Some electronics distributors expect double-digit increases in revenue this year, after sales plummeted 20 to 35% for many distributors last year. However, few distributors are forecasting double-digit sales growth after 2010 because so much manufacturing has moved to low-cost regions in Asia. The good news for distributors is that while there may not be double-digit sales growth after 2010, North American revenue will rise because key end customer segments such as medical electronics, defense and aerospace, and transportation will drive component demand and sales growth. The average annual sales growth rate for many distributors after 2010 will be in the single digits. Distributors that offer design services and provide FAE (field application engineering) support to OEM customers will likely fare better, especially in markets such as solid-state lighting and transportation. While distributors acknowledge that North American revenue growth wont be as strong as growth in Asia, there is still plenty of distribution business in the United States, Mexico, and Canada. The North American marketplace is alive and well, said Lindsley Ruth, corporate vice president of Future Electronics in Montreal. We have a significant amount of opportunity ahead of us for growth. All customer segments are strong today. Medical is hot Ruth said defense and aerospace and networking are robust and medical will grow in importance to North America distributors. Medical is white hot, said Robin Gray, executive vice president of NEDA (the National Electronics Distributors Association) in Alpharetta, Ga. If you can sell components into the medical industry you are going to continue to do well.  Some distributors will have double-digit growth in the medical segment, but you wont see that level of growth in military/aerospace, but you will see steady growth, said Gray. And automotive is rebounding for many distributors as more foreign automobile companies are expanding in North America. Other executives at large distributors are also optimistic about the future of North American business, although they acknowledge most of their revenue growth will come from Asia. I feel very bullish about the opportunities in North America, said Chuck Delph, senior vice president of sales for Avnet Electronics Marketing Americas based in Phoenix. He agreed that defense/aerospace and medical will be growth drivers in North America, but there are other opportunities, as well, including alternative energy and solid-state lighting. Lighting will continue to rise in all regions of the Americas, especially in Mexico where they are transitioning to high-brightness light-emitting diodes [LEDs], said Delph. Avnet has a solid-state lighting division, as do other large distributors, including Arrow Electronics and Future. Delph added that electronics manufacturing services will continue to be a driver of Avnet North American business. To some extent I would put cable assembly houses in that category, he said. Cable assembly companies will drive Avnet sales of connectors, passives, and electromechanical devices. Arrow, headquartered in Melville, NY, said its strategy in North America will be to focus on higher growth vertical markets, but also to provide end-to-end services for customers, according to Peter Kong, president, Arrow global components. Our strategy is to leverage our strengths and differentiate on value, he said. Our value proposition includes full product lifecycle value-added services capabilities, including supply chain, design and engineering services, programming, kitting, excess management, end of life, and reverse logistics. Transportation drives sales For some distributors, transportation will drive sales growth for years. Michael Knight, vice president of corporate product management and supplier marketing for Fort Worth, Texas-based TTI, said transportation will soon represent about 10% of TTI overall sales in North America. Transportation includes off-road vehicles such as farm and construction vehicles. Knight said manufacturers of such vehicles are looking for design help from distributors. We have a fleet of engineers whose sole purpose is to work with our sales force to design in parts at John Deere and Caterpillar, he said. The engineering piece in such equipment is so important and the customers are technically savvy and more demanding. They ask more questions about specs, functionality and mean time between failures. It;s the segment where we do our most technical selling, said Knight. He said such equipment uses highly reliable, robust parts because they are used in harsh environments. Another segment that many distributors will focus on is defense and aerospace. Frank Stalzer, president and CEO of Astrex Electronics, a connector distributor in Plainview, NY, said business has been spiky this year, but he expects business to be steady in the next few years. Much of Astrex= business is to defense contractors and subcontractors. What is unique about mil-aero is that we dont see either the high highs or the low lows that you see in the commercial world. Our business wont be down 30% one year and up 40% the next. It more stable, said Stalzer. Because of that stability, other distributors will focus on the mil-aerospace business when their commercial business drops off. Astrex also sells some connectors to the medical segment.  Greater growth for Asia While distributors say they expect growth in North America, many will have strong growth in Europe and Asia. Digi-Key, based in Thief River Falls, Minn, is an example. Mark Larson, president and chief operating officer for Digi-Key, expects his company will have strong single-digit and sometimes double-digit sales growth in North America in the next few years, but Digi-Key will post higher double-digit growth in Asia and Europe. He said about 70% of Digi-Key= sale revenue is in North America, but in a few years about 50% will be in North America and 50% will be from customers in Asia and Europe. Sales in Europe for Digi-Key have increased dramatically over the last few years. Four years ago 89% of Digi-Key= sales were in North America and eight years ago 97% of the distributor revenue was from North America, said Larson. However, while Larson says growth will be stronger in Europe and Asia, the North American market will continue to grow for years, albeit at a slower rate than Asia. The same is true for most other North American-based distributors. While some growth will be due to growth in certain segments, another reason is that component manufacturers are relying on distributors more, said Knight of TTI. Component manufacturers are cutting back on their direct sales channel. OEM customers that had been buying direct are now buying through distribution, he said. He said such OEM customers are realizing the value that distributors provide in the supply chain. The role of component manufacturers is not to keep large inventories of parts and a deep array of products, said Knight. They are not holding parts speculatively for future customer demand. That= what distribution does.