Foremost Asian IC Distributor Next Battlefield: The World
2009-12-15
(This article has been adapted from the Taiwanese media United Evening News)
The recent M&A fever has been the most talked about topic in the electronics industry. WPG Holdings (3702.TW), which has grown to its current size through a series of mergers and acquisitions, is rumored to welcome its latest member Yosun Group (2403.TW), Asia’s second largest semiconductor distributor, into its corporate family. WPG, the first holding company in Taiwan, is now Asia’s foremost semiconductor distributor. Chairman Simon Huang says continual M&A practice has been a goal of the company since it was first established, “For us, merger talks are always in progress.” Having occupied the predominant position in Asia, WPG has set its sights on becoming No. 1 in the world.
WPG Holdings has its roots in the merger between World Peace Industrial Group and Silicon Application Corp., which was later followed by the acquisition of RichPower Electronic Devices, Pernas Enterprise and AIT Group. From financial figures released in recent years, it is evident that the holding company has established itself as a master of M&A, and with its member groups’ consistency in delivering favorable financial results, the rate of return on the parent’s working capital has continued to rise. Our reporting team paid a visit to WPG Holdings Group, the leading semiconductor distributor in Asia, and conducted an interview with the group’s chairman, Mr. Simon Huang:
Holding Company: An Innovation for the Industry
Q: How does WPG Holdings achieve synergy within the group?
A: From the very beginning when we established the holding company, we advocated the concept that “people will go all out if the front-ends are separate, and the company will be competitive if the back-ends are integrated.” The integration of back-end operations will allow individual companies to lower their costs, including warehousing and logistics.
Since the sub-groups joined the WPG alliance, they have adopted the parent group’s management indicators, which allow them to improve their financial indicators and receive more favorable terms with banks and save a lot in acquiring loans, thus naturally improving their operational performance. As for the front-end, it is easy to find the right direction through each company’s hard work and under a set of suitable management indicators,.
Q: You have been referred to as the king of mergers and acquisitions. How does one succeed in M&A, and how does one identify the targets for M&A?
A: We have our own set of M&A values and approaches that determine what kind of targets would be a good match and what kind of value they represent. For an M&A case to be successful, the most important thing is, of course, the choice of the target. It is necessary to spend a lot of time understanding the M&A target. Many mergers and acquisitions begin negotiations three to five years before they are realized.
The difficulty of M&A is that there are a lot of opportunities on the market. When opportunity knocks, it is vital that you know what the best match is and whether to reject or accept it. The considerations for an M&A proposal are nothing more than the product mix, customer portfolio and geographical factors, which must complement each other in order to achieve diversification and a sound operational basis.
Cross-Border M&A Requires Guts and Determination
Q: WPG has already established itself as the dominant force in Asia’s semiconductor channels. What are the Group’s future strategies?
A: I often ponder the question: If we don’t try to establish a presence in North America or Europe and are satisfied with our No. 1 position in the Asia-Pacific region, what are the implications? It is a very important objective for WPG to be number one in the Asia-Pacific region, but a global deployment strategy has its place within our organization.
We have to take into consideration the shifting of the economic blocks. It is true that currently the East is taking the lead, but who can tell what is going to happen in the long run? Which economic block will be in a favorable position in 20 years time? Patience is essential in cross-regional deployment, and it would be unwise to go with the flow. It is all right to start small, because after two or three decades it may grow to something significant. Take the Indian market for example. We’ve been there many years, and we’ve established six or seven locations. We’ve also been present in the U.S. for a couple of years. This is just the first step. It’s OK to move at a slow pace initially, like a duck taking slowly to the water.
Our opponents have their presence in all three major global regions, yet we have only really established ourselves in Asia. We are hoping to gain footholds in both North America and Europe and take our slice of the business. It is always tough when you are on someone else’s turf. It is a long-term battle and requires strategic investments. Acquiring local distributors is one way of doing it, but one has to have guts and determination.
Establishing a Significant Presence in China and Challenging for the No. 1 Position in the World
Q: Can you tell us about WPG’s advantages and disadvantages relative to Arrow, the No. 1 distributor in the world?
A: WPG has a very good reputation when it comes to M&A. We have been particularly successful in our back-end integration efforts in China, and we are at a very advantageous position in terms of continuing to build a larger alliance. In addition, our product coverage and technology have to a certain extent achieved the platform effect.
Compared with Arrow, the leaders of WPG’s sub-groups are first generation entrepreneurs, whose energy, passion and influence, not to mention the ability to rally support from employees, are not to be underestimated
This is both our strength and our weakness. The founders won’t be around forever, so we are also actively building up a mechanism to allow the next generations to continue to grow. Only by establishing a mechanism will the future generations be able to do battles on a global scale.
Q: Tell us about WPG Group’s visions.
A: They are: finding the Group’s second core business and copying the success model, which will allow WPG to “build a long-lasting foundation.” This is a huge challenge. There has not yet been an electronics company in Taiwan with a history of more than a century, and we may not see that realized in our life time. Nevertheless, this is our dream. In terms of the second core business, as long as it is something that will help WPG to raise our core competitiveness, we are interested. It would have to be an approach that extends our current business and not something put together hastily.
