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Supply Chain Trade Association Established in China

The electronics distribution industry has established a trade association in China to represent franchised distribution services in the market, strengthen cooperation between distributors and suppliers, encourage technical and service innovation, and work with the Chinese government to shape policies.

Earlier this month, international distributors gathered in Shenzhen, Guangdong Province, China, to announce the formation of the China Electronics Distributor Alliance (CEDA). This is a significant development in the electronics supply chain: Until the formation of CEDA, there was no industrial organization for the electronics distribution sector in China. CEDA will help member companies identify new market opportunities, establish strategic partnerships, and provide professional services for distributors in business transformation, business development, initial public offerings, and financing.

CEDA also plans to publish China distribution statistics — a service that has been difficult for the global channel to establish. Using third-party research firms, CEDA will analyze the data and produce periodic industry reports, according to Amy Wang, vice president of China Outlook Consulting and CNT Networks. “The task is vital to distributors for managing their own operations and for supply-chain forecasting,” says Wang.

“CEDA will enhance closer cooperation between component distributors and their suppliers, which will improve distributors’ contribution to technical and service innovation in new markets,” says Michael Liu, CEO of CNT Networks. “Because China’s electronics manufacturing industry is spread across the country and emerging markets are wide open, distributors have great potential for growth in China.”

The Chinese distribution market is highly fragmented, populated by a few global players — such as Avnet, Arrow, Future, and WPG — and hundreds of local, regional, and specialty players. Global players have largely entered the market though strategic alliances and acquisition. The Chinese supply chain has traditionally been run based on relationships, so few standard policies or practices have been established in the region. CEDA’s mission includes enhancing executive networking, establishing distribution regulations and standards, promoting the value of value-added services, sharing supply chain market intelligence, and improving collaboration along the distribution chain.

“The alliance will bridge the electronics distribution industry and government bodies so that we can build industry rules and develop policies in the future,” says Wenhai Chen, vice president of China Electronic Appliance Corp. (CEAC). “Although electronics distributors have been movers of innovation in China, there are no policies in place to regulate the industry. CEDA will influence the Chinese electronics distribution industry and the related supply chain deeply.”

In the last decade, China has emerged as a key player in the world’s electronics supply chain, and production services have become increasingly important. The services sector, including electronics component distribution, is a focus of China’s 12th Five-Year Plan (2011-2015).

The establishment of CEDA is supported by the International Distribution of Electronics Association (IDEA) and its worldwide members, including the Electronic Component Supply Network (ECSN), Electronic Components Industry Association (ECIA), and other distribution associations around the world. CEAC, CNT Networks, and China Outlook Consulting (COC) hosted the CEDA inaugural luncheon at the March COC Forum in Shenzhen.

“Congratulations to CEDA,” said Shijing Diao of China’s Ministry of Industry and Information Technology (MIIT). “We hope to see more service innovation in electronics distribution through CEDA as this is a very important sector in China’s electronics supply chain.”

“The Chinese distribution sector has developed very rapidly so we are looking to CEDA to help with the professional development of domestic distributors so we can be globally competitive,” said Paolo Wang, president of Honestar.

Founding members include Arrow Electronics Inc., Avnet Inc., Digi-Key Corp., Future Electronics, Mouser Electronics Inc., Richardson Electronics Ltd., RS Components Ltd., WPG Electronics, Alignment, Asiacom, Comtech, element 14, FCI, Honestar, Interine, Jiangsu Sunlord, Letdo Electronics, Lierda, Micon, Mornsun CE-Power, Seeddsp, Shanghai Linpo, Shenzhen Sunlord, SSMEC, SZCEAC, Taiyo Yuden, Techtronics, and Zetron.

CEDA will operate as a non-profit organization. CEDA members will be primarily franchised electronics distributors and manufacturers but will also include independent design houses, supply-chain service providers, and academic and research organizations.

6 comments on “Supply Chain Trade Association Established in China

  1. DataCrunch
    March 11, 2011

    The formation of CEDA should be seen as a major positive step not only in China, but by companies that do business in China and use Chinese companies as a part of their supply chain network.  However, as with any organization and assoociations with many founding members representing numerous types of companies, the amount of progress that will actually be made on the ground could be very slow, if any progress at all.  Standards and active communications and positive actions don’t happen overnight, but let’s hope for the best for now.

  2. SunitaT
    March 12, 2011

    Barbara,

     Thanks for the info. This is really a significant development, but I am not sure why it took so long to form CEDA.

    “The alliance will bridge electronics distribution industry and government bodies so that we can leverage more on building industry rules and acquiring supporting policies in future.”

    As George pointed out in his previous blog “China, the involvement of key government officials is a prerequisite to anything of consequence being done”. So if CEDA brings about change in the industry rules, build suporting policies, it will definitely help the companies who want to explore the chinese market.

  3. mfbertozzi
    March 12, 2011

    Thanks for very important news from the market perspectives.

    @Barbara: I have noticed members' foundation are a mix between local companies and others from West; due to cultural differences between China and West, do you think CEDA foundation in its purpose has conceived specific methodologies to support trading approaches and actions there?

  4. elctrnx_lyf
    March 14, 2011

    This is one more example of the china growth in the technology area. It is a great value for the chinese manufacturers to have the association founded by the chinese companies. CEDA will certainly play huge role in helping out the electronic components growth in china.

  5. Barbara Jorgensen
    March 15, 2011

    Hi–I know some of the founding companies have had a long history in China–“long” being 15 years or so. I think the participation of domestic (Chinese) companies in the organization speaks to the commitment they have in standardizing some policies and practices.

  6. mario8a
    March 15, 2011

    The biggest challenge for CEDA will be to work in the alliance with the government entities mainly to work hand by hand with the design houses since most of them established in TW.  Some of the western companies have around 60%-70% of their supply chain in the China Market one of the good business practices will be to involve their strategic partners overseas.

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