Distributors in China Seek to Improve Capabilities, Inventory Management
Semiconductor suppliers readjust strategies to gain more distributor interest.
Although China’s semiconductor market suffered flat growth during the global economic downturn, the country’s leading electronics component distributors managed rapid sales growth in 2009 because of several advantages, including success in growing markets, better customer resources, broad product lines and healthy inventory levels, according to iSuppli Corp.
iSuppli estimates that 52 percent of China’s semiconductor sales, or $25.7 billion, passed through distribution channels in China in 2009. Distributor sales grew 7.6 percent in 2009 compared with 2008, while supplier-direct sales dropped 4.6 percent after some leading suppliers that mainly implemented direct sales saw their sales decline in 2009. For the next five years, however, semiconductor suppliers will handle an increasing percentage of their overall sales in China directly during the next five years.
While China’s semiconductor market has recovered and is enjoying brisk growth once again in 2010, distributors are encountering a number of huge challenges, including component shortages, prolonged lead times, increasing product costs and complex market conditions. To cope with such issues, distributors are improving their forecast capabilities and inventory management capabilities in hopes of gaining more trust from suppliers and electronics product makers.
With devices mired in a shortage situation, the supply chain for semiconductors was out of balance from July 2009 to June 2010. Moreover, some commodity components will continue in a state of shortage in the second half of 2010.
Nonetheless, all participants are ramping up cooperation efforts and implementing several important strategies in order to rebalance the semiconductor supply chain. Semiconductor suppliers, for their part, are implementing flexible strategies to drive distributors and strengthen their buffer effect.
In one strategy, providing price protection and rewards can inspire various distributor classes to build inventories in rapidly changing markets.
In a second plan of action, key suppliers with broad product sectors can implement in some commodity markets general agents—which, while not generating very big total sales, can serve as leaders in their respective product sectors.
In a third strategy, large suppliers and distributors with better cash flow performance can cooperate to build up inventory through flexible accounts-receivable models. With the relationships between suppliers and large distributors strengthening, principal distributors can continue their mergers-and-acquisitions strategy, while authorized distributors can acquire local distributors in a new development.
All told, local distributors after more than 10 years of effort have been able to adopt clear and moderate strategies to develop their businesses. Furthermore, distributors have established competitive advantages and become key partners of suppliers in some market segments.
Although China’s semiconductor market suffered flat growth during the global economic downturn, the country’s leading electronics component distributors managed rapid sales growth in 2009 because of several advantages, including success in growing markets, better customer resources, broad product lines and healthy inventory levels, according to iSuppli Corp.
iSuppli estimates that 52 percent of China’s semiconductor sales, or $25.7 billion, passed through distribution channels in China in 2009. Distributor sales grew 7.6 percent in 2009 compared with 2008, while supplier-direct sales dropped 4.6 percent after some leading suppliers that mainly implemented direct sales saw their sales decline in 2009. For the next five years, however, semiconductor suppliers will handle an increasing percentage of their overall sales in China directly during the next five years.
While China’s semiconductor market has recovered and is enjoying brisk growth once again in 2010, distributors are encountering a number of huge challenges, including component shortages, prolonged lead times, increasing product costs and complex market conditions. To cope with such issues, distributors are improving their forecast capabilities and inventory management capabilities in hopes of gaining more trust from suppliers and electronics product makers.
With devices mired in a shortage situation, the supply chain for semiconductors was out of balance from July 2009 to June 2010. Moreover, some commodity components will continue in a state of shortage in the second half of 2010.
Nonetheless, all participants are ramping up cooperation efforts and implementing several important strategies in order to rebalance the semiconductor supply chain. Semiconductor suppliers, for their part, are implementing flexible strategies to drive distributors and strengthen their buffer effect.
In one strategy, providing price protection and rewards can inspire various distributor classes to build inventories in rapidly changing markets.
In a second plan of action, key suppliers with broad product sectors can implement in some commodity markets general agents—which, while not generating very big total sales, can serve as leaders in their respective product sectors.
In a third strategy, large suppliers and distributors with better cash flow performance can cooperate to build up inventory through flexible accounts-receivable models. With the relationships between suppliers and large distributors strengthening, principal distributors can continue their mergers-and-acquisitions strategy, while authorized distributors can acquire local distributors in a new development.
All told, local distributors after more than 10 years of effort have been able to adopt clear and moderate strategies to develop their businesses. Furthermore, distributors have established competitive advantages and become key partners of suppliers in some market segments.
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