Q5 interview - Mark Robinson, Advanced Power Components

Mark Robinson, CEO at component distributor Advanced Power Components, talks to Electronics Weekly about consolidation in the market, the opportunities facing UK-based electronics companies, and the importance of skills in a downturn...

1. How would you describe APC’s business in 2 sentences?

APC is a UK-based distributor of specialist electronic components. With seven focused business units, we serve a range of niche markets including aerospace, defence, industrial, medical and broadcast, and offer a very technical approach.

2. You serve a number of specialist markets. Which are particularly strong at the moment and are there any areas that are struggling?

We have deliberately developed our business into a number of specific sectors which we believe offer good opportunities for growth and, between them, limit our exposure to individual sector downturns. Key to this strategy is complete avoidance of commodity products. As a result, we have been affected by a lack of confidence across the distribution market but this has had a relatively small effect in comparison to the pain being experienced by the broadline distributors.

Right now, sales into more specialist applications in all sectors are holding up well, especially high reliability applications whether defence, aerospace, medical or high end industrial. This might change if government spending is dramatically cut following the financial crisis, but right now we are feeling pretty good about things.
 
3. Do you think there will be much more consolidation in the distribution market?

Consolidation will continue but the opportunities amongst the larger distributors are obviously becoming restricted.
This has to be seen as a threat to both customers and suppliers as their options become increasingly limited and, as we have seen in the past, service levels have a tendency to fall whether in terms of technical support, local sales support etc.

Our approach has been, and will continue to be to pull together the strengths of small technical distributors whose entire philosophy is based on providing great technical support to both customers and suppliers. It sounds like a bunch of clichéd BS but the fact is that many non-commodity type components must be well supported from a technical point of view or sales simply do not develop. 

4. Can market conditions get much worse and what steps can a distributor like yourself take to safeguard itself if times get harder?

For me, the key issues remain diversity and differentiation. We were dependent upon the communications market into 2001/2002 when the market collapse affected us significantly and the lack of diversity nearly brought us to our knees. We are now balanced across a far wider cross section of markets and technologies so I believe we have a level of diversity which will give us some protection if conditions deteriorate further.

We have also generated an organisational structure which focuses on individual markets and technologies, in harsh contrast to the approach taken by other distributors. Key to this is the way in which we have branded each of our technical sales teams. We have a number of small, expert teams operating primarily independently and with a very high degree of focus across a diverse range of technologies and market sectors.

Attracting technical expertise and management out of the larger corporate accounts works well for us. We benefit from their experience and they are relishing working for a fast growing organisation. For a business reliant for the time being on the UK market, I am happy that we are as robust as we can be.

5. What are the challenges and opportunities facing UK-based electronics companies?

The old challenges of volumes moving offshore and margins being squeezed are not going away but the mass exodus is over and it is now more a fact of life. More recent challenges are, in my view, being self inflicted to a certain extent. The ongoing pressure on margins reflects the fact that the bulk of UK distribution is handled by the broadliners who are becoming increasingly complex logistics operations with less added value in other areas. They will continue to argue the point but this is the common perception.

Over time, this perception will increase and as a result the tendency towards lower margins will continue. The knock on effect will be a door opening for pure logistics operations to enter the market creating non electronics specific competition. On the flip side, we see increasing appreciation of specialist technical understanding of the products and applications in niche areas fuelling our growth in several areas.
 
See also: Q5 - Interviews with electronics industry leaders
Read all the Electronics Weekly Q5 interviews. From ARM's chairman, Sir Robin Saxby, to touchscreen technology firm Zytronic's MD, Mark Cambridge, the business leaders share their particular insights on the UK electronics industry.

See also: Credit Crunch: Semiconductor light amid economic gloom, in which Electronics Weekly highlights some recent stories that run counter to the prevailing industrial outlook.

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