Surge Components, Inc. (Surge) is a supplier of electronic products and components.
The company’s products include capacitors, which are electrical energy storage devices, and discrete components, such as semiconductor rectifiers, transistors and diodes, which are single function low power semiconductor products that are packaged alone as compared to integrated circuits such as microprocessors. The products that the company sells are typically utilized in the electronic circuitry of diverse pro...
Surge Components, Inc. (Surge) is a supplier of electronic products and components.
The company’s products include capacitors, which are electrical energy storage devices, and discrete components, such as semiconductor rectifiers, transistors and diodes, which are single function low power semiconductor products that are packaged alone as compared to integrated circuits such as microprocessors. The products that the company sells are typically utilized in the electronic circuitry of diverse products, including, but not limited to, automobiles, telecomm, audio, cellular telephones, computers, consumer electronics, garage door openers, household appliances, power supplies and security equipment. The products that the company sells are sold to both original equipment manufacturers, commonly referred to as OEMs, who incorporate them into their products, and to distributors of the lines of products the company sells, who resell these products within their customer base. Surge sells its products through three of the top four distributors for electronic components in the world and also supplies its products to subcontractors who manufacture for their customers. These channels open doors to Surge at customers which Surge may not have access to otherwise. The products that the company sells are manufactured predominantly in Asia by approximately sixteen independent manufacturers. The company has one binding long-term supply agreement with one of the company’s manufacturers, Lelon Electronics. The company has an agreement to act as the exclusive sales agent utilizing independent sales representative organizations in North America to sell and market the products for one of such manufacturers, Lelon Electronics. When the company act as a sales agent, the company receives a commission from the company’s supplier who sold the product to the customer that the company introduced to the company’s supplier.
The company’s core products include buzzers, speakers, microphones, resonators, alarms, chimes, filters, and discriminators. The company also works with its suppliers to have the company’s suppliers customize many of the products the company sells for many customers through the customers’ own designs and those that the company work with the company’s suppliers to have the company’s suppliers redesign for them at the company’s suppliers’ factories. The company has engineers on its staff who work with the company’s suppliers on such redesigns and assists with the introduction of new product lines. The company is continually looking to expand the line of products that the company sells. The company sells these products through independent representatives that earn a commission on the products the company sells. The company is also working with local, regional, and national distributors to sell these products to local accounts in every state Challenge also at times handles the brokering of certain products, helping their customers find parts that regular suppliers can’t deliver.
Products
Surge supplies a wide variety of electronic components (some of which bear the company’s private ‘Surge’ label), which can be broadly divided into two categories—capacitors and discrete components.
The company sells, under the name of the manufacturer, Lelon Electronics, aluminum electrolytic capacitors, which are capacitors that store and release energy into a circuit incrementally and are used in various applications, including but not limited to, computers, appliances, automotive, lighting, telecommunications devices and various consumer products. The company’s sales of products under the Lelon Electronics name accounted for approximately 31% of the company’s total sales (and approximately 75% of the company’s capacitor sales as noted above) in Fiscal 2023.
The principal products sold by Surge are sold under the Surge name (except with respect to capacitors, which the company also sells under the Lelon Electronics name as noted above) or by Challenge are set forth below.
Capacitors
A capacitor is an electrical energy storage device used in the electronics industry for varied applications, principally as elements of resonant circuits, coupling and bypass applications, blockage of DC current, frequency determining and timing elements, filters and delay-line components. All products are available in traditional leaded as well as surface mount (chip) packages. The product line of capacitors the company sells includes:
Aluminum Electrolytic Capacitors- These capacitors, which are Surge’s principal product, are storage devices used in power applications to store and release energy as the electronic circuitry demands. They are commonly used in power supplies and can be found in a wide range of consumer electronics products. The company’s supplier has one of the largest facilities for these products in Taiwan and China. These facilities are fully certified for the International Quality Standard ISO 9001 and QS9000, and TS16949, which means that they meet the strictest requirements established by the automotive industry and adopted throughout the world to ensure that the facility’s manufacturing processes, equipment and associated quality control systems will satisfy specific customer requirements. This system is also intended and designed to facilitate clear and thorough record keeping of all quality control and testing information and to ensure clear communication from one department to another about the information (i.e., quality control, production or engineering). This certification permits the company to monitor quality control/manufacturing process information and to respond to any customer questions.
