Electronic manufacturing distributors like geometry

In the electronics manufacturing industry chain, distributors have long been an indispensable channel partner in the entire manufacturer's supply chain by virtue of their extensive search for goods and the adjustment of excess inventory in the supply chain. However, at the time of the overall upgrade and transformation of China's electronics manufacturing industry and the integration of industrial chains, how do manufacturers and distributors form an "integrated" interest relationship? What is happening to the value of distributors?

"Now we face competition that is all-encompassing. On the one hand, the penetration of international distributors into domestic businesses has brought direct competition to these distributors. On the other hand, the profits of the entire electronic manufacturing industry have become thinner and more costly. Rising, we all have to adjust the structure and direction of the business,” said a person in charge who has been in the electronic manufacturing industry for many years.

As the distributor said, the involvement of international electronic component distributors has largely eroded the survival of local independent distributors. In the past, domestic distributors provided local services and used information asymmetry. They knew where to get the goods. Today, independent international distributors directly enter the world with a global purchasing network, which is an impact on local Chinese companies. To this end, some local distributors have begun to engage in a number of authorized businesses, through a diversification strategy to meet the challenges.

Transfer of procurement rights to the mainland, manufacturers benefit According to statistics of isuppli Corporation, over 60% of the components in the Chinese semiconductor market are sold directly by semiconductor manufacturers or through distributors located in mainland China and Hong Kong. There is still an upward trend in this figure. It is expected that in the coming years, the growth rate of the local components market in China will still be maintained at around 18%. The pattern of purchasing components in Singapore, Japan, and Taiwan, China, and shipping them to the mainland several years ago is gradually diminishing. This is because China’s local decision-making procurement ratio is increasing.

This change in trend is due to the fact that China has attracted more and more manufacturers to shift production capacity to the mainland. More and more North American and European OEMs, contract manufacturers and other multinational companies are shifting their production equipment to China. We are seeing those Taiwanese regions and Japanese electronics manufacturers that have entered the mainland market early on are benefitting.

The rapid development of China's electronics manufacturing industry has provided component suppliers with excellent opportunities for development. As one of the most dynamic channels in the market, distributors naturally play an important role in the supply chain of the entire industry in the region. The change in business models raises a new topic for the global supply chain. Industry insiders believe that semiconductor manufacturers and distributors need to make adjustments in order to better serve traditional and emerging customers.

Manufacturing industry chain model In the manufacturing industry chain, the corporate form of football (processing and manufacturing) is a common form of China's manufacturing industry today, and it is also the low-end part of the industrial chain that we strive to change. However, the form of football business is not entirely useless. It is also a good model for the early development of small businesses. As the processing plants of other large factories, they are seeking partners with higher profits, stabilizing their revenues, and maintaining sustainable development. They are also paying attention to the market and preparing for future upgrades.

In the field of electronic manufacturing, Apple has created a meticulous and mysterious global industrial chain. China has become the largest and most important manufacturing base in this industry chain. Among the world’s 156 major suppliers announced by Apple, Chinese companies account for the vast majority.

However, the profit margin of China’s largest and most important manufacturing base is only 2%.

We often hear about the "4+1" model in the manufacturing industry. The "4" refers to the four aspects of product design, raw materials and parts procurement, logistics and transportation, and wholesale and retail. "1" refers to the manufacturing process. However, the famous economist Lang Xianping also proposed the "6+1" model. "6" is the big logistics link, "1" is the bottom end manufacturing process. The logistics chain is further subdivided into six major parts: product design, raw material procurement, warehousing and transportation, order processing, wholesale operations, and terminal retail.

Whether it is the "4+1" model or the "6+1" model, our manufacturing companies are all in the "1" link. In the "4+1" model, when the "1" link created a value of 1/10, the other "4" links created a value of 9/10. Similarly, with the theory of Lang Xianping, the first six sectors are the real industry chain that can create 90% value.