IoT: A Business Opportunity for Components Distributors?

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The IoT is everywhere and presenting a lot of opportunities in almost every sector and business segment. As electronic components are crucial in the making of IoT devices and products, it serves as a good business opportunity for components distributors. They can keep ready inventory of components that are needed for making IoT devices and products. Is it an easy business proposition for them to keep inventory or still there are issues? EFY finds out

There is no denying the fact that Internet of Things (IoT) is everywhere and this new technology is offering mind-boggling market opportunities. The volume of IoT products and services and their associated revenue estimates are huge and headed in the right direction. According to Cisco, there will be 50 billion devices connected by 2020. As per the estimates by Statista, there will be around 31 billion IoT devices globally by 2020.

On the other hand, Marketwatch estimates that the IoT space will be worth US$ 2.5 trillion by the end of 2022. One such report predicts the value of IoT devices and services market will cross US$ 7 trillion by 2020. There are infinite benefits of IoT to the manufacturers, suppliers, distributors and customers. Is this the ‘killer tech’ the electronics components market has been waiting for?

If you look for the answer, then it should definitely be ‘yes.’ The electronic components manufacturers, suppliers and distributors believe that the IoT will lead to an exponential growth in the market. Every link in the electronic components supply chain can bank upon the IoT if they are well-positioned to do so. However, distributors per se hold a unique position in the supply chain as they serve the component manufacturers and suppliers as well as the end customers.

Increasing opportunities

Components distributors, for long, have been serving as the information providers, and with the IoT picking up speed that role is growing. Today, a key focus area is the sensors and the ability of distributors to deliver most up-to-date information on sensor trends and advances as well as greater access to them is driving much of the IoT craze and allowing manufacturers and design engineers to create more life-changing products and solutions.

Moreover, the huge potential of IoT presents growing opportunities for component distributors, who act as the pipeline for providing products and services required to make the connected devices work. Several of them are embracing this part and enhancing their capabilities in the IoT space.

On exploring opportunities for products in IoT space, Gulabchand Hariya, CEO, Cirkit Electro Components, tells EFY, “We are tying up with some companies for the IoT products and including all modules required for integrating the products. We are already selling a lot of IoT components.”

The component distributors are responding to the rapid growth of IoT and strengthening their product lines in order to provide manufacturers with the necessary components needed for IoT devices, such as integrated circuits (ICs), print circuit boards (PCBs), diodes, sensors, etc. With extended product lines, distributors are empowering original equipment manufacturers (OEMs) to create new devices in line with the demands of enterprise and consumer.

Ready inventory – issue or need?

However, the question arises: To capitalise on the growing demand for IoT related products, are components distributors keeping ready inventory?

Keeping inventory of IoT products and components is not an issue for components distributors like Ramakrishna Electro Components. As Harinder Mitter, Product Manager of Ramakrishna Electro Components Pvt Ltd, puts in, “It is not an issue to keep inventory of the IoT related products. Today, anything can be sourced, whether it is from outside or not, and every chip company is outsourcing. At any point of time, Ramakrishna can hold an inventory of suppose Rs. 300 crores. Therefore, it is not a big challenge to keep an inventory of suppose Rs. 100 crores for IoT.”

Hariya from Cirkit Electro Components also shares the same thoughts. “At present, whatever our customers ask us we are sourcing for them and then supplying them. At present, there is not much inventory of IoT-enabled components with us. We have just 5-10 per cent IoT products in our overall inventory.”

He, however, adds, “It will automatically increase as and when the demand starts growing and I am hopeful it is going to increase.”

Sunil Hasija, Managing Director, Elektronika Sales, also says that they are working closely with their existing partners and establishing a flexible and dynamic third-party ecosystem to meet the demands of customers.

“We are prepared to support the needs of our customers, whether it be sensing things or connected products/components, enabling smooth network of supply,” Hasija mentions.

“Purchasing decisions will be taken only after assessing buying patterns of customers and when demand forecasting was streamlined,” he adds.

However, Chandrakant Sohandani, Director of Netwin Infosolutions was a little cautious in suggesting keeping a huge inventory of IoT products. “Talking about inventory, electronics components distributors cannot keep too much of things together, because technology is constantly changing,” he tells EFY.

Sohandani further explains, “Take for example, GPS tracking devices. Earlier, we’re using 2G support for these devices and now not 3G and 4G have come. If you have lot of inventory based on 2G, either you will have to change it or upgrade it or discard it altogether. You’ve to see what volumes you’re expecting in the business, then only you should keep inventory.”

“However, the potential is huge for IoT-related devices,” he adds.

Cost – a major challenge

The potential IoT is offering is huge but still there are issues that are making the components distributors cautious in keeping inventory. While asked about the challenges, Mitter from Ramakrishna tells, “Sourcing is not a challenge for us, the challenge is cost of the products. For us, it is not a big challenge to keep an inventory of 100 crores for IoT related products, the major challenge is that is the consumer ready to buy those products.”

“Therefore, costing is a big challenge to implement technology. This also impact the demand also, if there are no/less buyers for technology-driven products,” he adds.

“So, the major challenges actually are what kind of audience should be targeted, what should be the technology adopted, etc. The issue is if customer is prepared to pay the amount and which segment of consumer to be addressed,” Mitter says.

He further explains, “Take for example – if a manufacturer wants to convert a conventional switch into a smart switch, it will definitely cost more. If the price of a conventional switch is, say suppose, Rs. 100 per switch, the cost of smart switch will be three times or five times higher. Even if manufacturer does cost effective design, still it costs more, compared to conventional switch.”

As a result, component manufacturers will definitely be going to pass the increased cost on to the distribution channel partners and thereon to the end customers.

The way forward

However, with the rising adoption of IoT, the demand for several components and products will increase, offering an exciting opportunity for distribution channels and the entire supply chain. It is not just about smart electronics and wearables, there is also a lot of opportunities for growth in the industrial IoT space.

There are a number of opportunities for electronics components distributors going forward as the industry readying itself for widespread adoption of IoT. On the brighter side, technological innovation, increased internet usage and lowered barriers to entry for OEMs are all contributing to IoT device adoption and growth as consumers and businesses alike are seeing tremendous value in the IoT.

In coming time, low-power wide-area (LPWA) networks and narrowband IoT will enable millions of devices across wide geographies to connect to Internet without even consuming much power or data. Even, it is also easier today than ever before for OEMs and start-ups to produce IoT devices as funding is more accessible and development times are shorter. Thus, in turn, leading to the demand for components such as sensors and development kits, needed for IoT devices and solutions.

According to Hariya from Cirkit Electro Components, “The future is IoT. I think all those companies who want to go to a higher level will have to start selling components based on IoT requirements.”

Overall, it can be said that IoT is allowing components distributors to approach and prepare for the future, however, with a cautious optimism.

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