Ceramic Capacitors- These capacitors are the least expensive, and are widely used in the electronics industry. They are commonly used to bypass or filter semiconductors in resonant circuits and are found predominantly in a wide range of low cost products, including computer, telecom, appliances, games and toys.
Mylar Film Capacitors- These capacitors are frequently used for noise suppression and filtering. They are commonly used in telecommunication and computer products. Surge’s suppliers in China have facilities fully certified for all of the above mentioned quality certifications.
Discrete Components
Discrete components, such as semiconductor rectifiers, transistors and diodes, are packaged individually to perform a single or limited function, in contrast to integrated circuits, such as microprocessors and other ‘chips’, which contain from only a few diodes to as many as several million diodes and other elements in a single package, and are usually designed to perform complex tasks. Surge almost exclusively distributes discrete, low power semiconductor components rather than integrated circuits.
The product line of discrete components the company sells includes:
Rectifiers- Low power semiconductor rectifiers are devices that convert alternating current, or AC power, into one directional current, or DC power, by permitting current to flow in one direction only. They tend to be found in most electrical apparatuses, especially those drawing power from an AC wall outlet. All products are available in traditional leaded as well as surface mount (chip) packages. Surge’s rectifier suppliers all have the aforementioned certifications, giving the company an opportunity to market the products that the company sells to the automotive industry.
Transistors- These products send a signal to the circuit for transmission of waves. They are commonly used in applications involving the processing or amplification of electric current and electric signals, including data, television, sound and power. All products are available in traditional leaded as well as surface mount (chip) packages. Surge sells many types of ISO 9002 transistors, including power transistors, designed for large currents to safely dissipate large amounts of power.
Diodes- Diodes are two-lead or surface mount components that allow electric current to flow in only one direction. They are used in a variety of electronic applications, including signal processing and direction of current. All products are available in traditional leaded as well as surface mount (chip) packages. Diodes sold include:
Circuit Protection Devices- The company’s circuit protection devices include transient voltage suppressors and metal oxide varistors, which protect circuits against switching, lightening surges and other uncontrolled power surges and/or interruptions in circuits. Transient voltage suppressors, which offer a higher level of protection for the circuit, are required in telecommunication products and are typically higher priced products than the metal oxide varistors, which are more economically priced and are used in consumer products. All products are available in traditional leaded as well as surface mount (chip) packages.
Audible Components- These include audible transducers, Piezo buzzers, speakers, and microphones, which produce an audible sound for, and are used in back-up power supplies for computers, alarms, appliances, smoke detectors, automobiles, telephones and other products which produce sounds. Challenge has initiated marketing relationships with certain Asian manufacturers of audible components to sell these products worldwide. All products are available in traditional leaded as well as surface mount (chip) packages.
New Products- The company periodically introduces new products, which are intended to complement the company’s existing product lines. These products are ones that are commonly used in the same circuit designs as other of the products that the company sells and will further provide a one- stop-shop for the customer. Some of these products are common items used in all applications and others are niche items with a focus towards a particular application. These new products include fuses, printed circuit boards and switches. All products are available in traditional leaded as well as surface mount (chip) versions. In 2019 the company was issued a patent on a new pinpoint alarm designed to improve an individual’s ability to determine the location of the alarm. The improved alarm can be used in a wide variety of applications including reversing vehicles, medical emergency notification and hardware devices that use Bluetooth or other wireless communication protocols in combination with mobile software applications to locate lost items.
Marketing and Sales
Surge’s sales efforts are directed towards original equipment manufacturer (OEM) customers in numerous industries where the products that the company sells have wide application. Surge employs ten sales and marketing personnel, not including two of its executive officers, who are responsible for certain key customer relationships. In addition, Surge has expanded its sales team, hiring a Europe manager based in London as well as one based in China.
