DONGGUAN, China, -- China's electronics manufacturers are expected to purchase US$34 million worth of components on average in 2014, representing a substantial increase of 26 percent from US$27 million in 2013. Manufacturers purchased 60 percent of components from distributors last year, and 51 percent of them planned to raise the proportion of components from distributors. Local distributors are gaining popularity, with 41 percent of manufacturers saying they preferred China distributors (2013: 25 percent), while 22 percent had no preference by distributors' headquarters location (2013: 12 percent). Proportions of respondents preferring international, Hong Kong and Taiwan distributors have dropped.
These are among the findings of the 14th Annual Electronic Components Distributor Survey announced 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.
Components distributors seem bullish about the China and Hong Kong markets and anticipate revenue growth of 22 percent in 2014 on average as the global economy slowly recovers. They put their 2013 revenue growth at 19 percent (2012: 17 percent) on average, with the top three markets remaining the same as the previous year: consumer electronics, industrial electronics, and network and communications systems. The average profit margin was 18 percent, which was 5 percentage points higher than that indicated in last year's survey, although 31 percent of distributors stated shrinking profit margin as one of the top three challenges they faced.
"By revamping business operations and strategies, some surveyed distributors have successfully differentiated themselves from the competition as well as expanded into new markets. As many as 8 percent of distributors surveyed this year had profit margins of 40 percent or higher," saideMedia Asia President Brandon Smith. "ESM-China's annual Survey aims to identify distributors' business challenges and manufacturers' difficulties when sourcing for components, as well as ways they can overcome these, in order to help both parties fine-tune their strategies for greater success."
Price is the main consideration for manufacturers
Price is by far the top consideration (more than 70 percent) for manufacturers when purchasing components, a possible contributing factor in the growing popularity of local distributors and component brands. This year, 28 percent of distributors indicated that they would carry more China brands (2013: 21 percent), although the majority (59 percent) still said they would carry more international brands (2013: 68 percent). Complementing existing product lines (52 percent, 2013: 43 percent) has overtaken brand awareness (49 percent, 2013: 53 percent) as the major consideration when choosing new brands to carry.
Product quality, price and delivery lead time are manufacturers' top concerns when choosing franchise distributors, while distributors themselves consider product supply capability, technical support and competitive pricing the main qualities as a good distributor.
Manufacturers surveyed said that the main challenges in components sourcing were inaccurate demand forecast (61 percent), product quality (35 percent) and delayed delivery (34 percent). In response, they are strengthening partnerships with suppliers (58 percent), building safety stock (32 percent), and working with strong and all-round distributors (30 percent).
The two main challenges distributors face have been the same over the past few years: softening market demand (40 percent) and disorderly competition (34 percent). To address these, they are developing new application markets, expanding customer base as well as adding product lines.
The challenges that have intensified most are fluctuating market demand (8 percentage points higher in 2013 than 2012), difficulty in securing franchise brands (7 percentage points higher) and high logistics costs (3 percentage points higher).
Online transactions increasing, albeit slowly
The proportion of online transactions in distributors' total revenues, at 13 percent on average in 2013, has been increasing for three years (2012: 11 percent). Online transactions are still mainly for small-volume purchases. As many as 49 percent of manufacturers used online platforms for sourcing, mostly for component models search, inventory search and product inquiries.
A total of 179 senior managers working for leading components distributors in China and 2,260 managers and engineers from China's electronics manufacturers participated in the Survey.
Top distributors in China unveiled
The Survey results were unveiled today at ESM-China's annual Supply Chain Forum and Distributor Survey Awards held in the Songshan Lake Hi-tech Park in Dongguan, Guangdong Province. More than 200 executives from components distributors, IC vendors, electronics manufacturers and independent design houses participated in the event and witnessed the awarding of the top components distributors who were selected through online voting by managers of China's electronics manufacturers.
Winners of each category (in alphabetical order) are:
• Top 10 International Distributors: Arrow Electronics, Avnet, Cytech Technology, Digi-Key Electronics, Excelpoint Systems (HK), Future Electronics, HK Baite (Group), Jetronic Technology, Mouser Electronics, Willas-Array Electronics, and WPG Holdings.
• Top 10 Local Distributors: Asiacom Technology, Burnon International, CEAC, Comtech Group, Fengbao Electronic, Fortune Techgroup, Honestar Electronics, Mornsun Electronics, Powertek Group, and Sekorm.
• Top 5 Most Promising Distributors: Ample Solutions, Hi-Hone, Mission Electronics, Sigma Technology, and Vadas International.
• Top 3 Best e-Commerce Distributors: Shanghai Galaxy Electronics, Shenzhen Shenmei Technology, and RightIC.
• Top 3 Best Technical Support Distributors: EDOM Technology, Lierda Science and Technology, and WT Microelectronics.
• Top 3 Best Logistics Service Distributors: Advanced MP, America II, and RS Components.
• Top 3 Rising Star Distributors: Heilind Asia Pacific (Hong Kong), Succeed International Trade, and Yang Cheng Electronics International.
• Analyst's Choice - Outstanding Executive of the Year: Frederick Fu, Regional President, China, Avnet Electronics Marketing.
For more information on the 14th Annual Electronic Components Distributor Survey, read the detailed survey reports at http://www.emrgresearch.com
More information about Global Sources is available on the company's corporate site at http://www.corporate.globalsources.com