BOM Monitoring: The Best Safeguard Against the Effects of M&As
In 2016, Broadcom announced their intentions to acquire NXP Semiconductors for a whopping $44 billion. At the time, it was the largest single acquisition the electronic components industry had ever seen – and although the merger was cancelled in July of 2018, for a time it provided an appropriate capstone for what has very much been what the industry might call “the era of acquisitions and mergers (M&As).”
The next largest merger of this era, which can be defined as taking place from 2015 up to present day, was between Avago and Broadcom for $37 billion. Below that, SoftBank acquired ARM for $32 billion in 2016, $13 billion more than Western Digital’s acquisition by SanDisk. In total, approximately 100 M&As occurred between 2015 and 2018, totaling roughly $245 billion, according to IC Insights.
The intention behind such mergers are obvious: component manufacturers are seeing a brief window of opportunity to gain as much of a market share as possible before markets such as automotive reach their full potential. Many analysts are predicting growth in the electronic components industry to be quick, steady, and quite lucrative for those firmly in place to meet demand. In one such study, for example, the passive electronic component market is expected to grow over 4.2 percent annually between 2019 and 2023 to over $26 billion. Competition is going to be fierce, and the “arms race” to acquire the most resources to get a head start is very much in full effect.
This signals a looming period of transition not just for the companies themselves, but for their customers, as well. Unexpected component obsolescence, allocation and lead time issues, and other supply chain disruptions are to be expected as the new ownership looks to synchronize current commitments with their new, expanded business strategy. Some components and semiconductors will increase production levels, but just as many less profitable components will be discontinued in favor of other offerings more in line with what will give the OEM a greater return on their investment. OEMs who operate in more niche markets and need components to support extended product lifecycles, such as the healthcare sector, are those most directly affected – and if careful considerations are not made to carefully monitor the market, they run the risk of being forced to discontinue entire product lines, alienating huge portions of their consumer base in the process.
More than at any point in the history of the electronic components industry, OEMs need a BOM monitoring system in place that keeps them ahead of obsolescence and allocation issues before they occur – and there is only one that is capable of predicting both.
Every 15 minutes, Partstat BOM Monitoring will scrub an unlimited number of bills of material on the OEM’s behalf against our 50 billion points of Big Data, and alert them to any sudden drops in inventory quantities or lead time increases that may signal impending obsolescence or allocation. Such knowledge buys our customers precious time to pivot their supply chains accordingly to find alternative components, place an order, or, in some cases, make a last time buy. And when such an action is needed, customers can take advantage of our status as the world’s largest free electronic component search engine and marketplace to connect directly with thousands of authorized distributors who stock the inventory they require.
Partstat BOM Monitoring is a proactive solution designed specifically to address the uncertainty many OEMs are facing as component manufacturers continue to merge and consolidate their resources in ways that leave the integrity of customer supply chains in question. The future looks bright, but a few bumps in the road are to be expected. We are positioned to not only help customers overcome these bumps, but thrive well into the next era.