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[China Special] Avnet Poised for Growth in China
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It's no secret, China will soon be the greatest market in the world. It's what business executives from around the world, especially those in Europe and the US, have believed for years. Avnet's view is no different, China is perceived to be a great, untapped market.
Developing a corporate strategy for China has always been top of the agenda at board director's meetings. It is a particularly important market for the semiconductor industry, as China is set to dominate activity in this market.
The semiconductor industry will not return to its previous success levels for a few more years. The analysts' views that the total available market (TAM) will not get back to year 2000 levels until 2004 is supported by Avnet. As is the belief that it will slowly pick up over the next few months. China's WTO entry will help with this.
Ever since the Chinese government employed an open market economic policy allowing privatization of businesses, it was just a matter of time before China would look at entering the WTO.
Must-Win Market
Avnet aims to invest ahead of its competition and at the same time drive a balance on ROI (return of investment) for its investors. The company will closely monitor post-WTO business development and build on the existing infrastructure to keep up-scaling its services to customers and suppliers in China.
Everyone in the industry will have to stay focused and be prepared for changes and challenges. The electronics business will only get tougher and tougher; only the best will survive. The value that companies deliver will come under close examination from suppliers and customers, there will not be any more "perceived value" and every single dollar of value delivered will need to be "solid."
China is the focus and "must-win" market for most businesses. But to be successful in China, companies must show commitment; investment must be long term. That said, shakeouts are expected in the distribution market within the next three years. The better-run niche regional distributors will be bought by global companies or merge with Pan-Asia distributors. The "big guys" share of the market will definitely grow very fast. That's why Avnet has been putting its plans in place and is now ready for those challenges and the changes that lie ahead.
Avnet's plan kicked off in 1995 with the acquisition of Hong Kong-based distribution company, Wong's Kong King (WKK). The deal was a stepping stone for Avnet to move into China's distribution market and start serving its mainland customers through the Hong Kong operation.
Sunrise Acquisition
Then in 1999 Avnet established a joint venture, ChinaECNet, with the Ministry of Information Industry (MII) and Global Techmart of San Jose, Calif., investing in a long term "Go IT" directive that the Chinese government had instigated. In the last two years the ChinaECNet operation has developed an IT infrastructure platform that allows over 60,000 registered engineers to browse the latest engineering news and electronic component product information. ChinaECnet also jointly runs online seminars and online training, together with Avnet's suppliers, to help prepare and build up the China market for their future product and service needs.
Avnet stepped up its investment in China in 2001 with the successful acquisition of one of the country's leading distributors, Sunrise Technology. The deal boosted the number of Avnet employees to over 350 in the Hong Kong/China region including over 200 employees in China. Avnet has a strong infrastructure that includes three free trade zone warehouses in Tianjin, Shanghai and Shenzhen. It also has over 15 liaison offices to support our franchise suppliers and customers all over China, together with two system design centers.
The company developed its IT platform with ChinaECnet to provide various kinds of value-added services to customers, suppliers and the local community and it is now ready and positioned to grow when the overall electronics market regains its momentum. The company has had to review its setup in China and work out the best operational infrastructure to support it.
Changing how Avnet works has been an essential strategy. It now comprises three separate autonomous, self-sustaining businesses to match how the industry is developing. Authorized products are now marketed under three different companies -- Avnet Technology, Avnet Sunrise and Chinatronic. Each company has its own set of line cards and the suppliers are aligned so that there are complementary benefits among the products' strengths. The business plan is built upon certain focused end-market segments in China.
by Raymond Tsang,
Vice President & Regional Director,
HK & PRC, Avent Inc
(April 2002 Issue, Nikkei Electronics Asia)
Developing a corporate strategy for China has always been top of the agenda at board director's meetings. It is a particularly important market for the semiconductor industry, as China is set to dominate activity in this market.
The semiconductor industry will not return to its previous success levels for a few more years. The analysts' views that the total available market (TAM) will not get back to year 2000 levels until 2004 is supported by Avnet. As is the belief that it will slowly pick up over the next few months. China's WTO entry will help with this.
Ever since the Chinese government employed an open market economic policy allowing privatization of businesses, it was just a matter of time before China would look at entering the WTO.
Must-Win Market
Avnet aims to invest ahead of its competition and at the same time drive a balance on ROI (return of investment) for its investors. The company will closely monitor post-WTO business development and build on the existing infrastructure to keep up-scaling its services to customers and suppliers in China.
Everyone in the industry will have to stay focused and be prepared for changes and challenges. The electronics business will only get tougher and tougher; only the best will survive. The value that companies deliver will come under close examination from suppliers and customers, there will not be any more "perceived value" and every single dollar of value delivered will need to be "solid."
China is the focus and "must-win" market for most businesses. But to be successful in China, companies must show commitment; investment must be long term. That said, shakeouts are expected in the distribution market within the next three years. The better-run niche regional distributors will be bought by global companies or merge with Pan-Asia distributors. The "big guys" share of the market will definitely grow very fast. That's why Avnet has been putting its plans in place and is now ready for those challenges and the changes that lie ahead.
Avnet's plan kicked off in 1995 with the acquisition of Hong Kong-based distribution company, Wong's Kong King (WKK). The deal was a stepping stone for Avnet to move into China's distribution market and start serving its mainland customers through the Hong Kong operation.
Sunrise Acquisition
Then in 1999 Avnet established a joint venture, ChinaECNet, with the Ministry of Information Industry (MII) and Global Techmart of San Jose, Calif., investing in a long term "Go IT" directive that the Chinese government had instigated. In the last two years the ChinaECNet operation has developed an IT infrastructure platform that allows over 60,000 registered engineers to browse the latest engineering news and electronic component product information. ChinaECnet also jointly runs online seminars and online training, together with Avnet's suppliers, to help prepare and build up the China market for their future product and service needs.
Avnet stepped up its investment in China in 2001 with the successful acquisition of one of the country's leading distributors, Sunrise Technology. The deal boosted the number of Avnet employees to over 350 in the Hong Kong/China region including over 200 employees in China. Avnet has a strong infrastructure that includes three free trade zone warehouses in Tianjin, Shanghai and Shenzhen. It also has over 15 liaison offices to support our franchise suppliers and customers all over China, together with two system design centers.
The company developed its IT platform with ChinaECnet to provide various kinds of value-added services to customers, suppliers and the local community and it is now ready and positioned to grow when the overall electronics market regains its momentum. The company has had to review its setup in China and work out the best operational infrastructure to support it.
Changing how Avnet works has been an essential strategy. It now comprises three separate autonomous, self-sustaining businesses to match how the industry is developing. Authorized products are now marketed under three different companies -- Avnet Technology, Avnet Sunrise and Chinatronic. Each company has its own set of line cards and the suppliers are aligned so that there are complementary benefits among the products' strengths. The business plan is built upon certain focused end-market segments in China.
by Raymond Tsang,
Vice President & Regional Director,
HK & PRC, Avent Inc
(April 2002 Issue, Nikkei Electronics Asia)
