Q&A: Mark Burr-Lonnon on the future of the electronics industry

Mark Burr-Lonnon, Mouser Electronics’ Senior Vice President of Global Service & EMEA and APAC Business, discusses current trends affecting the electronics industry.

Do you think 2023 will be a profitable year for the worldwide semiconductor industry? Do you think the industry will finally have recovered from the impacts of the COVID-19 pandemic?

According to the WHO and other organizations, COVID-19 is no longer a global health emergency. Yet the effects of the pandemic still linger across many industries. While analysts are calling for a decline in global semiconductor revenue in 2023, the semiconductor industry is poised for significant long-term growth, driven by the communications, automotive, AI and data processing sectors.

In 2023, the electronic component industry is expected to see a levelling out or small decline, dependent upon Geography, in terms of growth, with some sectors of the economy entering a period of recession in many countries/regions. However, with so much innovation in so many areas, the electronics industry will most likely be one of the stronger market sectors for the foreseeable future. At Mouser, we anticipate flat to modest growth. Mind you, this is over and above the 25 percent growth we had in 2022.

On the demand side, the industrial, communications, transportation and other market sectors, especially for electronic components with high energy efficiency, should stay steady. We expect emerging technologies such as artificial intelligence, automation, IoT, and networking technologies such as 5G to continue to accelerate growth. Mouser’s focus on new product introductions (NPIs) and building inventory has positioned us to meet the rising demand for electronic components.

Dealing with recent disruptions to the global supply chain has undoubtedly shifted the electronic supply chain. However, these challenges and disruptions have exposed vulnerabilities. With light shed on these underlying issues, what are some of the steps that Mouser has taken to adopt a more proactive approach when it comes to cost and risk?

Global supply chains remain a concern but have improved. The industry does face challenges keeping up, but this is also driven by a higher demand in global consumption due to the acceleration of the digital revolution. There is indeed a shortage of some chips, which continues to drive up the price of new cars. On the other hand, mobile phone manufacturers, who consume half of the MLCCs produced each year, are facing lower demands and are oversupplied, according to reports.

As a top 10 global distributor of electronic components, our key strategy, always, has been to build inventory. This has worked well for us. Our customers rely on us because they know we are a well-resourced distributor with the widest selection of products in the industry. We now stock over $1.8 billion (USD) worth of components comprising more than one million unique parts in stock and available to sell.

We constantly augment product choices for our customers. Mouser is an authorised distributor for more than 1,200 brands from across the globe, and our manufacturer partners rely on us to introduce their newest products into the market. We collaborate closely with them and understand delivery schedules so that we may apprise our customers, design engineers and purchasing professionals accordingly, updating them on expected delivery timetables.

Our large library of online resources can help buyers plan supply schedules and place orders in advance. If a part is not available, we suggest alternatives. Our Intelligent FORTE BOM Tool can map customers’ requirements to the best available current alternatives. It can also mark outdated and end-of-life part numbers, helping customers avoid obsolescence, and project the level of confidence and risk for each part. Customers can also register for stock notifications, so that we can update them on the availability of components in real time, ultimately yielding a time-to-market advantage.

To support our customer base and ensure consistency and greater choice of products, we offer 27 global customer support centers and are expanding our global distribution center. At present, our state-of-the-art facility stocks more than one million components, and we are currently expanding to double our capacity. We can process most orders, within 15 minutes from the time an order is received — sealed, labelled and ready to ship.

We continue to invest in automation to help our employees work smarter. For example, Mouser has 138 Vertical Lift Modules (VLMs), the largest installation in the world, used for storing, stacking, and moving components. We have also installed an Auto Store system to expedite order processing for our customers.

After the disruptions and chip shortages of 2022, many governments around the world are taking steps to boost domestic chip manufacturing. For example, the U.S. passed the Chips and Science Act to increase domestic chip manufacturing. Do you believe that the nationalisation of semiconductor technology will have significant implications for supply chains, talent acquisition, and access to government subsidies? What about the rise of counterfeit products in the supply chain?

Indeed, increased global demand for semiconductors is leading governments to pass legislation to subsidize and boost the fabrication industry. Yet, such multi-billion-dollar investments cannot happen overnight. Presently, for many countries like Australia and India, semiconductor demand is met through imports. The industry will certainly look to the private sector, government and professional organizations to help find solutions. Semiconductor foundries can take three to five years to build and can cost upwards of $20 billion. It will take strategic planning and significant investment to increase growth in chip manufacturing.

At Mouser, we work very closely with our manufacturer partners. More than ever, the role of distributors has become pivotal in guaranteeing regular supplies of authorized, genuine components. In recent years, the rise in counterfeit components entering the supply chain has been a serious problem. With Mouser, customers are assured of 100% certified, genuine products that are fully traceable from each of our manufacturer partners. Mouser takes every precaution to ensure that the products are obtained directly from the original manufacturers or through their authorised channels.

Which sector do you think will be the most important for driving semiconductor revenue over the next year?

The automotive and healthcare sectors have been hungry for components. The rapid adoption of MEMS technology (micro-electro-mechanical systems), is driving up demand for active electronics. Military and aerospace applications will also be crucial in driving revenue growth. However, there is an overall increase in consumption across many fronts, from consumer electronics, wearables and laptops to industrial automation and data-driven technologies.

Worldwide, there has been a major shift in manufacturing processes, towards greater adoption of digital processes and smart technologies for increased productivity gains. The Asia-Pacific, with large economically empowered populations, presents a huge opportunity for growth. The current emphasis on infrastructure development is expected to drive demand across diverse sectors, from smart agriculture to biotechnology to EVs. Australia represents a mature market, where the need for components is driven by the energy sector, power management, transportation, and wireless and telecommunications sectors. Currently, much of Australia’s demand is met through imports.

Given the current economic and industry trends (rising interest rates, falling demand in some important chip sectors), how can companies best revamp and accelerate digital transformation? And how can companies deploy resources to modernise and integrate their IT systems when budgets are getting tighter?

Digital transformation and automation is a business imperative today, regardless of disruptions and uncertainty. Industry has constantly strived for greater control and automation on the factory floor. With the confluence of a host of emergent technologies, Industry 4.0 and smart manufacturing offer new modes of autonomous corrective feedback in factory machines and systems. Autonomous intelligent machines deliver higher accuracy and allow mass customization while ensuring greater safety.

Organizations can thus gain more strategic value from the greater process efficiencies and higher productivity. All this has become possible due to advances in microprocessors and other components. Resource planning is key for any business, combined with the flexibility to be nimble to change course as the business needs dictate.

Planning and ordering in advance for popular product lines that require regular replenishment can help. Mouser’s wide selection of inventory, extensive logistic support and state-of-the-art shipping and delivery can bring reassurance to customers.