Growth for the semiconductor and electronics industry, on the heels of IoT expansion across market sectors and regions, is bringing along important supply chain changes. As discussed last Friday, the current market expansion is lead by the IoT expansion, particularly in mature market economies, but it is the opening of smart mobile devices for lower-priced market segments in mature, emerging and developing market economies that is truly adding volume sales to the growth equation.
Emerging and developing growth markets gain from aggressive new competitors
In the emerging and developed markets, lowered pricing of smart mobile devices along with 3G and 4G rollouts is driving adoption because consumers are able to now access the internet through these handheld mobile devices thanks to prices they can afford and new networks that give them access to information and services they need, especially in remote locations.
It is on the backs of OEMs with strategies focused on emerging market consumers that volume growth is expanding the fastest. The OEM competition is heating up in the emerging and developing markets among companies such as Nokia, Samsung, and especially upcoming Xiaomi. The strategies focusing on providing low-priced but feature-rich mobile devices that include smartphones and tablet PCs, are successful and sales volumes are quickly growing. Xiaomi has also aggressively priced HDTVs at less than one-half the price of major OEMs like Sony.
The sales volumes for emerging markets, especially in China, are supporting rapid market expansions and bolstering revenue gains. In turn, these rapid market gains are contributing to changes in the global semiconductor and electronics supply chain. The sales volumes are impressive, as Bloomberg and BusinessInsider both reported, Xiaomi outsold Apple and is quickly gaining on Samsung in the hot CE battleground of China: "Last year Xiaomi sold 18.7 million smartphones in greater China. This year the company has expanded to Singapore and Malaysia and hopes to sell 60 million phones," as cited in Bloomberg.
Competition brings supply chain change
To support this type of dynamic market growth the global supply chain is necessarily seeing shifts as new OEMs gain ground and bring with them new requirements. As EPS' Bolaji Ojo reported this week, the distribution landscape is shifting in China as regional and local distributors rise in the ranks, just as their OEM counterparts are doing on the device end. Companies that are locally embedded, like Smith & Associates' local offices as discussed by EPS' Barbara Jorgensen in Part 1 and Part 2, and regionally native distributors such as Taiwan's WPG Holdings, featured in Ojo's article, have a flexibility not just in supply chain knowledge and access, but also in the business cultural aspects that support deeper relationship building, successful customization of services and support, and an understanding of the goals, requirements and strategies that are important in supply chain relationships.
With the expansion of not only IoT but especially targeting new consumer sectors with lower-priced devices and regionally focused strategies, the global supply chain is expanding as well, introducing healthy new competition, shifts in alignments and new opportunities for old and new partners along the dynamic chain.