Prioritize long-term resiliency over short-term efficiency
By Avnet CEO Phil Gallagher
I’m excited about the outlook for Avnet and the semiconductor industry overall. While we can’t control the market, we are determined to help our customers and supplier partners compete well within it.
How we do that successfully is by being more deeply engaged with our customers and suppliers than ever. This enables us to maintain the necessary expertise and capabilities to help them navigate today’s supply chain complexities.
A healthy 41% of Avnet supplier partners and customers globally see semiconductor supply chains stabilizing or improving, a good signal for the year ahead. There are signs of slight improvement in lead times and pricing, particularly in the Asia Pacific region.
The insights come from a recent Avnet survey and it bodes well for this year.
The survey revealed another good sign: the speed with which the industry adapted over the last three years of constrained supply.
Designers, supply chain experts and distributors like Avnet flipped the script to prioritize long-term resiliency over short-term efficiency. That understanding couples well with today’s strong customer preference to strengthen relationships with key partners who have deep supply chain understanding.
And as the semiconductor industry adapts to the hard lessons of chip shortages, supply chain resilience moves to the forefront this year, as companies must implement longer-range strategies to navigate disruption.
Anticipating change
OEMs need the ability to respond quickly to disruption and recover just as quickly. More than respond, they need to be able to forecast and anticipate change.
To make those decisions, OEMs need the right data, and I can share some of that with you today.
But, first, I offer some quick takeaways:
- Companies continue to navigate the global chip shortage, but there are some encouraging signs for 2023.
- The severity and longevity of the chip shortage prompted many customers to adapt design processes, and they appear to be doing that successfully.
- Avnet’s position at the center of the technology value chain and our deep supplier engagements enable us to help customers navigate today’s supply chain complexities. From these relationships, we know that demand remains strong globally in key verticals like transportation, industrial, medical, communications, and aerospace and defense.
Our role as a distributor is particularly critical now. As we have proven over the years, the value of Avnet in the current complex operating environment is our ability to serve as a control tower for our customers and suppliers, helping them to proactively manage their supply chains.
Digging into the details
The most recent Avnet Insights research report documents how the ongoing chip shortage impacts engineering, procurement and supply chain professionals who work with electronic components. It also discusses the steps they are taking to adapt.
In September 2022, Avnet surveyed 1,605 professionals worldwide employed by Avnet suppliers and customers who represent a wide range of companies from industrial equipment makers to contract manufacturers.
Some research highlights:
- Following three years of disruption caused by the global chip shortage, respondents have a cautious assessment of the semiconductor market today. More than one-third (41%) say that the situation has stabilized or improved compared to a year ago.
- The ongoing challenges have underscored the need for and importance of more strategic design and supply chain initiatives to achieve greater resiliency. Nearly a quarter (23%) have begun testing and qualifying multiple parts that meet requirements early in the design process. Additionally, organizations are adjusting their supply chain strategies to build up buffer inventory (23%) and lengthen supply agreements (21%).
- There are signs of a slight improvement regarding lead times and pricing, particularly in the Asia Pacific region. Here, more than one-third (37%) are more concerned with market conditions than component availability.
- Companies are challenging conventional thinking about lean inventory, with 50% of respondents noting they are building up buffer stock.
Rising to the challenge
As our most recent quarterly financial statement shows, we saw continued strength in the Americas and EMEA regions and began to see signs of slowing in Asia beyond the COVID-19 customer shutdowns.
In Asia, we experienced a softening of demand as we worked with customers to adjust their backlogs due to lead time improvements. I'm proud of our Asia team's continued success not only in ensuring business continuity, but it consistently gaining market share in the region.
There’s never been a greater need for the capabilities Avnet delivers. We look forward to continuing to play a critical role at the center of the technology supply chain.
Phil Gallagher is the chief executive officer of Avnet and a member of its board of directors.