Classic and America II grew their global sales.

Arrow topples Avnet from top slot

Arrow has usurped Avnet as the leading North American distributor for the first time since 2000 with $6.1 billion in 2004 revenue. Arrow grew its North American revenue by 23.7% in 2004. The company's worldwide sales grew to $10.6 billion in 2004 from $8.7 billion the previous year.

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