Chinese suppliers' abilities vary
SUPPLIER MANAGEMENT
Jim Carbone, Executive Editor - Electronics -- Purchasing, 6/24/2004 2:00:00 AM
There’s no question that China is quickly becoming an electronics industry powerhouse. More component manufacturers are producing parts in China as more electronics manufacturing heads to China. As a result China is quickly becoming a low-cost source for many parts.
However, the Chinese supply base is a work in progress and will evolve as time goes by. Purchasers looking to source in China should know that while China is a sourcing opportunity, buying there can be risky because the supply base is immature.
Suppliers in China are at different levels concerning their operations. Some have total manufacturing there but not test operations. Some have test and manufacturing, but not test development. Some have all of that, but not reliability verification and testing.
There are three types of suppliers in China, according to Karlheinz Totz, vice president of purchasing at Celestica, a Toronto-based electronics manufacturing services provider. “First there is a western manufacturer like Motorola or Intel which goes into the low cost geography and opens up their own plants. That has occurred over the last five years in China and is ongoing,” says Totz. Those suppliers typically are the most sophisticated and have testing and quality systems in place.
The second category is western component manufacturers who have done mergers with Chinese companies. For instance, many western chip companies have gone into joint ventures with Taiwanese companies.
The third category is local indigenous suppliers who are building components such as resistors and capacitors, which are often used in locally built equipment.
Celestica’s strategy is to not purchase from category three suppliers. “We have stayed away because of the maturity of those suppliers. We use category one and two suppliers,” says Totz.
The indigenous suppliers may have the cheapest price for parts and may be a good source for buyers looking to make opportunistic buys. But purchasers need to check the quality systems of indigenous suppliers carefully. While that may seem to be a no brainer, indigenous Chinese suppliers are often reluctant to share information about their operations. Some buyers say Chinese suppliers can be downright secretive.
For instance, if an OEM or EMS provider is considering doing business with a supplier in China and asks for a complete list of equipment at the supplier’s facility, the supplier may not be forthcoming.
“The supplier will say ‘we have no relationships with you, we don’t have any dealings with you. Why should we tell you?’” says Totz. “We tell them if you want to do business with us in the future, we need to know what type of equipment you have to help us make our sourcing decision,” he says.
Totz says having a local supplier engineer who has the same background of the Chinese supplier helps in the gathering of information about the supplier.
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