Q&A with DigiKey

1. What new market trend are you seeing so far in 2025?

Following on from 2024, we are seeing strong growth in our industrial automation and interconnect business. In our industrial automation business unit, we are seeing continued growth in traditional products like motors, controls and PLCs, as well as test and measurement products and tooling. On the interconnect side, we see growth in mil-aero and industrial/harsh environment connectors and tooling.

2. What other challenges are you working through and how are you overcoming them? 

One of the challenges the industry is working through is around tariffs. DigiKey has and continues to take steps to mitigate the impact of tariffs to the best of our ability. Our strategy is to only pass through the portion of the tariff costs that are physically incurred after these mitigation steps. Tariff rates may vary by supplier or part depending on what costs DigiKey incurs directly as either the Importer of Record (IOR) or what a supplier may pass through to DigiKey.

DigiKey established the largest foreign trade zone (FTZ) in the United States (based on the number of shipments that pass through it) to ensure our supply chain was dynamic for any challenges that may come up. Products shipped into the FTZ are not legally considered ‘imported’ until they leave the FTZ and ship domestically. A product that is subsequently shipped internationally legally never enters the US, and thus, no tariff is incurred.

Partnering with DigiKey’s FTZ program allows DigiKey to become the IOR, handling paperwork, declarations, and tariff management, resulting in lower costs and more competitive prices. We will continue exploring FTZ utilization to reduce this cost to our end customers where possible.

3. What do you see ahead for the rest of the year (any new trends, challenges, opportunities, etc.)?

We’re seeing positive design activity in Q1, and we expect that to continue. Sales momentum is moving in the right direction, and our customer reach has broadened to some of the highest levels we’ve seen in our history. There are good indicators that new and existing customers are developing products that should be introduced into production soon. 

One opportunity for our suppliers as this new development begins is to ensure they are making affordable, non-tariffed product options available so they don’t miss out on this design cycle, which will have purchasing impacts for years to come. By partnering with DigiKey on our FTZ program, advanced shipping notices, and other partnerships that benefit our end customers, everyone can win with this next design cycle.