Bullish components distributors expect double-digit revenue growth in China in 2011

SHENZHEN, CHINA: Components distributors are positive about the China market, with 87 percent expecting double-digit revenue growth in 2011. On average, distributors in China forecast a 27 percent increase in revenue this year. This optimism is echoed by China's electronic manufacturers. This is part of the findings of the 11th Annual Electronic Components Distributor Survey announced today by Electronics Supply & Manufacturing-China (ESM-China), an electronics management title of Global Sources' joint venture subsidiary, eMedia Asia Ltd.

After a bumper year in 2010, which saw revenues of China's electronics and information industry increase by 24.1 percent year-on-year to RMB 6,364.5 billion ($979 billion), China's electronic manufacturers continue to be optimistic, with 54 percent planning to increase their orders from components distributors this year in anticipation of continual growth.

Despite the surge in component demand, over 30 percent of China's franchise and combination distributors surveyed by ESM-China in December 2010 and January 2011 indicated that they had reduced delivery lead time, while over 50 percent said there was no change.

Over half of components are sourced from distributors
The Survey found that on average, China's manufacturers purchased RMB210 million (US$32 million) worth of components in 2010, 54 percent of which were ordered directly from distributors.

A total of 147 senior managers working for leading components distributors in the China market and 1,629 corporate, purchasing and procurement managers from China's electronics manufacturers participated in this year's Survey, which looked into their current challenges and plans for the future.

In addition to component shortage, franchised and combination distributors are wrestling with fierce competition (54 percent), dropping profit margin (41 percent), rising costs (28 percent) and suppliers' changing channel management strategy (25 percent). To counter these challenges, they are developing new application markets (51 percent), developing new brands (38 percent), expanding sales network (31 percent) and increasing marketing activities (28 percent).

Aggressive competition is also the main challenge facing independent distributors, 37 percent of whom are looking to enhance their competitiveness by shifting to a combination business model. In fact, only 18 percent of distributors polled this year are independent distributors, compared with 24 percent in 2010.

Component quality is top priority for manufacturers
ESM-China Publisher, Brandon Smith, said: "The results show that components distributors are expected to continue enjoying business growth in China this year. One of the main objectives of our annual distributor survey is to give them a better understanding of what China manufacturers are looking for, so that they can adapt their business strategy accordingly."

Quality (66 percent) is China manufacturers' major issue when working with distributors, followed by prices and timely delivery. Using alternative components is a core strategy they adopt to overcome delivery and cost challenges. They are also optimizing their supply chain through signing supply agreements with suppliers, building up safety stock for key components, and expanding suppliers in their approved vendor list.

The most preferred distributors in China
The Survey also revealed the most preferred components distributors, as voted by managers of China's electronic manufacturers. Winners of each category are (in alphabetical order):

Most Preferred Overseas Franchised Distributor: Arrow, Avnet, Cytech Technology, Excelpoint System (HK), Future Electronics, HK Baite (Group), Kei Kong Electronics, Weikeng International, Willas-Array and WPG Holdings.

Most Preferred Local Franchised Distributor: Asiacom Technology, Burnon International, China Electronic Appliance Shenzhen, Comtech Communication Technology, Fengbao Electronic, Guangzhou ZLG-MCU, Honestar Electronics, Mornsun Electronics, Powertek Group and Secom Telecom.

Most Preferred Independent Distributor: Advanced MP, America II, Compo Electronics, Mogultech International and PartMiner.

Special Achievement Awards
Catalog Distributors: Digi-Key, element 14, RS Components and Wuhan P&S;

Combination Distributors: Interine Electronics, North Technology, Pioneer Electronics and Vadas International;

High-growth: Mouser;

Outstanding Technical Support: Shenzhen Cestar.