UniBetter’s Co-founder Jun Wu Attended the 2024 Electronics Industry Overseas Forum:
How Can Electronics Supply Chain Companies Overcome Challenges in Expanding Overseas?

On the afternoon of April 9, the “Analysis Forum on the Current Status of the Overseas Market in the Electronics Industry,” hosted by HC360, was held at the Shenzhen Convention and Exhibition Center. Jun Wu, the Co-founder of Shenzhen UniBetter Technology Co., Ltd., was invited to participate in a roundtable discussion. Together with electronics industry practitioners, innovative companies, and government representatives, they discussed the new wave of technological revolution trends for electronics companies expanding overseas. They explored the development prospects of the electronics industry, jointly discussed the opportunities and challenges in the industry’s path, and witnessed the future development of Chinese electronics companies going global. From the perspective of the electronic components distribution industry, Jun Wu shared UniBetter’s experiences and practical insights on their journey overseas. The following is the transcript of Mr. Wu’s roundtable interview.

PART.01

How Do You View the Growth Potential of Overseas Markets? Is It Worthwhile for Electronics Companies to Invest Overseas?

How Will the Overseas Space for China’s Electronics Industry Expansion Change in the Future?
Based on my 15 years of experience in the electronics industry, starting from 2005 to now, almost 10 years of exploring overseas markets, I still ponder a question—do I truly understand the overseas market? I find myself still in the process of going from “0” to “1” because the approach is different.

Expanding Overseas Can Be Divided Into Two Levels:

  1. Product Expansion
  2. Company Expansion

We are more familiar with product expansion, but we still lack understanding when it comes to company expansion. We often find that we don’t understand our customers or the overseas market. Facing a new environment presents numerous challenges.

In the past one or two years, expanding overseas has become a hot topic. Many have realized that domestic competition has stalled, prompting them to venture abroad, only to find that the overseas environment is equally competitive.

Based on UniBetter’s recent experience in laying out its overseas strategy, here are three points summarizing the outlook on the development potential of overseas markets:

First: The Space for Electronics Companies to Expand Overseas Is Very Large.

The total demand for semiconductors remains significant. Observing some data changes, according to recent statistics from the American Semiconductor Industry Association: since 2019, global sales of electronic components have exceeded $400 billion annually, reaching nearly $600 billion during the peak of global shortages in 2021. Over the past five years, the demand for components has hovered between $500 billion and $600 billion. From the perspective of the growth rate of the global components sales market, it exceeds 5% annually. This indicates that the market demand has a stable base with potential for explosive growth, especially due to the high-end market needs for large computing power and storage, driven by technologies like AI and ChatGPT.

China remains the largest global consumer of semiconductors. The domestic demand for imported semiconductors has been around $400 billion in recent years. Despite various impacts, China is still a major consumer and the largest importer of electronic components globally.

Domestic production capacity and demand are shifting overseas. In 2023, global semiconductor sales in the Chinese market decreased by double digits, with a peak decline of 15% last year. This decline indicates a shift in demand overseas since the overall demand is growing while China’s demand is decreasing.

This shift provides a premise for companies to expand overseas. With weakened domestic demand and intense competition, the overseas market offers vast opportunities. Therefore, whether it’s manufacturers or distributors, they may need to seek opportunities abroad.

Second: Domestic Industrial Upgrading and High Labor Costs.

The overall international level, scientific research, and talent quality of domestic enterprises are improving, leading to high labor costs. China used to focus on low-end manufacturing and labor-intensive industries, but now we are evolving towards high-end “smart” manufacturing, including digital construction and the new quality productivity advocated by the Two Sessions, driven by technology.

This transformation, where labor becomes expensive, results in many consumer electronics manufacturing plants in China losing their competitive edge. Previously, China was at the bottom of the production chain, but now we aim to climb higher. Large factories, whether domestic, European, or American, will consider this factor, leading to the supply chain and industrial chain having to follow suit and expand overseas.

Third: Rapid Development and Rise of Domestic Semiconductors.

Domestic semiconductors have been a national strategy since the 1980s but progressed slowly due to our reliance on “borrowed” technology. In recent years, customers have found it challenging to adopt domestic components because imported ones were cheaper and more reliable. However, the lack of opportunities for domestic components made it difficult for them to establish a foothold.
Recently, many domestic components have gained ground as customers had to choose and back up options, providing ample trial and error opportunities for domestic semiconductors to rapidly develop.

