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Excelpoint builds on nexus role in electronics distribution

Everyone thinks this is a sunset industry, but they could not be more wrong, says the company's chief

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One of the key growth drivers for the distribution industry include China's "One Belt, One Road" (OBOR) initiative, Mr Phuay says.

Singapore

TECH veteran Albert Phuay sees himself as an accidental entrepreneur.

The founder and chief executive officer of SGX-listed Excelpoint Technology Ltd began his career in the tech sector, with roles ranging from quality assurance to manufacturing.

"Coming from a technical background, electronics was familiar territory for me, and I also had many peers who joined this industry," Mr Phuay recalled.

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The opportunity to set up Excelpoint came in 1987 - as a bolt from the blue - when one of the electronics suppliers he was working with offered him a contract to distribute its components.

Mr Phuay lacked capital to set up the business, but a close friend, who believed in his enterprising spirit, stepped in with a US$25,000 loan.

That marked a key turning point in his life, and resulted in the birth of Excelpoint.

"An entrepreneur's path in the electronics sector is never an easy one," Mr Phuay said with a wry grin.

"But the many ups and downs along the way are not as important as building a solid foundation and establishing the right values from day one. The most critical lessons are staying positive and upholding the principles of integrity."

From a one-man operation in the 1980s, Excelpoint today has a presence in more than 10 countries across the Asia-Pacific region, and a total of over 700 employees.

Listed on SGX Mainboard since January 2004, Excelpoint is a business-to-business platform that provides quality components, engineering design and supply chain management services to original equipment manufacturers (OEMs), original design manufacturers (ODMs) and electronics manufacturing services (EMS) providers in the Asia-Pacific.

It was ranked among the Top 25 Global Electronics Distributors in 2017 by EBN, a premier online community for global supply chain professionals.

The group's key suppliers include Analog Devices, Qualcomm, Samsung Electronics and Qorvos.

Excelpoint has a current market capitalisation of about S$83 million. In the 2018 year-to-date, its shares have generated a price gain of 12.9 per cent, outperforming the benchmark Straits Times Index's (STI) 1.1 per cent rise and the broader FTSE ST All-Share Index's 0.5 per cent increase.

Cutting-edge

On the financial front, the group has increased revenues by a compounded annual growth rate (CAGR) of 18 per cent between 2015 and 2017, with sales surpassing the US$1 billion mark for the first time last year. Net profits have increased by a CAGR of 36 per cent over the same period. For the financial year ended Dec 31, 2017, Excelpoint achieved record revenue of US$1.1 billion, up 16 per cent year-on-year, while net profit gained 14.8 per cent to US$8.1 million.

"Compared to 30 years ago, our business today is very different, and the ways in which we service our customers have also evolved significantly," noted Mr Phuay, who clinched the Entrepreneur of the Year Award in the Electrical and Electronics Industry category at the 2017 Asia Pacific Entrepreneurship Awards.

"In the past, it was all about brands and consumer demand. Now, the focus is not just on branded white goods, but also the latest cutting-edge technologies and infrastructure development."

Right from the start, Mr Phuay was quick to set up research and development (R&D) centres to boost service offerings for clients.

"Initially, we employed field application engineers to solve problems onsite on behalf of suppliers. But we soon realised the FAEs were not enough - we needed to get closer to the market and focus on developing new technologies."

The group set up its first R&D centre in 1994, and has added another in China since then, with each centre helmed by a team of professional engineers. About a quarter of Excelpoint's workforce - one of the highest percentages in the industry segment - comprises trained engineers.

"Focusing on R&D was the most strategic decision that we made, which helped secure Excelpoint's future," Mr Phuay said.

"The rewards have been huge - though not necessarily in profit terms - as our efforts signalled to suppliers and customers that we were totally committed to the industry, and to meeting their needs."

Three decades ago, Mr Phuay was optimistic about the outlook for the electronics distribution business, despite a myriad of challenges that included the need for superior product innovation and strong interpersonal skills to keep abreast of the competition.

