Alex Iuorio, senior vice president, supplier management, atAvnet Electronics Marketing Americas, spoke with EDN atthe end of June as many companies were preparing fortheir second-quarter statements. From his viewpoint, as an experton the electronics supply chain, Iuorio addressed statements onbookings, component demand, and expectations for the year. Anexcerpt of that discussion follows.In late June, financialreports and company guidancebegan noting softeningbookings. What are yourthoughts?
A: As we think about thatand home in on it[regarding] the electronicsindustry ... there seem to besome plausible reasons for it.If you start with the [earthquakeand tsunami in March]in Japan, clearly what that didwas take what would havebeen June-quarter bookingsand move them into the Marchquarter to some percentage.
The second factor isthat we're coming off the2008/2009 recession and thesubsequent bounce back,which in the high-tech worldlooked like a straight-up V,and that [situation] extendedlead times. That [scenario]went on for a while, and thenkind of slowed down.
And the third factor isclearly the summer slowdown:a cyclical slowdown in theUnited States and Europe thathas been there forever.
When you factor in thosethings and you look at theoverall softness of bookings, it seems pretty reasonable thatwe would be where we are.
If you put all those factorstogether with the fact thatcustomers seem to be chuggingalong at normal tolerances,it would seem thatthis [situation] is an inventorycorrection of sorts and notreally a comment on underlyingdemand. There are a lotof people talking about softenedbookings, but nobodyseems to be talking about thereasons [for them]. We immediatelyrevert to the macroissues and we are sensitive tothose issues, but micro issuesfor our industry prevail here.
Gartner in June lowered itsestimate for 2011 semiconductorrevenue to around5.1% growth, down from anearlier 6.2% estimate. However,IHS iSuppli in Juneraised its estimate for 2011semiconductor revenue to7.2% growth from the 7%projection it made earlier.What do you think of thosefigures?
A: If you [can agree] thatthere is an inventorycorrection in the industry, then you [can agree] that our informationsystems as an industryare strong enough to reactboth upside and downside soit doesn't get too far out ofcontrol. The carry-throughwould be that we'll burn it offin 60 or 90 days, and we willstill have enough time to beable to catch those forecasts.Somewhere between Gartnerand IHS iSuppli is going to bereality for the year.
Are you happy with thatsituation?
A: In some respects, thewestern world hasmatured, and mature industriestend to grow at thosekinds of rates. I'm just happythat the forecast looks to belegitimate and that the industryis showing that type ofgrowth.
Where is engineers' designdemand coming from?
A: We've established alighting business toaddress high-brightness-illuminationapplications within ourstandard customer base butalso to address the lightingindustry itself—these luminairemanufacturers that are goingtoward high-brightness technologiesand need processorcontrol, the thermal solutions,optics. The lighting industry isa great metaphor for what wesee. More and more, our dailylife is becoming processorcontrol. [An analyst company in June] revised estimates[upward] for electronics in theautomotive market. Cars werealready chock-full of componentsand were processorcontrolled,so we are talkingabout an increase in electroniccontent. Aerospace/defensealso continues to grow. Thatmarket is an interesting onebecause all that defensespending is stable at best,probably declining. However,electronics content within governmentsystems continues togrow. Beyond that, medicalelectronics is a growth area.But the general answer is thatit's really about everythingbecoming more dependent onprocessor control, and, whenyou are more dependent onprocessor control, you'retalking directly about microprocessorsand microcontrollers.[That scenario] willhelp drive us.
Are you seeing moredemand for the designchainparts of Avnet'sbusiness?
A: Today, we really think ofthe design chain andthe supply chain as linked.But everybody is playing forbigger chips. You have to beable to design in the rightproducts, and the right producthas to be designed as notonly the right fit, form, andfunction for the application butalso producible and availableat the time the customerwants to hit its market window.In short, we are seeing alot more consultative use ofour design teams, our FAEs[field-application engineers],and our business-developmentmanagers in helpingcustomers decide what theright [technology] is so that itfits the application so that it'savailable when they want it.
Avnet's Alex Iuorio: Micro issues in the electronics supply chain are no small matters
