Survey says electronic components distributors expect double-digit sales growth in China in 2015

SHENZHEN, China, May 28, 2015 /PRNewswire/ -- As the export market recovered in 2014, Chinese electronics manufacturers purchased 23 percent more components than in 2013 according to a recent survey. This coincides the data from a corresponding survey for components distributors: their sales in mainland China and Hong Kong averaged US$385 million in 2014 which represents an average revenue growth of 26 percent. Distributors' market outlook remains optimistic with an average revenue growth of 26 percent in 2015, which is 4 percentage points higher than last year's projection. Profit margin for distributors in 2014 is 20 percent (2013: 18 percent).

These findings were unveiled today by Electronics Supply & Manufacturing-China (ESM-China) -- China's leading electronics management title published by Global Sources' (NASDAQ: GSOL) joint venture eMedia Asia Limited -- at the 2015 Electronic Component Supply Chain Forum and Distributor Awards Dinner. Around 250 executives from components distributors, IC vendors, electronics manufacturers, supply chain service providers and independent design houses attended to discuss industry developments and witness the presentation of the 2015 Distributor Awards.

Brandon Smith, President of eMedia Asia, said: "This year marks the 30th anniversary of ESM-China, and we are honored to see so many clients and friends in the industry gather to celebrate the amazing progress of China's electronics industry over the past three decades.

"Components distributors play an important role in this growth. That is why we have been conducting the Distributor Survey for 15 years to understand distributors' business challenges and manufacturers' preferences when purchasing components, and how difficulties were overcome. The objectives are to help both parties develop business strategies that lead to win-win relationships, as well as to recognize outstanding companies and people in the distribution industry."

According to Survey findings, distributors are shifting their focus on new applications such as smart home, wearables/smart devices, Internet of Things (IoT), security and surveillance and electric cars. Emerging applications deemed the most important in the past, including smartphones, LED lightings, mobile medical and tablets, are given lower priority. This indicates that distributors are very sensitive to market changes.

Effects of tight supply chain felt

Product lines are the lifeblood of distributors. Compared with 2014, more distributors intend to carry more international brands (63 percent, 4 percentage points higher). The key considerations when carrying brands are the vendors' brand awareness (44 percent), followed by complementing existing product lines (39 percent) and product quality (37 percent). The importance of vendors' supply capability (31 percent) has grown significantly, by 13 percentage points, indicating that the effects of tight supply chain have been felt. By the same token, more manufacturers pointed to vendors' capacity constraint as a procurement problem (33 percent, up by 7 percentage points).

Distributors' three main market concerns were the same as before: reduced market demand (38 percent), falling profit margin (35 percent) and disordered competition (30 percent). Meanwhile, the problems of increasing operations cost, inventory pressure and changes in suppliers' channel management all significantly deteriorated (each rising by 6-8 percentage points). Despite their efforts in reducing inventory to lower costs and in improving turnover rate, their average on-hand inventory level was higher in 2014, at 5.2 weeks (2013: 4.8 weeks).

Developing new application markets and customers is by far the main way they overcome these market challenges (59 percent). They also increasingly resort to enhancing marketing activities (32 percent) and building closer partnerships with current vendors (28 percent), while adding product lines, expand sales offices, and strengthening technical support became lower priorities compared with previous years.

Fifty percent of manufacturers use online platforms for purchasing activities

Manufacturers purchased 56 percent of their components from distributors on average in 2014, and 44 percent said they plan to increase the proportion purchased from distributors. The ratios of those preferring international and China distributors are the same, at 34 percent, while 23 percent has no preference in distributors' headquarter location.

As much as 50 percent of manufacturers use online purchasing platforms, mainly to conduct component model searches, price check queries and inventory inquiries. Online transactions accounted for 16 percent of distributors' revenues on average in 2014, and this ratio has been increasing for four consecutive years (2013: 13 percent). Distributors believe that manufacturers' purchasing habits (61 percent) and trust (59 percent) are the two main obstacles to the growth of online business. They mainly use online platforms to handle online orders and inquiries on part numbers, inventory levels and prices, while more complicated functions such as online payment, alternate components inquiries and providing technical specifications and spot price trend are not as common.

