Frankfurt The timing was ideal when Noureddine Seddiki started his brokerage firm Sand & Silicon in spring 2021. During the corona pandemic, companies around the world scrambled for the scarce semiconductors. The intermediary for chips has been able to help desperate buyers more than once in dire need, reports Seddiki.
The semiconductor crisis has now passed its peak. Nevertheless, the entrepreneur is not worried about his start-up. “There will be bottlenecks by 2030,” predicts the business economist. The currently planned new chip factories would not be sufficient to satisfy the increasing demand.
Something else makes Seddiki, who was born in Frankfurt, confident: He also earns money from full warehouses. The 38-year-old helps companies turn surplus stocks into cash. It’s becoming a lucrative business these days.
Seddiki knows that some companies have bought too many chips in recent months for fear of not getting enough. Now the ample inventories would weigh on the balance sheet.
After almost two years, Sand & Silicon has twelve employees. “We’ve grown faster than I thought,” says Seddiki. The start-up competes with hundreds of brokers who move electronic parts back and forth around the world. These are often companies from the Far East or the USA.
Sand & Silicon saves corporations in the supply crisis
Meanwhile, Seddiki sees itself as a trustworthy partner for industry in German-speaking countries. The concept seems to work. Initially, he had small businesses in his sights, he explains. But his first customer was a global medical technology company. In the meantime, there are many large customers in the file.
>> Also read: Electronics association criticizes meager progress in Europe’s chip race to catch up
So does Dormakaba. The specialist for access control systems from Switzerland said it got through the chip doldrums well with the help of the start-up. Procurement manager Gabriel Strickler praises the “independent distributor, who works both quickly and flexibly and at fair prices”. The start-up ensured that Dormakaba could continue to produce competitively. The group employs 16,000 people and most recently generated sales of CHF 2.8 billion.
Companies tend to turn to brokers when they can’t get parts through their usual channels. Large customers such as Bosch, Continental or ZF normally obtain chips directly from the manufacturers.
Smaller buyers buy from so-called distributors. The largest German distributor is Rutronik with a turnover of around 1.1 billion euros. The distributors maintain direct contractual relationships with the semiconductor manufacturers and some of them are huge corporations like Arrow or Avnet from the USA.
Brokers are more flexible. They buy from other brokers, use excess inventory and sometimes stock up on goods themselves if they think the technology might one day be in demand.
“The Tinder of the Parts Market”
Seddiki learned his trade at the distributors Future Electronics and Arrow. Most recently, he worked in Frankfurt for Converge, Arrow’s own broker. The many contacts that the father of three children made during this time are now his greatest asset.
Rainer Koppitz, head of the listed electronics manufacturer Katek, says: “Brokers are extremely important in a difficult market environment, as has been the case for the past eighteen months.” Katek produces electronics for the automotive industry, for energy supply and manufacturers of medical technology, among others.
In the event of bottlenecks in particular, brokers are “a useful addition so that providers like us can meet customer expectations at all if the normal sources – distributors and manufacturers – are not able to deliver sufficiently,” says Koppitz.
There are numerous chip factories in planning and also under construction. But it takes years for the factories to run. Albert Waas from the Boston Consulting Group
The manager believes that brokers are something like “the Tinder of the components market”. Without them there would be far fewer “matches”, the right partners would not find each other, i.e. companies with overstocks and those that lack components.
Seddiki and his team think they know who to call to get semiconductors somewhere on earth that are out of stock elsewhere. They are also known for their good prices, the entrepreneur claims: “We are mostly the cheapest.” This cannot be verified. He also gives no information on sales. In the first year it was in the single-digit millions, which quadrupled in 2022.
However, it is clear that brokers will also be needed in the future. The delivery bottlenecks triggered by the pandemic are over in some areas. Memory chips and processors for computers are available in large numbers.
>> Read here: US group keeps its only German chip factory
But some of the autochips that are particularly important in Germany are still scarce. Nothing will change in that regard any time soon, says Albert Waas from the consulting firm Boston Consulting Group (BCG): “There are numerous plants in the planning stage and also under construction. But it takes years for the factories to run.”
Orders are often placed via SMS
When companies that have come under pressure contact Seddiki, it is usually the turn of the purchasing department. But sometimes he also has sales people on the line who fear for their sales targets and want to find the necessary components themselves.
When Sand & Silicon finally have the chips in hand, things often happen very quickly: “I often get the answer to an offer by SMS.” Customers are afraid that the scarce goods are already sold out if they even write mail.
>> Read here: The US is subsidizing itself to be the world leader when it comes to chips
Seddiki assures that he only ever supplies original parts. He guarantees this through an independent test company that examines the chips. This is an important aspect for brokers’ customers. “We have had the worst experiences with brokers from whom our customers bought directly out of sheer necessity and without adequate quality assurance,” says Katek boss Koppitz.
Katek himself has not had any quality problems when buying through brokers. This was ensured by strict contracts, mandatory tests by the brokers themselves and a thorough inspection of incoming goods.
Now Seddiki wants to expand further. A dedicated office in Dubai is scheduled to open in the spring.
More: Electronics association criticizes meager progress in Europe’s chip race to catch up