Market Insights

The Rise of Global Chinese Power Supply Manufacturers

October 31, 2016 by Todd Hendrix

Less than a decade after Jack Kilby and Robert Noyce invented the integrated circuit, American electronics companies began exporting manufacturing operations

Less than a decade after Jack Kilby and Robert Noyce invented the integrated circuit, American electronics companies began exporting manufacturing operations to low cost regions around the world, in predominantly Singapore, Taiwan, Malaysia and The Philippines in Asia. At the time mainland China was not easily accessible due to language, cultural and political issues. These first Western companies were labor intensive businesses focused on primarily on PCB assembly.

Western subsidiaries grew to employ thousands of workers and gradually developed a skilled workforce with a level of technological expertise. In the 1980’s indigenous local companies began to spring up in the surrounding region to provide passive components and other electronic sub-assemblies. The founders and management were aspiring entrepreneurs---former local employees who had gained experience working for the subsidiaries of America and European companies. During the decade many related supply industries grew to generate more and more of the local content. Soon we saw the rise of the ODM business model for consumer electronics products.

In the 1990’s we saw Asian companies in Japan and Korea begin to build brands that competed globally and became readily available and well known in the West. Sony and Sharp in Japan, as well as Samsung and LG in Korea were indigenous component suppliers producing simple discrete semiconductors under their own brand.

Taiwanese and Hong Kong companies began setting up factory operations in mainland China by leveraging their close cultural contacts. Soon western companies followed suit and set up manufacturing operations in southern China, which was easily accessible from Hong Kong. The first Asian power supply company, Astec, based in Hong Kong, grew by purchasing the internal power supply operations of Hauwei and Nortel, but was later acquired by Emerson Network Power, thus coming full circle back to being an American owned company. Soon Taiwan spawned Delta which became a global force in their own right in ODM power supplies; Acer and Asus also rose as global brands in PC’s.

Chinese electronics and power supply companies have existed for many years. However, they have focused their efforts internally on Chinese equipment OEM’s. The effort, time and cost required the address a global marketplace was seen as a daunting undertaking from their perspective. Recently companies with visionary leadership and westward-looking experience are now embracing the challenge of ‘going global’.

Only in recent years have we seen the creation of global brands from Chinese companies, which is a dichotomy given that the majority of the electronics sold around the world are produced in China! Why? One reason may be that there is no pure Mandarin expression for “marketing”: it has been lumped into one expression with “sales’ that always pulls along the term marketing. However, global brand building requires a high degree of marketing, and there is a growing appreciation and understanding of the marketing aspect of business separate from the sales function.

During the late 2000’s Chinese companies began to show interest in expanding their business internationally. Initial efforts were focused on under-developed countries and regions, such as India, South America and Africa, where the lower cost advantages of unknown brands were more attractive to poorer consumers than higher cost brand names. The US and Europe proved more difficult to penetrate due to consumers’ higher level of brand consciousness as well as expectations for product service and support that Chinese companies did not have in place.

In this decade of the 2010s we are beginning to see the emergence of the first Chinese brands in the US and Europe. Some of these successes have been possible due to the acquisition of unattractive operations of western companies, such as Lenovo’s purchase of IBM’s PC division; Lenovo, albeit built on the IBM base, now ranks as the number one PC supplier in the world. Likewise, Haier is now building their brand globally in white goods.

In the last few years the rise of indigenous Chinese companies entering the global market for merchant power supplies is evident. My company, Enargy Power Corp. based in Shenzhen, has committed to developing business outside of China by establishing marketing and sales operations in San Ramon in northern California, with future plans to develop European operations. Our goal is to be the first Chinese power supply company to expand and establish design resources locally in North America to address custom low and medium power solutions to address the needs of medical and industrial equipment applications.

The rise of global Chinese power supply manufacturers will not happen overnight, and will require years of dedicated commitment and perseverance; but it will happen eventually as they learn how to harness the engineering, organizational, management and marketing talent that has been developed by working for, and collaborating with, foreign operations on the mainland.