ASC 100: Long-term changes to top 20 suppliers in six Asian countries are worth watching

Countries in Southeast Asia and South Asia stand a chance of becoming rising stars in the midst of supply chain shifts and the move toward shorter supply chains and localization. Four Indian firms and one Indonesian firm entered Digitimes' Asia Supply Chain 100 (ASC100). By region, Tata Motors at No. 22 in ASC100 is the champion in Southeast Asia and South Asia, followed by Indonesia's Astra International (No. 68) and India's Mahindra & Mahindra (No. 69), Maruti Suzuki (No. 74) and Motherson Sumi (No. 89). ASC 100 is a study based on the companies' revenues, profit and market cap that will be renewed annually.

Digitimes' ASC100 is the first report with revenue and earnings assessments on local supply chains in India and five Southeast Asian countries (Malaysia, Singapore, Thailand, Vietnam and Indonesia). The Digitimes team examined top 20 publicly listed suppliers in each of the six countries. As publicly listed firms offer more transparency in their finances and operations compared to those that are not publicly traded, Digitimes' lists of South Asian and Southeast Asian suppliers are a valuable reference to Taiwan-based vendors looking to expand into the regions or seeking partners or acquisition targets.

It should be noted that Digitimes' lists are only limited to publicly traded firms in view of their information transparency. For example, Cal-Comp Electronics (Thailand) and Delta Electronics Thailand have established operations in Thailand for years and are publicly traded on the local stock exchange so they are included in Digitimes' lists and are ranked No. 1 and No. 2 in the top 20 Thailand-based suppliers, which is impressive. However, there are many multinational corporations that have long set up operation in Thailand but are not included in the study due to insufficient information transparency even though they have great influence in the country. One such company is Samsung Electronics. It has eight plants in Vietnam and contributes 25% of the country's exports. However, it is left out from the study as it is not publicly listed in Vietnam and its local supply chain data is not made available. If more multinational corporations have their subsidiaries go public in Southeast Asia or South Asia in the future, there will be changes to Digitimes' lists.

As the Asian supply chain develops toward China+n, South Asia's and Southeast Asia's local leaders with solid foundations in automobile, electronics and electrical industries are gearing up to embrace the opportunities. Although these local leaders are not yet named in this year's ASC100, they stand a good chance at quickly narrowing their gaps with multinational conglomerates amid the once-in-decades supply chain change.

In the face of the US-China trade war and the COVID-19 outbreak, supply chains gradually shifting some production away from China to Southeast Asia and South Asia has become a clear trend. What changes will this introduce to the local supply chains in the regions? The following points are worth watching in the long run.

Will there be a change to the situation that the industry is highly concentrated on traditional automotive manufacturing?

India and Indonesia are the only two countries with supply chain scales that are large enough to make it into ASC100. One thing they share in common is that automotive manufacturers and part suppliers represent a large portion. Driven by carbon neutrality initiatives, fuel vehicles are bound to gradually fade out of the market. Leading automakers in the regions are also transitioning to producing electric vehicles. Furthermore, as governments in the regions offer policy incentives to encourage electronics brands such as Apple to establish local manufacturing facilities, this also attracts ICT device and consumer electronics OEMs to relocate their supply chains so their ratio in the regions' industry ecosystem will be on the rise over the next few years.

Will supply chain reshuffling pick up pace?

Suppliers' earnings performances are the most stable in Singapore and India. Thailand, Vietnam, Malaysia and Indonesia have multiple mechanical/electrical part and equipment, industrial machinery and automotive part/equipment suppliers operating at a loss or with a meager profit margin (<1%). These firms may get acquired or eliminated in the future, resulting in the situation where the big gets bigger and supply chain reshuffling will pick up pace.

Will foreign corporations have stronger influences on the local supply chains?

With the exception of Samsung, Cal-Comp Electronics (Thailand) and Delta Electronics Thailand mentioned above, there are plenty of other multinational corporations in Southeast Asia and South Asia with strong and deep influences on the local supply chains. For example, Thai-Stanley is a joint venture between Thailand and Japan. Jardine Matheson has the largest stake in Indonesia's biggest automaker Astra International. Germany-based Bosch and American home appliance maker Whirlpool are publicly traded in India. Eicher Motors, listed among Indian suppliers, not only produces motorcycles and commercial vehicles but is also engaged in a joint venture with Sweden's Volvo to sell trucks. These multinational conglomerates agilely leverage joint ventures, alliances and acquisitions to drive growth. They are expected to place more emphasis on the regions in their global planning going forward.

Source: Companies, compiled by Digitimes, May 2021