Cytech Systems Wins the 2023 ASPENCORE 'International Potential Star Distributor' Award

November 16, 2023

Since 2022, the semiconductor market has experienced a downward turn, marked by significant fluctuations in market demand and product prices. This weak demand has intensified market competition and led to a decline in marketing performance, causing unprecedented impacts on the global semiconductor supply chain. As a crucial connection between original equipment manufacturers (OEMs) and end-users, distributors are facing the common challenge of building a more resilient and high-quality supply chain amidst these disruptions.

On November 2-3, the "2023 International IC & Component Exhibition and Conference (IIC Shenzhen)" was successfully concluded at the Sheraton Shenzhen Grand China Hotel. Organized by AspenCore, a renowned media company in the global electronics industry, the event featured the concurrent "2023 Global Electronic Components Distributor Excellence Awards" ceremony. At this ceremony, Cytech Systems Limited ("Cytech Systems"), a leading independent distributor of electronic components, was honored with the prestigious "2023 Global Electronic Components Distributor Excellence Awards – ‘International Potential Star Distributor’ Award".

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Figure 1. Ted Wang, Sales Director of Cytech Systems (left), receiving the "International Potential Star Distributor" trophy on behalf of the company.
 
Navigating Turbulence: How Distributors Can Achieve Stability and Maintain Competitive Advantages Beyond Industry Cycles

 

Receiving an Award Amid Industry Downturn is not only a recognition of Cytech Systems' contributions to the semiconductor supply chain, but also a confirmation of the company's commitment to its mission and continuously strengthening its competitive advantages in the face of challenges.

Since the beginning of this year, Cytech Systems has experienced a certain degree of decline in sales performance due to the overall market conditions. "As market competition intensifies and our business faces challenges, we have instead made every effort to meet customer needs, actively seek new business opportunities, and implement various measures to maintain the company's profitability, such as cost control, diversification strategies, and authorized agent for domestic chips, ensuring the steady growth of our business." said Ted Wang, Sales Director of Cytech Systems.

Indeed, compared to the upstream R&D process, the chip distribution sector emphasizes the importance of service attributes. However, ensuring high-quality service and delivering it to all customers remains the ultimate test for any distributor.

In building their own moat advantages, Ted Wang summarized three key points. Firstly, establishing in-house testing laboratories to enhance quality control systems. Secondly, having an extensive supply chain network and strong procurement capabilities. Lastly, maintaining a good reputation and providing excellent service.

As a leading independent distributor in the industry, Cytech Systems has always prioritized the importance of quality, considering it the lifeblood of the company. The company has achieved AS9120 and ISO9001 certifications and has established three state-of-the-art testing laboratories in both Shenzhen and Hong Kong, ensuring strict adherence to international testing standards such as AS6081, AS6171, and IDEA-STD-1010-B. With the employment of over 20 highly experienced senior testing engineers, Cytech Systems has significantly fortified its testing capabilities. The scope of testing projects has expanded to encompass various areas, including visual inspection, XRF analysis, X-ray inspection, decapsulation, electrical testing, solderability testing, and more.

Certainly, as a distributor, the accumulation of a strong supply chain is crucial. Cytech Systems, founded by industry veterans, has built a solid foundation of suppliers. As the company has grown, it has gradually expanded its partnerships with thousands of certified suppliers worldwide. This ensures quality assurance from the source and allows for the swift identification of high-quality materials from around the world. By doing so, not only can urgent customer needs be addressed promptly, but also procurement costs can be reduced. It can be said that having an extensive and high-quality supply chain network, along with strong procurement capabilities, is a prerequisite for ensuring top-notch quality.

Furthermore, as a customer-oriented distributor, maintaining a good reputation is the cornerstone of business success. Cytech Systems has always placed customers at the center, striving to provide professional, timely, and attentive service. Over the past two years, the company has garnered widespread praise and recognition from customers, earning the esteemed title of "A-level supplier" in supplier evaluations conducted by several global key customers. In addition, the company highly values long-term partnerships with customers. Ted Wang further emphasized, "We are committed to helping customers overcome supply chain challenges and achieve their business objectives through tailored solutions and personalized service systems."

Navigating Disruptions: Cytech Systems Proposes 4 Key Initiatives to Respond to Changing Landscape

 

However, in the downturn phase of the semiconductor market characterized by oversupply and inventory backlog, merely consolidating one's own "moat" advantage is not sufficient. The key to facing these challenges lies in repositioning the company's business strategy in response to the changing industry landscape.

Alice, CEO of Cytech Systems, stressed that after a year of volatility, the company has rolled out four major initiatives. Firstly, implementing agile operations by simultaneously addressing PPV and shortage challenges. Secondly, staying ahead of market trends and leveraging industry cycles. Thirdly, enhancing efficiency through digital transformation. And fourthly, executing a globalization strategy.

