Munich Thomas Rudel just can’t get chips. “The delivery times for individual product groups are still critical,” complains the boss and owner of electronics distributor Rutronik. The pandemic may be over, but the resulting supply bottlenecks for electronic components are not.
The entrepreneur from Baden finds it all the more incomprehensible that Europe relies almost exclusively on US companies for the wholesalers of electrical components that are so important for the domestic industry. 93 percent of electronics distribution in Europe is in the hands of US companies: “We are the only provider fighting against the Americans,” says the 59-year-old.
Rutronik is globally active with 82 branches. Nevertheless, the company is “almost too small to tackle the huge US conglomerates,” explains Rudel. And that despite an annual turnover of 1.1 billion euros and more than 1800 employees.
Thomas Rudel’s father Helmut founded Rutronik 50 years ago. The company from Isprung near Pforzheim is still family-owned – and that is probably the biggest difference to the US competition, which went on a buying spree with billions from the capital market and has grown massively over the years.
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In the meantime, the EU Commission has also recognized the deficits in chip production and announced a catch-up race a year ago. In view of the lack of chips, the EU states should become less dependent on overseas manufacturers and double their world market share, according to Commission President Ursula von der Leyen.
The electronics distributor has annual sales of 1.1 billion euros and more than 1,800 employees.
(Photo: Rutronik)
Brussels and Berlin also want to push semiconductor research with billions in aid. Rudel is outraged that no one has thought of sales, the dependency is blatant.
So-called distributors are vital for the survival of most buyers of electronic components. Because the majority of the chip companies only supplies a few dozen particularly high-revenue customers directly, brands such as Apple, Bosch or Lenovo. Everyone else has to buy from distributors. A look at Infineon’s figures shows how important these wholesalers are. Germany’s largest semiconductor producer achieves more than half of its sales with them.
The shortage of skilled workers also affects medium-sized companies
Nevertheless, politicians do not care about strengthening European distributors, according to entrepreneur Rudel. On the contrary: The average tax burden of US competitors is much lower. “As a result, we don’t have the money to be competitive.” Meanwhile, chip companies such as Intel and Infineon can expect billions in state support for their new plants in Magdeburg and Dresden.
Rutronik and large parts of the German electronics industry are dissatisfied with the funding for another reason. In the USA, Japan, South Korea and Taiwan, the governments have decided on huge subsidy programs for the semiconductor industry in recent months. Half a dozen huge new chip factories are now being built in America.
>>Read here: Europe? No thank you! Why a large Japanese chip group scorns the EU billions
Europe, on the other hand, is lagging behind and is still debating its own strategy. “It takes too long for us, the USA is a year and a half ahead,” says Gunther Kegel, President of the ZVEI industry association. “The Americans are moving forward more aggressively,” agrees Jan-Hinnerk Mohr, semiconductor expert at the Boston Consulting Group.
A medium-sized company like Rutronik is also hit harder by the lack of skilled workers in this country than the big ones, Rudel continues: “70 percent of our products require a lot of explanation.” It is vital for survival to find competent people. Creating hundreds of jobs in India, for example, like US competitors are doing, is not an option for him.
US competition is many times larger than Rutronik
There is no political initiative in Germany to bring together the many second- and third-tier distributors to create a powerful provider. “The small medium-sized companies will no longer be able to do this in the future, and there would be many synergies,” says Rudel. Of course, he himself lacks the means to drive forward the consolidation in this country.
In fact, the US competition is many times greater. The Arrow group, for example, achieved sales of a good nine billion dollars in the third quarter and made a profit of 342 million dollars. The figures show that electronic components are in greater demand than ever: CEO Sean Kerins emphasized that this was the best third quarter ever. “Supply, while improving moderately, is still not enough to catch up the backlog that has built up in previous quarters.”
The US competition is many times greater.
(Photo: Rutronik)
US rival Avnet’s revenue rose by more than a fifth to $6.8 billion in the most recent quarter. Operating profit has even increased by more than 70 percent to $290 million. Even the less powerful US competitor Digikey still has annual sales of 4.5 billion dollars.
“Everything for the circuit board”
To this day, Rudel sees the strength of his company in providing the most comprehensive range possible. That means: “Everything that the customer needs on the circuit board.” Many competitors, on the other hand, mainly offer high-margin semiconductors. With him, on the other hand, there are also many passive components and electromechanical components, such as switches.
This is particularly interesting for small, owner-managed companies. All in all, according to Rutronik, it ships 120 billion components all over the world every year. The engineers at Rutronik also develop complete electronic systems.
>>Read here: This is how the semiconductor researchers in Belgium are shaping our future
However, Rudel has put all plans for acquisitions on hold for the time being. With rising interest rates, it is becoming increasingly difficult to get capital. The entrepreneur also fears tax increases in Germany, which could weaken his earning power.
An IPO is not an option for Rudel. The fact that he has to let the US competition go is hard for the electrical engineer to bear. But do you want to give up control of your own business? Never.
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