Electronic Components

SIC 3670

NAICS 3344

The global electronic components industry fabricates an extensive array of electronic devices used in the manufacture of finished electronic products. Examples of industry output include:

printed circuit boards

electron tubes

electronic capacitors

electronic resistors

electronic connectors

electronic transformers

electronic coils

electronic inductors

Finished electronic goods, such as audio and video gear, are discussed in separate articles, as are semiconductors. See also Audio and Video Equipment, Computers, Semiconductors, and Telecommunications Equipment.

INDUSTRY SNAPSHOT

Electronic component manufacturing is characterized by intense competition among companies as well as countries. Most electronic components, which are the unassembled or partially assembled parts used in virtually any electronic device, are traded as commodities with slim profit margins for their makers.

Three chief divisions of industry output exist: printed circuit boards (PCBs), electron tubes, and passive components. By far the most ubiquitous and remunerative are PCBs and passive components; by value passive components—a catch-all term that encompasses many distinct products—is the largest category. A finished electronic end product, such as a television, generally contains components from all categories, including numerous kinds of passive components. In the mid-2000s, the increased use of electronic devices, particularly digital electronics such as digital versatile disc (DVD) players, mobile phones, high-speed devices, and flat-screen televisions, fueled a dramatic upswing in demand for connectors, resistors, switches, and other passive components, and an accompanying upswing in materials prices.

While the industry has important contenders in many parts of the world, Asian countries, notably China and its territories, Japan, Malaysia, and South Korea, have been perennially strong and efficient producers of low-cost and often high-quality components. However, in the mid-2000s the U.S. industry was the largest electronics components market and Japan remained the second largest. With the backing of U.S. and European producers, nations such as Mexico and Ireland also emerged as important production centers for electronic components.

ORGANIZATION AND STRUCTURE

The electronic components industry is made up of original equipment manufacturers (OEMs), such as IBM and Hewlett-Packard, and contract manufacturers, with electronic distributors also playing a key role. When OEMs produced electronic components, it was typically for use in their own products, an arrangement known as captive production, and they did not derive any direct revenue from the components themselves. In the past, contract manufacturing operations began as printed circuit board assemblers. In the late 1990s, however, OEMs such as IBM and Hewlett-Packard were increasingly turning to contract manufacturers to manufacture either subsystems or complete electronic products. Thus, brand-name manufacturers might not be involved in the physical manufacturing of products bearing their names. Contract manufacturers specialized in manufacturing and did not invest heavily in brand development, advertising, sales, distribution, or customer support. U.S. contract manufacturing revenues topped US$190 billion in 2004, up 20.1 percent from 2003. Worldwide revenues from contract electronic manufacturing were expected to reach $164.4 billion by 2008, and ODM sales forecasts predicted a rise of 21.2 percent to $134 billion by 2008 as reported by iSuppli in April 2005.

Distributors of electronic components also were jumping into the fray. As profit margins on component sales shrank, distributors attempted to drive profits through higher volume sales. These distributor-contractor manufacturers typically had three major advantages over those that were strictly contract manufacturers: (1) the distributorship provided a ready source of capital, hard to come by for many contract-only firms; (2) the distributorship's established supply channels provided an abundant supply of components, which many smaller contract manufacturers lacked; and (3) the distributorship provided an existing customer base. According to Electronic News, the largest components distributors in the world were Great Neck, New York-based Avnet Inc., with US$10.24 billion in 2004 revenues, and Arrow Electronics of San Jose, California, with US$10.6 billion in 2004 revenues.

BACKGROUND AND DEVELOPMENT

Electron tubes in the form of gas-discharge tubes were invented in the late nineteenth century and vacuum tubes were developed a short while later. The cathode ray tube, used in televisions, was invented in 1897 by Karl Ferdinand Braun at the University of Strasbourg in France. In terms of picture quality and price, the tube is still much better than liquid crystal displays, according to Steve Bush in Electronics Weekly.

In the 1920s, the first widespread use of these tubes began in radios; vacuum tubes were later crucial to the development of television and early computers. In the 1940s and 1950s, solid-state technology—in which a signal passes through a solid instead of a vacuum—represented a substantial advance in technology. The 1960s, however, saw the invention of integrated circuits, which could do much of the same work as the comparatively bulky transistor. Solid-state technology lends itself to complex, low-power circuitry, such as that found in...

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