The financial crisis is spreading across every corner of the economy and the electronics industry is not exempted. Forward Concepts reported that DSP shipment in November 2008 was off by a whopping 49 percent. Thankfully the distributors, an increasingly important link among the industry value chain after the bubble-burst in 2001, are becoming more intelligent in managing the inventory and supply chain. However, it is difficult to forecast the future due to market uncertainty. ECNA spoke to Victor Koh, Regional President, Avnet Memec China, regarding the status of China’s electronics market and how distributors can meet clients’ requirements in these hard times. Excerpts: What are the best strategies OEMs can adopt to stay competitive in this downturn?
The financial turmoil is certainly affecting China's economy and its electronics industry. However, the current crisis also offers OEM enterprises an opportunity to examine and readjust their product portfolios and improve enterprise management.
The positive economic climate in the past few years allowed companies to relax on their vigilance, and in some cases this has resulted in lax corporate management and poor cost control. As the impact of the financial crisis becomes clear, companies should strengthen their human resources management and finances, and streamline their structures in order to enhance productivity.
From a distributor’s point of view, how has Avnet performed during this crisis? How are you responding to clients’ requirements?
In a market contraction, Avnet believes it is crucial to work on two fronts – increasing income and reducing expenditure. Avnet will continue its drive to increase market share and push profitable growth, focusing on operational excellence by minimizing costs to remain competitive. In the current economic climate, our customers, suppliers and even our competitors are going to adjust their strategies, workforces and management structures. Avnet has to be ready to respond appropriately and quickly, and to look for opportunities for growth in the ever-changing environment. For example, because of the uncertainty, some customers have started to place smaller orders with shorter lead times. Others are delaying or bringing forward delivery dates because it is difficult for them to make long term predictions in such an unstable market. This means they have much higher expectations on distributors’ forecasting ability, readiness of inventory, and flexibility. Avnet understands these needs and we are well placed to respond rapidly by leveraging our global and local strengths, including flexibility, strong inventory capability, and a sophisticated financial system.
What is the best way to reduce overall costs? Do you have a detailed plan?
Cost saving is absolutely necessary in the current economic climate, however, business growth is also vital because it is the fuel for survival and sustainability. That means Avnet will consider streamlining its structure to maintain operational excellence, but we will also look at recruiting talent to put us in the best position when the market begins to recover.
The semiconductor market will shrink in 2009, according to WTST’s recent data, but Asia, especially China, will continue to grow. Do you have any specific strategy to better support this region’s market?
The Chinese Government has launched the four-trillion yuan stimulus package to cope with the global economic crisis, which will create enormous business opportunities for the domestic electronics market, including segments such as telecommunications and LED energy-saving equipment. China's exports remain strong, although they have slowed down somewhat during the current crisis.
One of Avnet’s key advantages is the wealth of its line card offering. We distribute over a hundred product lines so we are able to serve customers in different markets especially for those potential segments that benefit from the stimulus package. We will work closely with customers to grasp every new business opportunity to grow together.
In this economic downturn, both suppliers and customers find value in working with the best partners. They evaluate whether they are financially stable and have an experienced and efficient sales and marketing team to provide excellent service. They are also concerned whether the distributors have a well managed inventory and supply chain system to provide timely delivery, and are doing their utmost to provide support to them under the current environment.
Despite the pressure to streamline resources, Avnet remains committed to customer service. That means being flexible and responsive to meet the changing needs of customers and suppliers, and responding proactively to every opportunity.
For example, in October Avnet launched an Avnet Sales and Service Center (ASSC) at Shenzhen’s International Components Center (ICC), aiming to strengthen the support for small-to-medium sized manufacturers in China. The ICC is the only electronics market place recognized and supported by the Chinese Government for selling genuine products from legitimate channels. Through the ASSC, Avnet now provides speedy on-site service to SMEs for small quantity orders, and protects them from the risk of buying poor quality or counterfeit products.
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