The recent M&A fever has been the most talked about topic in the electronics industry. WPG Holdings (3702.TW), which has grown to its current size through a series of mergers and acquisitions, is rumored to welcome its latest member Yosun Group (2403.TW), Asia’s second largest semiconductor distributor, into its corporate family. WPG, the first holding company in Taiwan, is now Asia’s foremost semiconductor distributor. Chairman Simon Huang says continual M&A practice has been a goal of the company since it was first established, “For us, merger talks are always in progress.” Having occupied the predominant position in Asia, WPG has set its sights on becoming No. 1 in the world.
WPG Holdings has its roots in the merger between World Peace Industrial Group and Silicon Application Corp., which was later followed by the acquisition of RichPower Electronic Devices, Pernas Enterprise and AIT Group. From financial figures released in recent years, it is evident that the holding company has established itself as a master of M&A, and with its member groups’ consistency in delivering favorable financial results, the rate of return on the parent’s working capital has continued to rise. Our reporting team paid a visit to WPG Holdings Group, the leading semiconductor distributor in Asia, and conducted an interview with the group’s chairman, Mr. Simon Huang:
Holding Company: An Innovation for the Industry
Q: How does WPG Holdings achieve synergy within the group?
A: From the very beginning when we established the holding company, we advocated the concept that “people will go all out if the front-ends are separate, and the company will be competitive if the back-ends are integrated.” The integration of back-end operations will allow individual companies to lower their costs, including warehousing and logistics.
Since the sub-groups joined the WPG alliance, they have adopted the parent group’s management indicators, which allow them to improve their financial indicators and receive more favorable terms with banks and save a lot in acquiring loans, thus naturally improving their operational performance. As for the front-end, it is easy to find the right direction through each company’s hard work and under a set of suitable management indicators,.
Q: You have been referred to as the king of mergers and acquisitions. How does one succeed in M&A, and how does one identify the targets for M&A?
A: We have our own set of M&A values and approaches that determine what kind of targets would be a good match and what kind of value they represent. For an M&A case to be successful, the most important thing is, of course, the choice of the target. It is necessary to spend a lot of time understanding the M&A target. Many mergers and acquisitions begin negotiations three to five years before they are realized.
The difficulty of M&A is that there are a lot of opportunities on the market. When opportunity knocks, it is vital that you know what the best match is and whether to reject or accept it. The considerations for an M&A proposal are nothing more than the product mix, customer portfolio and geographical factors, which must complement each other in order to achieve diversification and a sound operational basis.
Cross-Border M&A Requires Guts and Determination
Q: WPG has already established itself as the dominant force in Asia’s semiconductor channels. What are the Group’s future strategies?
A: I often ponder the question: If we don’t try to establish a presence in North America or Europe and are satisfied with our No. 1 position in the Asia-Pacific region, what are the implications? It is a very important objective for WPG to be number one in the Asia-Pacific region, but a global deployment strategy has its place within our organization.
We have to take into consideration the shifting of the economic blocks. It is true that currently the East is taking the lead, but who can tell what is going to happen in the long run? Which economic block will be in a favorable position in 20 years time? Patience is essential in cross-regional deployment, and it would be unwise to go with the flow. It is all right to start small, because after two or three decades it may grow to something significant. Take the Indian market for example. We’ve been there many years, and we’ve established six or seven locations. We’ve also been present in the U.S. for a couple of years. This is just the first step. It’s OK to move at a slow pace initially, like a duck taking slowly to the water.
Our opponents have their presence in all three major global regions, yet we have only really established ourselves in Asia. We are hoping to gain footholds in both North America and Europe and take our slice of the business. It is always tough when you are on someone else’s turf. It is a long-term battle and requires strategic investments. Acquiring local distributors is one way of doing it, but one has to have guts and determination.
Establishing a Significant Presence in China and Challenging for the No. 1 Position in the World
Q: Can you tell us about WPG’s advantages and disadvantages relative to Arrow, the No. 1 distributor in the world?
A: WPG has a very good reputation when it comes to M&A. We have been particularly successful in our back-end integration efforts in China, and we are at a very advantageous position in terms of continuing to build a larger alliance. In addition, our product coverage and technology have to a certain extent achieved the platform effect.
Compared with Arrow, the leaders of WPG’s sub-groups are first generation entrepreneurs, whose energy, passion and influence, not to mention the ability to rally support from employees, are not to be underestimated
This is both our strength and our weakness. The founders won’t be around forever, so we are also actively building up a mechanism to allow the next generations to continue to grow. Only by establishing a mechanism will the future generations be able to do battles on a global scale.
Q: Tell us about WPG Group’s visions.
A: They are: finding the Group’s second core business and copying the success model, which will allow WPG to “build a long-lasting foundation.” This is a huge challenge. There has not yet been an electronics company in Taiwan with a history of more than a century, and we may not see that realized in our life time. Nevertheless, this is our dream. In terms of the second core business, as long as it is something that will help WPG to raise our core competitiveness, we are interested. It would have to be an approach that extends our current business and not something put together hastily.