In recent years, amidst the global semiconductor market's significant expansion, industry experts had anticipated a shift towards a more rational market post-boom. Yet, the true impact of the steep decline, reminiscent of a roller coaster, was only fully realized when it ensued, ushering in a challenging phase for the semiconductor industry. Electronic component distributors, serving as intermediaries between chip manufacturers and end-user companies, saw their performance fluctuate in tandem with the semiconductor sector. These distributors faced strenuous times, especially when manufacturers initiated layoffs and reduced production.

　　In a conversation with "International Electronic Business Information," Wu Jianqiang, Chairman of Shanghai Woshi Electronics Co., Ltd., who has been in the electronic component distribution field since 2005, bringing nearly two decades of experience, elucidated Woshi Electronics' strategic positioning and the benefits of embracing a multi-brand strategy in the distribution sector.

　　Woshi Electronics, a global and ambitious distributor of electronic components, specializes in providing comprehensive supply chain integration services to the worldwide electronics manufacturing sector. From this distributor, which recently surpassed the significant revenue milestone of 1 billion RMB, what key factors contributing to its performance enhancement can be discerned? (Unless specified otherwise, all monetary values in this article are in RMB)

　　The market conditions in 2023 are actually quite normal.

　　This year, "International Electronic Business Information" interviewed many distributors, including both international and local enterprises, with a range of sizes from large to small. Most of the distributors had a pessimistic view of this year's market and expected a significant decline in performance compared to last year.

　　Wu Jianqiang believes that although this year's distribution market seems sluggish, such conditions are quite normal. The distribution market in the previous years was overly prosperous, making this year's performance seem worse by comparison. "In earlier years, a distributor with an annual revenue exceeding 1 billion yuan could easily rank among the top local distributors. However, in recent years, as many companies have seen continuous growth, the threshold for being a top distributor has risen," he said.

　　Referring to the "Top 25 Revenue Rankings of Local Chinese Electronic Component Distributors" by "International Electronic Business Information" over the years, in 2019, the 25th local distributor reached an annual revenue of 2 billion yuan for the first time, whereas before that, the 25th distributor barely surpassed 1 billion yuan. Also, the combined annual revenue of the top 25 local distributors significantly increased from below 150 billion yuan before 2019 to over 180 billion yuan including and after 2019.

　　These figures reflect two points: First, there has been a significant increase in the performance of local Chinese distributors in recent years. Second, the performance figures of the top 25 local distributors have also improved. For local distributors, surpassing 1 billion yuan in performance no longer seems challenging. However, the reality is not entirely so – driven by the previous global chip shortage, the market has been in a 'stalled' state for nearly two years, and even by Q4 this year, the overall market trend remains in a slump. This means that maintaining positive growth in the current market conditions is already a win over most competitors.

　　Wu Jianqiang admits, "In conversations with peers and suppliers, everyone believes that this year's performance will significantly decline. The industry's downturn this year is a foregone conclusion. The extent of performance decline for each distributor might vary slightly. But based on my 18 years of professional experience, compared to 2007 and 2008, this year's overall market conditions are not that bad."

　　At the same time, he also sees some hotspots in the market. For example, the reduction in production by original manufacturers has led to a rebound in memory chip prices. Additionally, the popularity of AI chips has remained high over the past year. Whether distributors can seize these opportunities depends on their product selection, supply capabilities, and service quality. "We predict that in the next 1-2 years, it will be even tougher for distributors, and the industry may face a major reshuffle with significant consolidation among distributors. There will also be layoffs, and the dismissed employees will face major challenges in finding their paths, which will be a significant test for the entire industry."

　　A downturn cycle places higher demands on a company's operational capabilities, such as cash flow, customer base, and supply chain. "I hope everyone can adhere to the principle of 'love what you do, do what you love.' Whether in an upturn or downturn cycle, strive to offer deeper services and develop more competitive core products," Wu Jianqiang reflected.

　　How Can Local Distributors Survive the Winter?

　　Since the second half of 2022, affected by the sluggish consumer electronics market, the upstream chip market has taken a sharp downturn, with order cancellations and inventory reduction troubling the entire semiconductor supply chain, leading the semiconductor industry into a "frost" period. During this phase, many distribution enterprises also faced slowed growth, and some even incurred losses. Under the current business climate, how should local distributors overcome these challenges? Wu Jianqiang shared some problem-solving strategies from Wo Shi Electronics.

