Judging from India, Vietnam, and Thailand's present import-export structures for semiconductors and electronics, we can imagine what the future ecosystem will be like. Major ASEAN countries import semiconductors mostly through the logistics services providers in China and Hong Kong. But neither China nor Hong Kong has its home-grown distributors who can handle international sales. It's Taiwanese companies that are playing the key role behind the scene.
Generally speaking, distributors categorize their customers into TBMs (Taiwan-based manufacturers), CBMs (China-based manufacturers) and MBMs (multination-based manufacturers). According to first-hand data that DIGITIMES has collected, the semiconductor components that ASEAN and South Asia import currently cater mostly for the ecosystems of Taiwanese manufacturers, followed by Chinese ones. Growth of imports for MBMs has been limited. For example, almost 80% of India's semiconductors are imported from China and Hong Kong. Behind these imports are obviously Taiwanese ecosystems, and China isn't the country of origin of these semiconductors.
Based on such a logistics model, plus geopolitical developments, we can work out the possible deployments of components distributors in the future. We believe local firms will play an increasingly important role. The partnerships between Taiwanese makers and Indian businesses, such as Tata and Vedanta, will boost the proportion of local companies' market share. Taiwanese makers Foxconn, Pegatron, and Wistron produce handsets in India not only for the domestic market, but also for export. Delta Electronics and companies in the server and networking equipment sectors are also eagerly eyeing the Indian market. We believe demand from Taiwanese makers will shoot up, and Taiwan should reimagine its Asia-Pacific logistics hub project with its core in the areas around its international airport in Taoyuan, and its science park in Hsinchu.
In the mid 1990s, Taiwan's bid to build an Asia-Pacific operational hub failed. At the time, many Taiwanese businesses were moving their productions to China, and China was also Taiwanese makers' top export market. For the following two decades and more, the scale of cross-strait trade has tipped in favor of China, on which Taiwanese makers have been overly reliant in terms of production and market access. Companies working in China give top priority to efficiency, and they all work individually. But the impending era of IoT and regional production will require more turnkey solutions from suppliers. For example, the relationships between major system integrators and vendors of power supplies are changing. In the past when China was at the heart of their operations, makers seldom worked together. They would always be skeptical about proposals of collaboration, fearing there would be a hidden agenda. Now that the market has extended to ASEAN and South Asia, even big businesses have realized that "volume production" is not the only option and the best business model is possibly "division of labor." There is now a sharp rise in the number of companies mulling strategic partnerships.
In the early 1980s, Taiwanese component channels worked mainly as distribution agents and traders. As their economies of scale grew and demand from China's production bases increased, they started building their own capabilities with which they could offer technological support and smart warehousing services. They also raised funds by going public. Now components distributors are an essential part of the supply chain.
WPG is now a top components distributor of the world, following a series of mergers and acquisitions since 2005. It has been promoting the concept of LaaS (Logistics as a Service). It aims to jointly construct with others smart warehousing systems with which they can offer diverse warehousing services. The data collected through the services can be leveraged to further enhance the value of their services, extending them to other high-value products, such as medical supplies or even wine.