"Today, I remain equally, if not more, confident of our prospects. Everyone thinks this is a sunset industry, but they could not be more wrong. Growth over the next decade will be very steady," he noted.

"This business will still exist in the next 20 years, because there are gaps between customers and suppliers that need to be filled by distributors, especially for emerging markets such as China, India and South-east Asia, in areas like time-to-market, because products get outdated very quickly in this industry," he added.

Time-to-market refers to the length of time it takes to design and manufacture a product before it is available for sale to the consumer.

Future-proof

Key growth drivers for the distribution industry include China's "One Belt, One Road" (OBOR) initiative, which is expected to boost regional infrastructure demand, as well as the rise of the digital economy, including the Internet of Things (IoT).

Global spending on IoT - which refers to the interconnectedness of computing devices embedded in everyday objects or smart devices - is forecast to reach US$772.5 billion in 2018, up 14.6 per cent from 2017, according to forecasts by IT consultancy International Data Corporation (IDC).

IDC expects worldwide IoT spending to sustain a compounded annual growth rate of 14.4 per cent between 2017 and 2021, surpassing the US$1 trillion mark in 2020 and reaching US$1.1 trillion in 2021.

"OBOR and the resulting infrastructure demand will need a lot of support in terms of electronics, while IoT should see a take-off in volume terms over the next three years, especially in the areas of artificial intelligence and electric cars," Mr Phuay said.

"Right now, IoT is only a fraction of the ecosystem that it can, and will, become."

China's "Made in China 2025" initiative, targeted at upgrading its domestic manufacturing chain, will also throw up new opportunities in the industrial and instrumentation space, a key segment for Excelpoint.

Currently, North Asia is the largest revenue contributor, accounting for nearly 55 per cent of the group's aggregated revenue in FY2017.

These drivers are expected to help Excelpoint double its annual revenues to US$2 billion within the next five years, Mr Phuay added.

Inorganic growth opportunities - in the form of mergers and acquisitions as well as partnerships - will also play a critical role.

"For a company of our size, we need partnerships and M&As to enhance our technological know-how and broaden our revenue streams," he said, adding that the group is focusing on electronics-related segments, such as plastics, rubber and precision engineering.

Unflagging Ambition

Two years ago, Mr Phuay put in place a succession plan - not just for the next, but also subsequent generations - to ensure the company stays on a growth trajectory.

He is unwavering in his goal to develop Excelpoint into an Asian nexus between customers and suppliers, offering the best-in-class design services and integrated R&D solutions.

"Our management team is always improving and evolving to ensure we are ready to take on the next milestone of growth - to expand our current revenue of US$1 billion to US$2 billion," he said.

He aims to build a bai nian lao dian - a business with a 100-year legacy - for both staff and shareholders. "We've just crossed the 30-year mark, we have another 70 to go," he said with a laugh.

"As long as you are flexible enough to adapt to industry changes and can stay at the forefront of the technology curve, your distribution business will never die."

So far on this front, Mr Phuay has few concerns. "I'm very proud of our management team - about 70 per cent to 80 per cent of our senior management staff have been with Excelpoint for more than 15 years, and are industry leaders in their own right."

As a result, he sleeps like a baby every night. Mr Phuay attributes his cheerful spirit and good health to a stubbornly positive attitude.

"It's all about your mindset - I make it a point to be happy and energetic every day," the father of two daughters and a son, aged 20 to 29, said.

The Chinese proverb ren sheng bu ru yi de shi, shi zhi ba jiu - the observation that in life, eight or nine out of 10 things will usually not go your way - is a constant reminder of the need to choose positivity.

"Some things will always go wrong, but if you focus on the 80 per cent to 90 per cent of these occurrences, you will never be happy. All that negativity will just create more trouble and chaos in your life," he said.

"On the other hand, a positive attitude will go a long way towards resolving problems."

  • This is an excerpt from SGX's Kopi-C: The Company Brew, a regular column featuring C-level executives of SGX-listed companies. Previous editions can be found on SGX's My Gateway website www.sgx.com/mygateway
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