Despite rapid growth, major distributors faced severe challenges last year, including component shortages, longer delivery times, higher product costs, and the market becoming more complex. Due to sluggish demand in certain markets, such as mobile phones and computers, sales of major distributors declined in April and May 2011. Due to the slowdown in market growth, distributors will continue to face difficulties in expanding sales in the next five years.

The three largest distributors: Grand United Kingdom, Avnet and Arrow Electronics, will maintain their leading position in the future due to the implementation of merger and acquisition strategies and actively develop new markets. Because they have a broader product line and better customer resources than their smaller counterparts, the three companies have strong predictive capabilities and healthy inventory levels.

  Focus on communications

  In the last 10 years, consumer electronics has grown rapidly and dispersed, making it the largest semiconductor application area for distributors. However, starting in 2011, communications will become the largest distribution application market, including telecommunications equipment, mobile phones, media tablets and other mobile Internet devices (MIDs). The new products have a high growth rate and will help promote the development of the communications market.

  IHSiSuppli estimates that in 2010, communications-related semiconductor sales of $13.8 billion were realized through distribution channels, which accounted for 55%, while the remaining 45% were realized through direct sales. Distributors and major circuit board suppliers play an important role in the communications semiconductor supply chain because they help manufacturers with weaker internal design capabilities to produce qualified products.

  Semiconductor suppliers will continue to adopt direct selling strategies in certain centralized communications industries such as telecommunication equipment. Therefore, IHSiSuppli Corporation predicts that direct sales will account for 48% of communications semiconductor sales in 2015.

  The industrial and automotive electronics markets are diverse and decentralized. Higher industry growth rates and lower manufacturing concentration provide distributors with numerous opportunities.

  Due to the longer design cycles in the industrial and automotive electronics markets and diversified customer needs, in addition to distribution networks, core chip suppliers are actively improving their design service networks. An effective service network can accelerate manufacturers' time-to-market and reduce entry barriers. Service networks can also create more business opportunities for semiconductor suppliers.