According to IHS iSuppli's China Research Service, despite the strong growth of China's semiconductor market in 2010, the proportion of distributors in total sales has decreased due to the increase in direct sales. Customers increasingly choose to approach the chip supplier directly to ensure a reliable supply.

In 2010, China’s sales of semiconductors through distributors increased to US$34.4 billion, an increase of 31.3% from 2009’s US$26.2 billion. However, the direct sales of suppliers in the year increased more prominently, with an increase of 54%. This led to the distributor's share of total semiconductor sales in 2010 dropped from 52% in 2009 to 48%.

After component shortages in 2010, semiconductor sellers guaranteed supply to key customers, after which direct sales grew faster than distribution.

It is expected that this trend will continue in the future. From 2010 to 2015, the compound annual growth rate of semiconductor sales of distributors will reach 6.1%, while the direct sales growth rate for the same period will be 9.6%. Therefore, the proportion of distributors in total semiconductor sales in 2015 will be reduced from 47.5% in 2011 to 44%.

Despite rapid growth, major distributors faced severe challenges last year, including component shortages, longer delivery times, higher product costs, and the market becoming more complex. Due to sluggish demand in certain markets such as mobile phones and computers, sales of major distributors declined in April and May 2011. Due to the slowdown in market growth, distributors will continue to face difficulties in expanding sales in the next five years.

The three largest distributors: Grand United Kingdom, Avnet and Arrow Electronics, will maintain their leading position in the future due to the implementation of merger and acquisition strategies and actively develop new markets. Because they have a broader product line and better customer resources than their smaller counterparts, the three companies have strong predictive capabilities and healthy inventory levels.

The focus has shifted to the communications sector. In the past 10 years, consumer electronics has grown rapidly and dispersed, and is the largest semiconductor application area for distributors. However, starting in 2011, communications will become the largest distribution application market, including telecommunications equipment, mobile phones, media tablets and other mobile Internet devices (MIDs). The new products have a high growth rate and will help promote the development of the communications market.

IHS iSuppli estimates that $13.8 billion in communications-related semiconductor sales in 2010 was achieved through distribution channels, which accounted for 55%, while the remaining 45% was achieved through direct sales. Distributors and major circuit board suppliers play an important role in the communications semiconductor supply chain because they help manufacturers with weaker internal design capabilities to produce qualified products.

Semiconductor suppliers will continue to adopt direct selling strategies in certain centralized communications industries such as telecommunication equipment. Therefore, IHS iSuppli Corporation predicts that direct sales will account for 48% of communications semiconductor sales in 2015.

The industrial and automotive electronics markets are diverse and decentralized. Higher industry growth rates and lower manufacturing concentration provide distributors with numerous opportunities.

Due to the long design cycle of the industrial and automotive electronics market and diversified customer needs, in addition to the distribution network, core chip suppliers are actively improving their design service network. An effective service network can accelerate manufacturers' time-to-market and reduce entry barriers. Service networks can also create more business opportunities for semiconductor suppliers.