The electronics industry continues to feel the scourge of global slowdown. Despite various technological advancements and breakthroughs, the industry’s fast-paced evolution has not been spared by a web of intricate global factors.

Nonetheless, global electronics components distributor DigiKey sees a silver lining in the current industry down cycle. In fact, it is during this period that the Minnesota-headquartered company sees industry players get more aggressive to innovate and develop new products.

“We’re currently seeing a lot of activity because when the industry slows down…these activities stimulate interest, which we experience in the number of customers and the number of shipments, which are growing at an accelerated pace,” said Tony Ng, Vice President for APAC at DigiKey.

Particularly, Ng said this translates to new customers as it added 450 new suppliers across DigiKey’s core business in 2023. As such, they will contribute to the company’s revenue for 2024.

“We’re now in the next cycle of activity with an increasing number of smaller shipments, stimulating new designs and new opportunities. Down the road, this part of the cycle has historically been followed by stronger revenue growth for the industry overall,” said Ng.

Furthermore, Ng said there are several drivers the industry sees as providing opportunities for future growth. Among them are vehicle electrification, massive deployment of artificial intelligence (AI) across industries, alternative energy, healthcare, and more.

“With over 20 years of dedicated service in the APAC region, DigiKey has built a solid reputation among customers and supported hundreds of suppliers in their quest to expand globally. Today, DigiKey has transcended its role as merely a customer service center.

In this interview with AEI, Tony Ng, Vice President, APAC at DigiKey shares the innovative strategies the company employs in the face of market challenges.  

AEI: What measures do you employ to mitigate any impact of pressing issues that impact the industry from supply chain to other geopolitical-related incidents?

Ng: Our strategy does not waver as we encounter various issues. We continue to work with our suppliers to ensure DigiKey has the widest inventory selection available.

Regarding supply chain stability, DigiKey offers a robust supply chain management system to ensure the timely delivery of components. Our supply chain offerings include visibility into orders, returns, forecast constraints, inventory, shipments and invoicing. We provide this via the web or an API. Thus, enabling flexibility and resiliency throughout the entire product life cycle, beginning with new product introduction (NPI) and working through production and end-of-life (EOL).

Regarding geopolitical incidents, we follow U.S. export compliance laws and hope for an open global economy. The world has challenges, and the engineers and scientists that make up our customer base will be critical in finding solutions.

AEI: Based on your recent stock movement, what are the trends currently driving demand to DigiKey?

Ng: In the past year alone, there has been a surge in new product introductions in every industry. Specifically, from automotive to medical, industrial automation to consumer devices, and everything in between. This is driving business across the board. Healthcare, automotive, energy, 5G, and IoT will continue to drive innovation for many years to come. Thus, DigiKey will continue to provide all the components and services necessary to accelerate that progress.

This year, wireless connectivity, industrial automation and electrification, smart sensors, cross-architecture solutions, and rapid prototyping are all key trends globally.

Presently, significant trends in the APAC region include integrated circuits, connectors/interconnects, capacitors, and discrete semiconductor products. Various industries, including automotive, industrial automation, consumer electronics, healthcare, aerospace, and environmental monitoring, will continue to drive demand in the APAC (Asia Pacific) market this year.

AEI: How significant are automation products and solutions to DigiKey’s business nowadays?

Ng: DigiKey’s line card includes 450 automation and control suppliers, including Marketplace suppliers. We offer more than one million automation parts. In 2024, DigiKey will serve more than 400,000 automation customers globally. Worldwide, automation is DigiKey’s fastest-growing industry segment.

DigiKey can custom-cut wire and cable of any length, gauge, and weight, with no splice and no minimum, including UL certification and supporting European standard wire and cable. We can deliver automation products to customers in as little as 72 hours anywhere worldwide, with 99 percent of orders shipped the same day.

AEI: What significant advancements have you implemented in your distribution centers recently?

Ng: In 2022, we opened our state-of-the-art 204,000sq.m Product Distribution Center expansion (PDCe) in Thief River Falls, Minnesota, to scale capacity to keep up with skyrocketing demand. We allowed for plenty of room to scale up as order volume and the number of new products continue to increase.

Our distribution center was designed to support broken pack quantities to support engineering and low/mid-level production requirements. In addition to utilizing available 3rd party systems, DigiKey has also designed its own systems that further automate the picking process and improve traceability and more accurate pick quantities.

Our team has been hard at work on getting our new PDCe facility operating at a record-breaking efficiency level, with speed increases of 50% in picking, 36% in packing and 64% in receiving compared to our old PDC facility. We are on track to complete our migration. Furthermore, we still have room to grow with 30-35% available capacity that we are ready to tap into as soon as demand increases.

AEI: Can you share the outlook that you have for 2025?

Ng: The next cycle in 2025, as far as we can tell, will be far more gradual, sustainable, and steady than recent cycles. Product lead times in many areas have come down, making inventory generally more available. However, we don’t get complacent. Current conditions are mixed, with some technologies having lowered lead times while others have stabilized, and some are still extended. Because of this, our savviest customers are focused on the best practice of designing and manufacturing with flexibility in mind. Trying to predict our industry cycles is just as tricky as being a day trader on Wall Street, so it’s wise to work in flexibility from the start and prepare for the next cycle.

22 August 2024