[Electronics Industry] The under-recognized role of agents in Asia

This post may be controversial. I can already see the comments that will be left, or the silence from those not wanting to say the wrong thing.

In Asia, agents play an under-recognized but essential role in the electronic component industry. It may be well known amongst all new employees in say, Taïwan, however very few buyer-side professionals in Europe or North America would be aware of it.

East vs West

Here are the main differences between electronics manufacturing in Asia and Western Europe or North America:

• The most competitive end-markets for computers, communications and consumer electronics are in Asia. You don’t find smartphone manufacturing for under $100 anywhere else.
• Asia is a much more dynamic market. New giants sprout in a few months whereas the status quo of major players is the same year after year in the EU and North America.
• Paying intermediaries is more common in Asia than in Europe or North America.

Transparency International Corruption Perception Index 2017

Consequences

These differences have unexpected consequences.

1. In countries where manufacturers and distributors need to pay intermediaries, the practice is well accepted and the more acceptable it is, the more intermediaries you have. Additionally, intermediaries change regularly.
2. These numerous intermediaries have access to very competitive market prices.
3. It is very difficult — if not impossible — for manufacturers and distributors to control the resale prices of these intermediaries. There are too many intermediaries, too many buyers, plus they change too often.

It is very different in Europe and North America. Year after year, the buyers remain the same. They buy directly from manufacturers or through a very limited number of distributors. Manufacturers can use some sophisticated software and manual audits to control their distributors resale prices, end-customer by end-customer, BOM by BOM.

The unexpected result

As a result, Asia is a much more transparent and fairer market due to the existence of these intermediary agents… Controversial?