The company also uses independent sales representatives or organizations, which often specialize in specific products and areas and have specific knowledge of and contacts in particular markets. The company has representation agreements with approximately 30 sales representative organizations. Sales representative organizations, which are generally paid a 5% commission on net sales, are generally responsible in their respective geographic markets for identifying customers and soliciting customer orders. Pursuant to arrangements with the company’s independent sales representatives, they are permitted to represent other electronics manufacturers, but are generally prohibited from carrying a line of products competitive with the products that the company sells. These arrangements can be terminated on written notice by either party or if breached by either party. These organizations normally employ between one and twelve sales representatives. The individual sales representatives employed by the sales organizations generally possess an expertise which enhances the scope of the company’s marketing and sales efforts. This permits the company to avoid the significant costs associated with creating a direct marketing network. The company has had relationships with certain sales organizations since 1988 and continue to engage new sales organizations as needed. Additional sales organizations and representatives are available to the company, if required.
The company has initiated a formal national distribution program to attract more distributors to promote the products that the company sells.
Many customers require their suppliers to have a local presence and Surge’s network of independent sales representatives are responsive to these needs. Surge formed a Hong Kong corporation, Surge Components, Limited and hired a regional sales manager to service the Hong Kong/Greater China region customers.
Other marketing efforts include generation and distribution of catalogs and brochures of the products the company sells and attendance at trade shows. The company has produced an exhibit for display at electronics trade shows throughout the year. The products that the company sells have been exhibited at the electronic distribution show in Las Vegas, and the company intend to continue the company’s commitment and focus on the distribution segment of the industry by the company’s visibility at the Electronic Distributor Trade Show. In addition, the company has updated the company’s website to make it more informative and user friendly. The company’s search engines have been improved so that customers can find the company more easily and the company has developed a new portal system to help with lead management and disbursement.
Customers
The products that the company sells are sold to distributors and OEMs in such diverse industries as the automotive, computer, communications, cellular telephones, consumer electronics, garage door openers, security equipment, audio equipment, telecomm products, computer related products, power supply products, utility meters and household appliances industries. The company requests its distributors to provide point of sales reporting, which enables the company to gain knowledge of the breakdown of industries into which the products that the company sells are sold. Two of the company’s customers accounted for 20% and 18% of net sales for Fiscal 2023. The company’s discrete components are often sold to the same clients as the company’s capacitors. These OEM customers typically accept samples for evaluation and, if approved, the company works towards procuring the next orders for these items.
Competition
The company’s principal competitors in the sale of capacitors include Nichicon, Panasonic, Illinois Capacitor, NIC, AVX, Murata, Epcos, United Chemicon, Rubycon, Vishay and Kemet. The company’s principal competitors in the sale of discrete components include Vishay, General Semiconductor Division, General Instrument Corp., OnSemi, Inc., Microsemi Corp., Diodes, Inc. and Littlefuse, and Copper Bussman Division. The company’s principal competition in the audible business include AVX, Murata, Panasonic, Projects Unlimited, International Components Corp. and Star Micronics.
Government Regulation
Various laws and regulations relating to safe working conditions, including the Occupational Safety and Health Act, are applicable to the company.
The company is subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.
Patents, Trademarks and Proprietary Information
In September 2018, the company was issued a U.S. patent application with the United States Patent and Trademark Office for an improved pinpoint alarm designed to improve an individual’s ability to determine the location of an alarm versus standard single, multi-frequency, or broadband alarms. The improved alarm can be used in a wide variety of applications, including reversing vehicles, medical emergency notification, and hardware devices that use Bluetooth or other wireless communications protocols in combination with mobile software applications to locate lost items, including phones, wallets, and keys. The company’s patent issued on December 31, 2019, as United States Patent No. 10,522,008.
With respect to the other products that the company sells, the company has no patents, trademarks or copyrights registered in the United States Patent and Trademark Office or in any state. Additionally, to the best of the company’s knowledge the manufacturers of the products that the company sells do not have patents, trademarks or copyrights registered in the United States Patent and Trademark Officer or in any state.
History
Surge Components, Inc. was founded in 1981. The company was incorporated in the state of New York in 1981 and re-incorporated in Nevada in 2010.
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