Ally Winning, European Editor, PSD
Last year we invited Mark Burr-Lonnon from Mouser to give us some insight on how the company saw the year ahead. The article proved popular with our readership, and in hindsight it turned out pretty accurate. With that in mind, we’ve decided to invite Mark to look into his crystal ball again and give us his thoughts on how the market will turn out this year, both for Mouser and the overall industry.
The end of 2022 was pretty challenging for most of the world, with most developed countries flirting with recession. Unsurprisingly, the beginning of 2023 started off much the same. However, as long as 2023 doesn’t throw up similar surprises to the previous few years, Burr-Lonnon thinks that things will gradually recover through the course of the year and normal growth will return at the start of 2024. Even if the situation doesn’t improve, he is still optimistic for both Mouser and the industry, “At the minute I'd rather be in the electronics business during a recession than almost any other industry, because people still need technology to help them through it. Even if our industry is affected by recession, it will only slow growth. A lot of other industries may well go backwards”.
And he does have reason to be upbeat. Even though the overall global economic situation was slow, especially at the end of 2022, it was a very good year for Mouser. The company grew by around a third with revenue up from $3.2 bn to $4.1 bn during that period. The growth was driven by Europe for the second year in a row with 30% growth, followed by the Americas, up 25% and then Asia at 19%. This year has started as predicted for products, with semiconductors growing at around 16% and embedded products about 11%. The worst performers were passives and connectors which were down 4% and 12% respectively, due to more capacity coming online, lead times reducing and inventory returning to the supply chain. But it’s still early days.
The main reason that Burr-Lonnon is confident in continued growth for Mouser, even if a recession does hit, is the company’s breadth of offering, “We have over a million part numbers in stock to ship. Whether an engineer is looking for a part for a new design, or trying to put as much together on a bill of materials, the chances of finding exactly the parts that are needed through our sales channels is higher because of that breadth of inventory”.
The amount of stock held by Mouser has also doubled by value over the last year, and the company has over one and a half billion dollars of inventory both in stock and on order. At the same time, product specialists are adding new lines and new suppliers continuously. To keep up with expected growth this year, Mouser is building a new warehouse facility, which will double its overall storage capacity. Does that mean that the semiconductor shortage that affected the industry over the last few years is over? Not quite, but it is in an increasingly better position. Allocations and long lead times on many semiconductors will continue, certainly for the first half of this year. By the end of the year, those issues should sort themselves out and components should be available although there will be some differences both across suppliers and technologies that may continue to lag in some areas.
Last year we talked about difficulties in recruitment, and the situation remains much the same. Burr-Lonnon credits a good deal of the company’s growth this year to its operations in India, “There is a staff shortage and a staff quality issue across the US and Europe. We employ close to 1000 people in India as a backend operation, as well as leading the way in many IT Projects. That allows us to employ smart people for marketing on products, backend sales support and other work which we couldn't do anywhere else. We could not have grown by $2 billion in two years without the ability to accomplish the volume of work that was necessary to support it. Our operations in India were key to realising that growth.”
A second base in India will now help provide a boost to the figures in the future. The new office in Pune will drive sales as well as offering more corporate functionality. It also allows Mouser to target different applications, especially for the automotive industry, which has a strong presence in the Pune area. Having two locations also makes the recruitment of specialised staff easier.
Even though the last two years have been very tough for the industry, with many factories being temporarily closed because of the pandemic, it has proven remarkably resilient. Burr-Lonnon explains, “I'm almost surprised how few companies have gone bust over the past few years, due to issues such as getting parts in and trying to work through the cashflow issues through stocking incomplete goods that they cannot sell. Out of 650,000+ customers, you would have expected more issues, but I can't name any who have actually disappeared. It continues to amaze me how innovative customers have been to find components, redesign products with accessible parts, or start a new design to keep the business ticking over”.
Flexibility has probably played a part in helping that resilience, both from Mouser and the rest of the industry. Manufacturers are normally pretty strict on their terms, but distributors have looked to work with their customers to make it as easy as possible to keep them operating, through providing parts when available, suggesting alternatives and extending credit. The lack of closures proves that distributors have done a good overall job on that. Those companies are then doing the same thing to their own customers and the majority of the industry has come though very bruised but unbeaten.
One of the hardest tasks over the last year, and one which looks as if it will affect the industry throughout this year and well into the future has been enforced by governments. The war in Ukraine and the ongoing trade war with China has seen the global supply chain increasingly put under pressure through sanctions. Burr-Lonnon tells us how Mouser is dealing with that issue, “We spend a large amount of time trying to ensure that any product that goes out anywhere into the market is not being transhipped. We also work closely with manufacturers to track where the products are going and halt sales to companies that are known to be shipping it onwards to banned countries and organisations.”
On China, he says the company is still growing despite the sanctions, such is the huge demand for all products. Even with current sanctions, Mouser increased its revenue to $500m+ of sales in the country last year, an amount which will further increase this year.
In summary, the start of the year looks like it is going to remain pretty slow, but as supply issues get worked out and more components become available throughout the year, the market should pick up until we return to something resembling normal growth at the start of 2024. Thanks to Mark for taking time out of his busy schedule for the chat.