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Figure 2. CEO Alice of Cytech Systems discusses distribution strategies in response to changing landscape

The semiconductor market is a classic example of a cyclical industry. Over the past two years, amidst shortage market conditions, Cytech Systems swiftly transitioned to a shortage mode, assisting customers in sourcing scarce materials. "During this period, customer demand for efficiency outweighed cost considerations," explained Alice. "However, in the current stage of oversupply, persisting in the inertia of shortage mode will exacerbate the situation. It is now imperative to swiftly shift to a PPV mode, leveraging cost advantages within the customer's supply chain. Market demand has shifted from efficiency to stable, low prices."

Since its establishment, Cytech Systems has gone through several industry cycles, honing its ability to respond to complex markets and cyclical fluctuations. Each stage corresponds to accumulating strength and cultivating the ability to respond rapidly to customer demands and seize opportunities in the respective stages.

To capitalize on opportunities across different stages, distributors must adeptly grasp trends and leverage industry cycles. Even in the current downturn environment, there remains significant potential in various emerging technology fields, including AI, Internet of Things (IoT), 5G communications, healthcare, and smart automobiles. These high-value-added industries will remain a focal point for Cytech Systems. Additionally, within the traditional industrial sectors, Cytech Systems identifies numerous opportunities. Industrial automation is a key area of development, with an increasing demand for electronic components in the manufacturing industry. "We are actively investing in industrial automation, such as sensors, controllers, and drivers, to better support the automation and intelligence of industrial production," added Alice.

At the same time, the adjustment of business models, understanding and harnessing market cycles, are all supported by digital technology. Efficiency is crucial for the distribution industry. It has been reported that Cytech Systems has been utilizing advanced digital management systems since its establishment, integrating supply and demand information to respond swiftly to an enormous amount of inquiries. "Our digital intelligent management system employs automatic allocation strategies, enabling efficient collaborative workflows. Additionally, the system effectively manages a vast amount of customer, supplier, and SKU information," said Alice.

Furthermore, Cytech Systems is committed to a global strategy. The company plans to establish offices in multiple countries or regions worldwide to better serve local customers and enhance global operational capabilities. Simultaneously, as international trade frictions intensify and the globalization of manufacturing deepens, Cytech Systems has established its subsidiary, Shenzhen CHCHIP Electronics Co., Ltd. (referred to as "CHCHIP"), which focuses on promoting domestically produced chips and modules. This move aims to grow alongside manufacturers in the era of rapid development of domestic chips and modules. In the future, the company aims to strengthen its overseas presence through collaborations with local manufacturers, establishing a balanced and robust supply chain integration capability both domestically and internationally.

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Figure 3. Cytech Systems and CHCHIP Make an Appearance Together at the IIC Shenzhen 2023 Exhibition
 
Better International Expansion: Prioritizing Local Collaboration with Clients to Implement Localization in Overseas Markets

 

In the electronic components distribution industry, barriers to entry such as capital and authorization resources have made revenue scale a crucial indicator for measuring market position. Many global leading distributors have achieved a larger business scale through years of industry consolidation, gaining a wealth of authorized resources and competitive advantages, firmly establishing themselves as industry leaders. On the other hand, local electronic components distributors in China still have limited revenue scale.

Many local electronic component distributors in China aspire to reach the scale of the world's leading distributors. Global expansion serves as a key step towards achieving this goal. When discussing the challenges of expanding overseas, Alice emphasized that cultural differences and acquiring exceptional talent present the biggest obstacles. Consequently, Cytech Systems has implemented language improvements in their internal systems such as OA, ERP, LIMS, and WMS, and has partnered with renowned headhunters to attract outstanding professionals. "Let professionals handle their respective areas of expertise," Alice believes. "Regarding cultural and legal differences, we are also open to collaborating with third-party overseas consulting firms to seek relevant advice and assistance."

"Excellent Distribution, Connecting More" is the slogan of Cytech Systems, reflecting the company’s commitment to bridging the gap between upstream and downstream entities. "Whether in China or globally, we maintain an open mindset and seek cooperation with more companies and partners," Alice added. "I believe that the best way for us to expand overseas is to follow the footsteps of our prominent clients. By assisting them in their overseas ventures and establishing effective localization coordination and cooperation, we can foster mutually beneficial growth. As a result, specific regions and timelines for global expansion will be considered flexibly based on the perspectives and business needs of our existing customers." Alice concluded.

About Cytech Systems

Cytech Systems Limited, with the motto "Excellent Distribution, Connecting More", is a leading independent distributor of electronic components in Asia. Based in China, we have a global presence and are committed to providing customers with immediate, reliable, and high-value supply chain solutions.

Founded  by  industry  veterans  in  electronic  information  technology  and  supply  chain  distribution,  our  team  brings  decades of experience in the electronics industry chain. We have swiftly established a network of thousands of globally certified suppliers, positioning us as a reliable source of high-quality goods. With  a  focus  on  diversifying  our  sourcing  services,  we  offer  IPO  sourcing,  PPV  services,  shortage  material  support,  obsolete parts, and excess inventory solutions. This allows us to provide personalized, agile, and high-quality supply chain solutions to customers in over 50 countries, including leading companies among the Fortune 500. We aim to help our customers optimize costs, improve efficiency, and achieve mutual growth and win-win outcomes.

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