From Federated Solutions to Multipolar Markets: Reframing the Global Electronics Supply Chain

The global electronics supply chain is a study in constant change and adaptation. Over the past year especially, we have seen a high rate of consolidations that reshaped the global corporate landscape. To understand the drivers of change, it is important to note that these corporate shifts are happening in relationship to concurrent global socio-economic shifts. Driving corporate merger and acquisition (M&A) strategy include the changing drivers for end-devices, hence component demands, and a critical set of macro-level events that are directly informing the pattern of those product demands. As we discussed in EBNOnline in January , supply chain services are rapidly changing to meet the growing complexity demanded of next generation products and services.

Most companies can no longer meet their clients' complex demands alone, necessitating a much deeper level of integration and innovation across divisions within corporations and, more notably, across partner corporations (B2B). This new, deeply integrated, and highly collaborative supply chain morphology has been coined a “federated ecosystem” by Virginia Howard of Gartner. One significant advantage of these federated business ecosystems is the B2B integration to cooperatively develop unique supply chain services that deliver the most agile and global solutions for clients.

Extending beyond borders, whether divisions, corporations, or regional markets, is part and parcel of today's global business climate, particularly within the electronics industry. Enabling and affecting the pace of these changes is the growth of digital business and what has been termed, the Fourth Industrial Revolution by groups such as The World Economic Forum  (WEF).  Digital business affords corporations, regardless of size or location, the ability to rapidly and seamlessly transfer and share data through digital channels, hence reach new partners, competitors, and clients.

Borders, therefore, are no longer the major obstacles to overcome; access to markets regardless of where the corporation is located, or who the market audience is, is seamlessly and readily accessibly through digital business and global connectivity. As recently commented by Forum founder and executive chairman Professor Klaus Schwab, at a WEF summit, “It will not be the big fish that eats the small fish […]; it will now be the fast fish that eats the slow fish.”

The growth in complexity of solution designs, of course, is in response to a growth in the complexity of clients' demands; but what drives this demand? In considering the large-scale changes happening in the B2B arena globally, we note that important social shifts are in play. Although the economic growth in emerging economies has been slower than once anticipated, there are critical changes driving the (albeit slow) growth that is emerging. One of the fundamental shifts is the rapid rise in urbanization, the domestic migrations to urban centers in emerging economies, especially. The impact of the current “age of urbanization,” as coined by McKinsey Global Institute, cannot be underscored enough not only as a global economic and social shift but equally important as a core driver of change that percolates through B2C and B2B drivers.

Rapid urbanization is not just a demographic interest; it is driving digital business and the rate of IoT adoption directly. If we follow the trail from the competitive landscape along the global electronics supply chain back to sources, it is clear that the number of smaller, agile new competitors is high. To recall Prof. Schwab's comments, there are many fast fish out there.

The rise in these fast fish is the byproduct of the rise in urbanization and rapid growth of new businesses that have immediate access to global markets by virtue of the ability to connect, transfer, and collect data immediately; barriers to entry in terms of networks and supply chains are not what they once were. Today's pace of innovation is driven by access, by digital business, and the ability to connect immediately, learn, and then directly compete regardless of size or physical location.

The true democratization of the electronics supply chain is enabled by the rise in digital business. Similarly, the pace of change along the electronics supply chain can be correlated with the pace of urbanization and business growth in emerging market countries. In turn, the demand for more integrated solutions, whether as end-device products, integrated PiP or SoC components, or highly customized supply chain services, is directly driving the rise in consolidations and the rise in federated ecosystems today.

At the core is the requirement to compete in the fast-paced, hyper-competitive global arena where times in the market, number of offices, or other traditional markers of leadership no longer are the critical variables. Keeping pace and leading is not just about being the biggest, it is about being the most agile and, importantly, the most connected – whether as an individual or as a corporation. The continued rapid, global urbanization trend will only strengthen this driver both for consumer demands and for enterprise and industry-level demands. Along with rapid urbanization is the enormous increase in data transfer and the requirement to support those data waves with the best equipment, networks, services, and supply chain solutions.

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