Dinesh Singh, CEO, LWI Electronics Inc., talks to Atul Goel from EFY magazine, about the electronic components market and their strategy.
SEPTEMBER 2011: Q. How do you see the market for electronic components in India?
A. Unfortunately, due to inclination towards foreign goods, majority of the Indian franchises are more of brokers and not stockists. They order semiconductor components from foreign countries and then supply the same. However, the business is not as rosy as it appears. Equipment routed from China and Singapore throw up major challenges. Here devices are tampered, refurbished, counterfeited and quality standards are not met. This is affecting not only India but also the global market.
Some customers, who fall prey to the cheap Chinese parts, often come back to us in their production crises for genuine parts after losing time and revenue to such faulty parts.
Q. What are the key developments happening in the area of electronic components?
A. With the growing middle-class population of nearly 400 million people, India’s electronic equipment consumption, which was estimated at around $110 billion in 2010, is expected to reach $363 billion by 2015.
Q. What are the main component-types that LWI distributes?
A. LWI distributes military/industrial grade parts like integrated circuits, capacitors, resistors, discrete devices, linear logic, digital signal processors, dynamic random access memory, static random-access memory, cache memory, connectors, LAN products and much more. LWI stocks obsolete products that even the manufacturers do not keep. Today LWI stocks over 100,000 line items of new and obsolete semiconductor components. We expect to double our line items by 2013.
Q. LWI stocks obsolete products that even the manufacturers do not keep. Is there a considerable demand for such products? If so, from whom?
A. If you think obsolete electronic spares are worthless just because the market is flooding with novel electronic items, which become out of date within a short span, then you must re-look on obsolete parts from our point of view. We are strongly betting on the business of giving fresh life to these obsolete parts. It’s not so easy but worth over long run in supporting our customers in shortage/line stoppage scenarios.
A simple example is: Once a submarine made in 1980’s was stranded due to unavailability of a few critical obsolete parts. The manufacturers of those parts were no longer in business and LWI came for rescue with the tough-to-source parts. Today that submarine is cruising well.
In crises we also suggest the latest alternates to our customers for some of the most antique parts.
Q. What are the challenges that you face in stocking obsolete products, and what trends do you foresee in this line of your business?
A. This business requires high-risk appetite and future anticipation capabilities. It also requires managing a huge inventory, massive investment, large floor space and key inventory management practices. Likewise, to be successful in any business one needs to understand the market needs. Since its inception, LWI designed a strategy to be in touch with their customers on regular basis and do a thorough study of current market scenarios.
Q. LWI also buys OEM excess materials and inventories in bulk. What is the strategy behind this?
A. Most of the time franchise distributors sell components to our OEMs in minimum order quantities (MOQ). For example, even if an OEM needs, say, 10 pieces for production but franchise distributors sell them, say, 4000 as MOQ, the remaining 3990 become an OEM excess.
OEMs sell us their excess, new and unused stock parts. We also have a no-minimum-order policy on stocked products. This has been possible due to our strong roots in the international market at the supply end of the components industry.