Now, domestic brands can compete with well-known Western brands. Many of these brands are manufactured in China with only the label being foreign, earning most of the profits while we earned minimal processing fees. Now, with our own brands, we aim to share these high-quality products with global customers. Hence, in recent years, excellent domestic enterprises have also started actively expanding overseas.

Based on these three aspects, the vast global market will undoubtedly offer many opportunities for outstanding companies in the electronic components industry to upgrade and develop further. Therefore, I am very optimistic about the development potential of China’s electronic components industry overseas.

PART.02

Opportunities and Challenges of Expanding Overseas

Opportunities and Challenges of Expanding Overseas

Opportunities as mentioned earlier, the challenges now lie in expanding the company overseas. Unlike previous times when business was conducted from China with a global view, now it involves stepping out to explore the world, which is significantly more difficult. The challenges can be discussed from four aspects:

  1. Cultural Conflict
    For instance, when we established offices in Thailand and Singapore and needed to hire local employees, understanding the local culture was essential. It is challenging to integrate into the local environment. Management methods must cater to local preferences and characteristics, differing from those in China, creating issues due to cultural conflicts.
  2. Legal and Regulatory Risks
    Overseas, especially in Western countries, legal awareness is very strong, and individual rights are well-protected. When handling labor relations with overseas employees, it’s crucial to emphasize positive incentives rather than penalties to avoid significant legal and operational risks.
  3. Financial and Tax Risks
    Each country has different financial and tax systems. It’s essential to understand them thoroughly. Sometimes, what seems profitable by Chinese standards may not be profitable according to foreign calculations.
  4. Management Coordination
    Managing overseas institutions is challenging due to the long distance and time differences, leading to inefficient work and communication. The electronic components distribution industry values quick response and high efficiency. To overcome efficiency issues, we need to unify management tools, use a robust system for better coordination, standardize management language to ensure execution, and address brand challenges since many companies are well-known domestically but not abroad. Promoting the brand from the customers’ perspective in a way they appreciate is crucial, avoiding the Chinese-style promotion.

PART.03

How Should Electronics Companies Plan Their “Overseas Expansion” Path?

Talking about the path to expanding overseas, let’s discuss our development process from product expansion to company expansion.

  1. Developing a Strategy and Finding the Right Person:
    For us, expanding overseas is a tough battle, and any battle requires a strategy. What is your strategy? Are you targeting overseas trade customers or end customers? Are you focusing on Southeast Asia or the Western market? Different customer and market types require different approaches, so having a clear strategy is crucial.
    Once the strategy is set, finding the right leader is essential. The first person on the ground is very important. Local individuals with management experience are crucial, and we can empower them with industry experience. This right start can yield twice the result with half the effort.

  2. Building the Team
    Determine how many people are needed and what roles are required to achieve the goals. For example, for overseas market promotion, we aim to communicate the company and its services from the customer’s perspective, requiring specialized overseas agencies for optimization and transformation.
    Additionally, seek platform services for collaboration, such as focusing on the vertical Thai market, to better connect with local policies and resources, significantly increasing the chances of overseas success.

  3. Maintaining Long-term Commitment
    Don’t expect short-term profits within a few months or a year; a long-term mindset is needed for cultivating overseas markets. Making quick money requires opportunities, but long-term development requires a dedicated approach. As long as your goals and strategy are clear, short-term non-profit investments are worthwhile.

 

Reflect on whether you have the financial strength and patience for long-term persistence. If you can persist, you will eventually reap the fruits of victory and succeed in this battle. The initial steps are crucial; get them right, and then develop according to your plan. Expanding overseas has three stages: first, stepping out, second, surviving, and third, establishing a local foothold.

PART.04

Insights on Expanding Overseas

The topic of expanding overseas is vast, with many aspects to discuss. While it has great potential, I personally suggest tailoring the approach to suit the company’s development stage and size.

Expanding Overseas has become a trend, and many industry peers might blindly follow, thinking they should go global just because others are doing so. It’s essential to consider the risks and not just the profit opportunities. Ensure you can manage any potential issues that arise.
Our biggest takeaway from operating overseas for the past few years is that we often think going from 0 to 1 is difficult, but the real challenge is breaking through from 1 to 100. Moving from 0 to 1 is relatively easy, but the extension and development from 1 to 100 are much more challenging. Overcoming these difficulties requires continuous self-adjustment and correction to successfully establish an overseas presence.