Advertisement

Blog

More Companies Eyeing Electronics Aftermarket

Quick obsolescence and environmental mandates are just two of the factors driving a growing interest in the aftermarket for electronics. Businesses and consumers are finding themselves buried in useless cellphones, PCs, and other goods. And disposal and recycling procedures are becoming increasingly complex as countries (and even US states) try out different flavors of WEEE (the EU's Waste Electrical and Electronic Equipment directive).

More companies in the supply chain are eyeing services that manage electronics from cradle to grave. The world's leading electronics distributors, {complink 453|Arrow Electronics Inc.} and {complink 577|Avnet Inc.}, are among the corporations investing big bucks in companies that repair, replace, recycle, and dispose of electronics products.

However, such one-stop shopping is still the exception, according to Frank Cavallaro, principal of Fronetics Strategic Advisors, a consulting firm that focuses on electronic asset disposal and integrated logistics. Cavallaro was president of the independent distributor Converge, which Arrow acquired in 2010.

The electronic aftermarket is a highly fragmented business made up of small and midsized specialists. Some provide repairs. Others handle recycling, collection, and disposal. Yet another set of companies smelt and recover materials such as plastic, metal, and rubber. Fronetics operates as a kind of matchmaker between companies looking to expand into the aftermarket and companies that provide asset recovery and related services.

“There's no shortage of [service] companies out there,” Cavallaro told us. “The problem is finding one that fits the financial criteria of our clients.”

As big as the electronics industry is, data on the aftermarket remains elusive. The fact that Arrow and Avnet (each with more than $20 billion in revenue) have invested in the market is a nod to its potential. Fronetics' clients include private equity businesses looking to grow and add to shareholder value. “The hard part is figuring out the services mix that is the best solution for clients,” Cavallaro said. “That's where experience in the electronics supply chain comes in. We are good at figuring out what makes sense, and that, in turn, helps get our clients to market more quickly.”

Many of the companies in the aftermarket have remained small because of a lack of capital investment, he said. “They've only remained in a niche because of their capital structure. We’d like to think we also provide a platform for them to expand their services.”

7 comments on “More Companies Eyeing Electronics Aftermarket

  1. FLYINGSCOT
    May 3, 2012

    I think it will stay fragmented until people understand the compliance issues of the new directives.  Then we will probably see Arrow and Avnet mop up the smaller companies and offer this service directly.

  2. Barbara Jorgensen
    May 3, 2012

    Flyingscot: Agreed. It might behoove some of these service providers to join forces and become of scale to compete with Arrow and Avnet. I think as RoHS, WEEE and other directives reach (REACH–there's another one!) their implementation dates, companies will find themselves unprepared to even refer their customers to organizations that can help collect and dispose of stuff. As much as I respect and admire the Avnets and Arrows of the industry, a little competition doesn't hurt.

  3. Daniel
    May 4, 2012

    “Arrow Electronics Inc. (NYSE: ARW) and Avnet Inc. (NYSE: AVT), are among the corporations investing big bucks in companies that repair, replace, recycle, and dispose of electronics products”

    Barbara, for what reason these two corporations are investing in such companies. Whether they want to recycling the products or helping them to get dispose? I know certain companies are funding (sub contact) there distributor channels for collecting the unused or damaged products for recycling and reassembling/servicing.

  4. Jay_Bond
    May 4, 2012

    I think that until many of these directives get set in place and have a firm foothold, many companies are going to keep pushing off compliance. They will also be completely unprepared when compliance time rolls around. Companies like Arrow and Avnet are showing their dedication, and will be steps ahead of other companies for compliance issues.

  5. prabhakar_deosthali
    May 7, 2012

    I agree that the fast obsolescence in electronics is making many a products useless even if they are in working condition and worth many more years of usage and that is because of the ongoing surge of the new product introductions.

    While many directives are coming into place in the developed countries which will eventually make it mandatory for the suppliers to ensure recycling of these products , I believe there is a huge market opportunity for making such used products available to the third world countries where the new technology reaches a little late   and reuse of the old products does make an economic sense.

     

  6. biking.radio
    May 7, 2012

    The business of designing, manufacturing and marketing a good is a global effort with local tweaks to it, but compliance is almost exclusively local and the process of local compliance includes many sub-processes that also reference local financial regulations that can't be summarily handled by an overarching compliance directive or two, which is why a unified compliance directive won't automatically result into consolidation of providers.

    This is where strategic partnerships will have to come into play. One side will bring the global supply chain science to the table, and the other one(s) will bring regional muscle.

    The other key question to ask is; how does one achieve compliance while yielding economically optimal results? There is a key difference between maximum recovery and minimum depreciation. The answer to that question will shape how big-brand OEM's will find their next wave of solution providers.

    Anyone can swim downstream with varying levels of success, but a powerful reverse logistics service provider must be able to intercept the problem further upstream, or at a bare minimum, treat the reverse logistics challenge with the mantra of influencing upstream practices to achieve continuous improvement that will drive economical value.

     

     

  7. arianjane12
    July 29, 2012

    Business in electronics is like a virus, it suddenly goes out in market so fast but then it goes obselete in just short period of time. It's like the cycle is irreversible, it seems like you cannot go back to the way it was before. Look at the cassettes/VHS today, it evolves into cd,vcd, dvd, blueray, etc… http://www.cpr-tampabay.com

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.