　　Adopt a multi-brand strategy and increase key component inventory

　　Wo Shi Electronics adopts a multi-brand strategy, using different names in various markets. Its parent company is West International, and Shanghai Wo Shi Electronics Co., Ltd. is one of its subsidiaries. The multi-brand strategy also reflects its ambition to expand globally. As a global hybrid distributor, Wo Shi Electronics is highly sensitive to international relations and the global supply chain.

　　Previously, under the global division of labor and cooperation model, different regional supply chains had their advantages. However, due to the escalation of China-US trade relations, the global semiconductor supply chain faced disruptions. Now, with the semiconductor supply chain facing a disconnection crisis, the coexistence of "local short supply chains" and "global long supply chains" will persist for a considerable time. For distributors with a global presence, how to "break out" of this wave, stabilize performance, and survive is a deeply concerning issue.

　　Wu Jianqiang stated that Wo Shi Electronics’ brand strategy involves bringing Chinese products overseas and introducing foreign products to China. The company is also increasing its investment in inventory, especially in key areas such as high-end components from brands like Qualcomm, Intel, Xilinx. "We are the core component supplier for global EMS factories in automotive electronics, industrial control, network communications, energy storage, etc., holding significant stock of internationally renowned brands like TI, ADI, ST, Xilinx."

　　Export local brands internationally and introduce international brands domestically

　　In the context of globalization, mergers and acquisitions among distribution enterprises will continue. Eventually, everyone's work will become more homogeneous, differing only in specific products offered. Wu Jianqiang mentioned that Wo Shi Electronics observed this trend and adjusted the company's focus accordingly. The company mainly adheres to two paths – pushing overseas components to China and Chinese components to international markets.

　　Wu Jianqiang added, "Since 2017, we have been working on 'promoting local Chinese discrete and passive components to the international market.' To better approach overseas markets, we hire local staff in our overseas offices." Reportedly, Wo Shi Electronics has branches in Malaysia, Singapore, South Korea, Mexico, Poland, etc., staffed by local Chinese or natives.

　　Enhance product testing capabilities to ensure supply quality

　　For those closely following the component distribution market, it's clear that supply and demand fluctuations have been severe in recent years, with increasing concern over counterfeit components. Due to high demand from end manufacturers in recent years, the market has been plagued with counterfeit issues. To address this, Wo Shi Electronics has invested millions in new testing equipment, primarily for professional inspection of incoming materials.

　　As Wu Jianqiang introduced, the company previously relied on QC inspectors for material testing. After experiencing the global chip shortage, clients imposed higher quality demands on suppliers' resources. Wo Shi Electronics invested millions in solderability testing equipment, X-Ray testing equipment, and Decapsulation for wafer opening tests. Wu Jianqiang emphasized that Wo Shi Electronics spares no expense in product testing, believing this will become one of the company's advantages.

　　Chose a multi-business model for distribution

　　In terms of business structure, Wo Shi Electronics’ distribution business currently accounts for about 65%, agency business about 30%, and OEM inventory management business about 5%. This multi-business model integrates resources and channels from different industries to achieve widespread distribution and market development.

　　Wu Jianqiang noticed that as the business forms of distribution enterprises become more diverse, the boundary between distributors and agents is increasingly blurred. Many agents are now involved in distribution, and some distributors are advancing agency lines. He believes the trend of integration between the two will become more apparent.

　　Additionally, distributors and agents are moving towards online development. Leading distribution enterprises have already established one-stop purchasing platforms. In the future, more traditional distribution enterprises will undergo "digital transformation," and the trend of online and offline integration will become more pronounced.

　　Counterintuitively recruit talent to enhance industry competitiveness

　　Finally, Wu Jianqiang told "International Electronic Business Information" that Wo Shi Electronics is hiring. He pointed out that the industry downturn is the best time to recruit talent, with this year's campus recruitment quota several times larger than in previous years. Currently, Wo Shi Electronics has about 120 employees in China and plans to continue expanding its sales team, increasing agency lines, and enlarging its overseas team from 2023 to 2024.

　　"A good company is determined by good talent. Market downturns result in more personnel movement, and we hope to attract more industry elites to join us and enhance our industry competitiveness," he said.