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Arrow Boosts Presence in China

{complink 453|Arrow Electronics Inc.} is significantly boosting its presence in China through the acquisition of Beijing-based Seed International Ltd., a leading distributor of {complink 5703|Texas Instruments Inc.} products with a specialty in digital signal processor technology. Seed, with estimated revenues of $90 million, is Arrow's most significant acquisition in China since its 1993 purchase of Hong Kong-based Components Asia Ltd.

Seed will add 14 offices and 200 employees to Arrow's presence in China, according to the company. The press release notes:

    “Seed is a highly recognized brand for value-added distribution and engineering. This acquisition brings Arrow an expanded presence in China while strengthening our relationship with a key supplier,” said Peter T. Kong, president, Arrow Global Components. “This transaction should enhance our market position through increased demand creation activities and greater customer penetration in this fast-growing market.”

    Seed is headquartered in Beijing, China, and has approximately 200 employees, with 100 in value-added engineering. The company's sales for the latest fiscal year were approximately $90 million. The acquisition is subject to regulatory approval and is expected to close during the third quarter of 2011.

China has been a target market for global distributors since the early 1990s, when global electronics manufacturers began outsourcing their production to the low-cost labor region. Both Arrow and leading rival {complink 577|Avnet Inc.} established early footholds in China in the 90s — Avnet acquired Hong Kong-based WKK Semiconductors in 1995. In the decades since, China has been a key growth region for the channel, and the market there is expected to increase by as much as 27 percent this year, according to Electronics Supply & Manufacturing-China (ESM-China).

The Seed buy will also increase Arrow's overall Asia/Pacific sales, which the company reported were 21 percent of total sales in fiscal 2010. Avnet's regional sales, by comparison, have averaged closer to 30 percent of total sales in recent years. Arrow recently added to its presence in Asia/Pacific through the 2010 acquisitions of Nu Horizons Electronics Corp. and the RF/wireless business of Richardson Electronics Corp.

Arrow and Avnet both face significant competition in the region in the form of {complink 12835|WPG Holdings}, a $12 billion components distributor headquartered in Taiwan. Within the past decade, WPG has made inroads into the North American market through establishment of WPG Americas, based in San Jose, Calif.

According to ESM-China, the most preferred overseas distributors in China, in alphabetical order, for 2011 are: Arrow, Avnet, Cytech Technology, Excelpoint System (HK), Future Electronics, HK Baite (Group), Kei Kong Electronics, Weikeng International, Willas-Array, and WPG Holdings.

4 comments on “Arrow Boosts Presence in China

  1. saranyatil
    June 28, 2011

    I would say Arrow v/s Avnet. Both are trying to emerge Big in the distribution channel. Nowadays looks like competition is catching up lot of heat. At the end designers should not get confused with whom they should be working for which component.

  2. Jay_Bond
    June 28, 2011

    With Avnet and Arrow both having strong footholds in Asia, it would seem like the only steps left to gain more ground is through acquiring other companies in the area. Asia is such a large market for electronics manufacturers and distributors, it would seem like even with all the annual growth there isn't much room for new companies to make a major impact and not get swallowed up by a company like Arrow or Avnet.

  3. mario8a
    June 28, 2011

     

    Hello

    It seems like a good idea to adquire one of your best distributors for Embedded products, SEED has very strong knowledge about DSP.

    Regards

  4. Taimoor Zubar
    June 29, 2011

    I think Arrow has made a smart move here. Instead of penetrating into the Asian market as a completely new setup, they chose to acquire an already well-established distribution organization. This certainly saved them the cost of setting up a new company in the region and also there's lesser risk involved.

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