Electronics Distribution FAQ

Here are some Frequently Asked Questions about Smith & Associates...

What are electronics and semiconductor distributors?
Semiconductors and electronic components are the building blocks for computers and high-tech machinery, and are used in a multitude of products from video games and consumer electronics to communication equipment, medical equipment, computers, and automobile systems.

Companies that buy, sell, market, and resell semiconductors, electronic components and computer products on a business-to-business basis are considered distributors. Since the early 1980's, the electronics distribution marketplace has been growing at a phenomenal pace.

How does the semiconductor and electronic component distribution marketplace work?
The sale of semiconductors and other electronic products is broken down into three "tiers." This system has evolved significantly over the past decade as the result of a complex chain of supply and demand.

The first tier makes up the vast majority of sales. These are sales direct from Manufacturers such as chipmakers AMD, Intel, and Samsung to OEMs (Original Equipment Manufacturers) such as Compaq, Dell, and Sony. The OEMs, in turn, use the components to manufacture end-user products such as PCs and televisions.

The second tier is primarily Franchised Distributors who market and distribute semiconductors and electronic products to OEMs on behalf of the Manufacturers.

The third tier consists of all other distribution outlets. Major players at this level are the Independent Distributors, Surplus Resellers, smaller Brokers, and Value-added Resellers. Major customers include OEMs, Contract Manufacturers, and other Distributors.

What does an Independent Distributor do?
An Independent Distributor operates on a brokerage business model - buying and selling semiconductors, electronic components, and computer products on the "open-market" much in the same way that other commodities are traded.

A customer places an order and an Independent Distributor sources the product across all sectors of the market, based upon availability and inventory. This means Independent Distributors can provide product quickly, which is particularly advantageous when a customer is trying to reduce inventories or meet production deadlines and does not want to have production go "line down."

What is the difference between a Franchised and an Independent Distributor?
A Franchised Distributor has formal agreements with component manufacturers to buy and sell specific product lines at set prices with agreed upon lead times. Deliveries must be made on specific dates and, sometimes, within limited geographic regions. Franchised Distributors generally carry more products in stock, but have a limited number of manufacturers and product lines.

An Independent Distributor, on the other hand, does not have formal agreements with any specific manufacturer. This provides flexibility in purchasing from a variety of sources and on a time schedule that the Independent Distributor can control. An Independent Distributor also purchases and resells excess and obsolete inventories from OEMs, EMS providers, and other franchise and independent distributors. Customers typically purchase from both Franchised and Independent Distributors, based upon their particular time and sourcing requirements.

What is the difference between an Independent Distributor and a Broker?
Although they may operate on similar business models, Independent Distributors generally stock product, offer their customers credit terms, provide value-added services, honor manufacturers' warranties, provide RMA services, and have strict quality assurance. Brokers usually act only as agents for their customer in return for a fee. Top-level Independent Distributors such as Smith & Associates invest significant resources to expand infrastructure, hire personnel, develop markets, and create value-added services to meet the ever-changing needs of their customers. These investments enable top Independents to grow their businesses with long-term plans and alliances to create a class of "Super Independents." Smith & Associates is one of the most established and successful of the Super Independents.

Is Smith & Associates a member of any industry associations?
Smith & Associates is a member of IDEA, a trade association representing quality and ethically oriented independent distributors of electronic components. The purpose of IDEA is to promote the independent distribution industry through media advocacy, to improve the quality of products and services through a quality certification program, educational seminars, and conferences, and to promote the study, development, and implementation of techniques and methods designed to improve the business of independent distributors. For more information, visit www.idofea.org.