Active Components
Market, Supplier, Risk and
Competitive Intelligence

Industry Outlook & Drivers

Active Components Global Market Outlook:

Market Overview Semi-conductors: $421.3 billion (2020E), expected to grow at a CAGR of 5-6 percent from 2019 to 2023.

Porter's Analysis on AC

Supplier Power

• Component providers have medium to low power based on the industry they cater to
• For fragmented market in the consumer and devices segment, component suppliers have lower power 
• For consolidated, industrial/automotive segments, component suppliers have medium power
  Competition:
• The market is surrounded by a large number of suppliers but still, it is dominated by a small number of key players. This results in gaining supplier power

Barriers to New Entrants

• The foremost barrier for a new entrant is resources and capital cost required to start a plant. It is in addition to labor, transportation, and warehousing

Brand Differentiation:

• Though there is potential for new entrants to compete head-to-head with key players, brand differentiation strengthens the new entrant only to a limited extent, especially for semi-conductors

Switching Cost:

• Customers find it challenging to switch from one supplier to a new entrant by changing the entire design

Intensity of Rivalry

Product Differentiation and Contractual Terms:

• Intense competition in the industry, with few differentiated service offerings are the main factors for high industry rivalry
• Flexible contractual terms are being used to attract customers
• The pressure remains with all the tier-2 players in the industry
• Exit barriers for big players are also high due to high cost of entry into the market

Threat of Substitutes

Switching Cost:

• For semi-conductors, high switching cost is involved that makes it difficult for substitutes to draw customers away from key players
• For passives and interconnects, the switching cost is low, as there could be very similar passive component or interconnect that can substitute the existing product

Performance to Price Ratio:

• The switching cost differs for different electronic components, the low performance to price ratio of substitutes exerts a weak force in the industry environment

Buyer Power

Total Spend:

• With the ever-increasing buyer spend on electronic components, the buyer’s ability to bargain and obtain value-added services is high

Contracts:

• For semi-conductors, supplier alliances are formed on a long-term basis, so buyer power is generally high during long-term
• There is a mild backward integration risk due to large entry barriers. For passives and interconnects, they generally focus on procurement from distributors rather than suppliers for commoditized products