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Building on success

Serial System eyes US$5-10 billion in sales within the next decade

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'Our rationale for getting into the consumer products distribution business has not changed, but we are constantly fine-tuning our execution to ensure we achieve the desired results.' - Dato' Seri Dr Derek Goh, CEO of Serial System.

DEREK Goh, chief executive officer of Serial System, who turned a one-man operation into an electronics behemoth listed on the Singapore Exchange mainboard, has spent his career bucking the norm with remarkable results. The company has grown at a compounded annual rate of 26 per cent in the past 16 years, and is now the largest Singapore-listed electronic components distributor, with revenue of US$1.4 billion for its fiscal year 2016. In 10 years' time, Dr Goh wants to take this to between US$5 billion and US$10 billion, with Serial poised to benefit from the advent of disruptive technologies.

A hunger for success

Dr Goh set up Serial in 1988. It was not his first brush with business. As a son of a hawker, he was already helping his father at their stall at age 11. Life was gruelling.

"Many a time I would knock off at nine and by the time I reached home and took a shower, it would already be eleven. I would still have to spend half an hour to 45 minutes on homework, by which time whatever I write would be like what you would see on talisman paper because I was so tired," he says.

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That early experience instilled in him a keen drive to succeed. "Back in those days, everything was about survival. If I did not work, there would not be food on the table. Having eggs and chicken was considered a luxury. This hunger was what drove me, and made me do unconventional things to survive."

This included peddling watches, musical greeting cards, drinks, flower bouquets and gift sets while he was in the Navy. He even recruited and managed a network of runners selling such items for him. The market price then for musical greeting cards could go up as high as 20 to 25 Singapore dollars, he notes. "My cost was S$5, I sold at S$15. For those people selling for me, I gave them at S$11 and told them they must sell at a minimum of S$12."

After leaving the Navy, he set his sights on electronics. "From young I have always been fascinated with electronic gadgets and how they work. I used to tear them apart and modify them a little. This DIY spirit enabled me to sell electrical components convincingly."

He founded Serial in an 80-sq-ft room in the back of his wife's florist shop, where he worked using just one telephone and a fax machine. "As a one-man operation, it was difficult at first to obtain distribution rights from suppliers, so I scouted part-time salespersons and sought small clients who would later give us references for bigger suppliers."

While rivals have mostly collapsed or been acquired, Serial has successfully weathered multiple challenges. In 1999, Dr Goh handed over the reins to a friend, a move that resulted in the company losing millions of dollars in less than two years. Unable to sit back and watch his hard work go down the drain, he took back control in 2001.

Since then, Serial has emerged even stronger. It moved in 2004 to its current building in Ubi and now employs more than 200 people in Singapore. Serial has more than 1,000 employees in 53 offices and 13 warehousing facilities in key Asian markets including Singapore, China, India and Indonesia.

Diversifying downstream

In 2014, Serial entered a new chapter of growth by diversifying into consumer products distribution. Its current portfolio of consumer products consists of household appliances and lifestyle goods, including camera accessories, printer accessories, timepieces, motherboards and hard-disk drives from major suppliers such as Hewlett-Packard, Canon, Samsung and Fossil.

In Singapore, Serial distributes some of these products to large retail superstores such as Popular and to smaller retailers like those in heartland estates. The South Asia Pacific region makes up the bulk of its consumer products sales. "Given our track record in electronic components distribution, we figured that there would be synergies from having another distribution business focused on consumer products."

There is still room to improve the consumer products business, he notes, adding that the group has taken steps to streamline processes to achieve synergy for the electronic components and consumer products businesses across its international distribution network. "Our rationale for getting into the consumer products distribution business has not changed, but we are constantly fine-tuning our execution to ensure we achieve the desired results."

As for its main electronic components distribution business, it will continue to explore opportunities to expand in higher-value business segments such as security, automotive, smart devices and enterprise cloud solutions, he adds. "We need to be where the action is, to continue to grow."

New frontiers

Serial is looking to ride a recent wave of disruption, prompted by the growth of regional tech titans and technological advances such as Internet of Things and blockchain. Many such projects require integrated circuits and chips, Dr Goh notes.

Another sector he wants to expand in is the medical industry. The group supplies meal ordering software to hospitals in Singapore and assembles and distributes customised perfusion tubing packs used in heart operations to hospitals across the entire Asia Pacific.

It has also created additional income streams. In May this year, it bought 70 per cent of a managed print services company, Print IQ Singapore, which serves established brands such as Seagate, Charles & Keith, Soup Restaurant, Swarovski, Pan Pacific Singapore and OG Department Stores. "The acquisition will create an additional income stream for Serial and help enhance value for shareholders over the longer term." It also has a 27.3 per cent stake in a laundry business in Australia and a 21 per cent interest in a food caterer in Singapore.

His vision is that Serial will pull in US$5 billion to US$10 billion in sales within the decade, before he semi-retires. "There aren't many semiconductor companies with revenue in the range of US$5 billion to US$10 billion," he says, noting that once a semiconductor distribution company reaches that size, "it will be hard for it to topple", and that is where he wants Serial to be.

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