When purchasing critical components, manufacturers' key consideration is product price (76-84 percent). When selecting distributors, quality (76 percent) is the first priority, and prices (64 percent) come in second place, closely followed by delivery lead time (63 percent). Shortfalls in these three categories are also the main reasons they downgrade qualified suppliers. The main challenges they face in procurement are the same as before: inaccurate demand forecast (62 percent), product quality (34 percent) and delayed delivery (34 percent). However, delivery problems caused by tight capacity have significantly intensified (33 percent). Therefore, besides strengthening partnerships with suppliers, working with strong distributors and building safety stock, they are also using more standard components and less customized ones.

Technical support is still the service manufacturers want most from distributors, while their need for small-volume purchases and alternate components has increased substantially (by 10 and 8 percentage points, respectively).

For more information about the Survey findings, please visit http://www.emrgresearch.com.

Top 2015 distributors in China unveiled

Winners of ESM-China's 2015 Distributor Awards in each category (in alphabetical order) are:

• Top 10 Overseas Brand Distributors: Arrow Electronics, Avnet, Digi-Key Electronics, Excelpoint Systems (HK), Future Electronics, HK Baite (Group), Jetronic Technology, Mouser Electronics, RS Components, and WPG Holdings
• Top 10 Local Brand Distributors: Asiacom Technology, Burnon International, CEACSZ, Fengbao Electronic, Honestar Electronics, Powertek Group, Fortune Techgroup, Mornsun Electronics, Sekorm, and Wisewheel Electronics
• Top 5 Most Sustainable Development Distributors: Ample Solutions, Hi-Hone, Mogultech, Sigma Technology, and Wuhan P&S 
• Top 5 E-Commerce Distributors: Cogobuy Group, ICkey, Right IC, Semi Technology, and ZSW Technology
• Top 3 Supply Capability Distributors: America II, Heilind, and Vadas International
• Top 3 Rising Star Distributors: SOSOIC, Storda, and Together Good Success 
• Top 3 Technical Support Distributors: Cytech Technology, Getsoon Electronics, and Smart-core Technology

The winners above were selected by managers and engineers in China through online voting.

To commemorate the 15th anniversary of the Distributor Survey, ESM-China is giving out the following special awards in 2015:

• Excellent Distributors of the Past 15 Years: Avnet, Future Electronics, and Sekorm
• Best Channel Management: Broadcom Corporation
• Best Supply Chain Service Provider: Xinlikang Supply Chain
• Most Influential Executive of the Year: Liu Xun, CEO, CEC Port
• Outstanding Blogger of the Year: Cheng Xiaohua

For more information about ESM-China's 2015 Distributor Awards and 30th Anniversary special reports, please visit: http://www.esmchina.com/30ANNI/ (in Chinese only).

About Global Sources

Global Sources is a leading business-to-business media company and a primary facilitator of trade with Greater China.

The core business facilitates trade between Asia and the world using English-language media such as online marketplaces (GlobalSources.com), print and digital magazines, sourcing research reports, private sourcing events, and trade shows.

More than 1 million international buyers, including 95 of the world's top 100 retailers, use these services to obtain product and company information to help them source more profitably from overseas supply markets. These services also provide suppliers with integrated marketing solutions to build corporate image, generate sales leads and win orders from buyers in more than 240 countries and territories.

Global Sources' other businesses provide Chinese-language media to companies selling to and within Greater China. These services include online web sites, print and digital magazines, seminars and trade shows. In mainland China, Global Sources has a network of more than 30 office locations and a community of more than 5 million registered online users and magazine readers of its Chinese-language media.

Now in its fifth decade, Global Sources has been publicly listed on the NASDAQ since 2000.

About eMedia Asia Limited

eMedia Asia Limited is a joint venture between Global Sources (60.1%) and United Business Media's EETimes Group (39.9%).

eMedia Asia provides 500,000-plus technology decision-makers throughout Asia and China with access to a multichannel media network. Through its technical events, publications and online network, eMedia Asia leads in providing the region's electronics community with the business and technical information they need to remain competitive.

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