Eight-Year Breakthrough in Chip Distribution: From Blockade to New Course

The following is the full text of the speech:

Respected colleagues and friends, good afternoon to all of you. I’m Jiang Lei, also known as Huajie from Chip Superman.

My connection with Electronic Engineering Times (China) (EET-China) dates back to 20 years ago, when I had just graduated and started my career as a procurement specialist. Back then, I treated it almost like a "textbook" for the chip supply chain, and even compiled numerous clipping books of its content. Later, many friends told me that they first got to know me on the stage of the Dual Summit.

Earlier this year, I attended the 40th anniversary celebration of EET-China in Shanghai. Listening to the long-term clients who have accompanied them for decades sharing their stories on stage, I was truly touched: this industry is cyclical, yet Aspencore’s EET-China has transcended cycles. It has always stood side by side with electronics professionals, and with its professionalism and long-termism, has accompanied us to witness the entire industry’s changes and growth.

Today, I’ve set a rather grand title for my speech, but I hope to start from the big picture yet focus on the details, and throw out a few humble opinions to spark more in-depth discussions. I’d like to share with you some of my reflections over the years, as well as my thoughts on "breaking through dilemmas" as a veteran practitioner in the chip distribution industry.

If major historical changes have shaped the destiny of nations, then the technological blockades and supply chain restructuring of the past few years have completely reshaped the underlying logic of the chip distribution industry.

In 2018, trade frictions began.

In 2019, the sanctions imposed on Huawei (HW) led to a premature surge in global production capacity, and also hit the accelerator on China’s chip industry—driven by both capital and policy support simultaneously.

From 2020 to 2022, the three-year COVID-19 pandemic and the massive chip shortage not only allowed distributors to accumulate sufficient cash reserves for the first time to dare expand, but also drew in people and capital from outside the industry, propelling the "semiconductor myth" to a new height.

The inventory destocking wave that started in the second half of 2022, coupled with the AI boom, sent the industry plummeting from the euphoria of the previous chip shortage into a contraction phase almost overnight—only to be reignited immediately by a new generation of computing power revolution. Some distributors downsized their operations, some pivoted to new models, and others expanded overseas; yet you’ll find that almost no one truly exited the market.

Looking back, the Nexperia incident in 2025 may actually mark the first time we have gained some countervailing leverage at the international semiconductor negotiating table.

Over these years, China’s chip industry has been pushed to become more assertive and prominent on the global stage.

The sales revenue of Chinese chip design companies has skyrocketed from RMB 194.5 billion in 2017 to an estimated RMB 835.7 billion in 2025—representing a fourfold increase in the sales scale of China’s chip design enterprises.

Today, China’s semiconductors have become its top export commodity. Back in 2017, China’s chip import value stood at $260.1 billion, rising to $385.6 billion by 2024—yet it’s notable that imports began to decline after 2022. Meanwhile, exports have grown rapidly, surging from $66.9 billion in 2017 to $159.5 billion in 2024, showing a trend of skyrocketing growth.

This means that China’s chip industry has for the first time gained the capability of two-way import and export flow. This is also the underlying logic behind why we have finally had the chance to truly take a seat at the international semiconductor negotiating table and start wielding a certain degree of countervailing power.

 01     
Chip Distribution: Three Fundamental Changes

Over the years, I have witnessed three fundamental changes.

First change: Industry information has become increasingly transparent, yet the market has grown more chaotic.

The reason is simple: after the previous chip shortage, a huge number of new players have flooded into the industry.

Now, various unexpected events keep emerging—tariff wars, TI price hikes, the Nexperia incident, rumors about AI and memory chips, unsubstantiated rumors on the A-share market… At the first sign of a market stir, a large number of buyers and sellers immediately emerge in the market. Many of them are second-hand or even multi-hand intermediaries, all eager to jump in and see if they can cash in on this market trend. This has led to a flood of false information and a great deal of emotion-driven trading. As a result, price quotes are often withheld arbitrarily. Such situations were unheard of in the past, but now they are happening more and more frequently.

Therefore, the problem today is not a lack of information transparency, but an overabundance of information, too many participants, and excessive noise. What we lack is not information itself, but the ability to distinguish noise from valuable signals.

Second change—in fact, the most easily overlooked one over these years: distributors are not just "goods movers", but a crucial buffer layer in the supply chain.

In most cases, people may not even feel the existence of distributors. However, whenever unexpected incidents occur in the industry—such as production capacity squeeze, delivery delays, international frictions, or urgent customer supply guarantees—distributors are often the first to sense risks and the quickest to step in and coordinate.

Third change, in fact, the most perceptible one for everyone over the past two years: the trump card of competition has shifted from "who has more goods" to "who maintains stable rhythms and makes quick judgments".

In the past, competition in the industry revolved around who had stronger channels, larger inventories, and more aggressive pricing. Now, market conditions change too fast and erratically. What truly determines success or failure is: first, who can distinguish between "genuine shortages" and "artificial shortages" at the first opportunity; second, who can avoid following the herd when others panic and refrain from getting carried away when others are reckless; third, who can tell whether a market trend represents a structural opportunity or just a "one-day rally"; fourth, who can judge the true intentions of counterparties in the market.

So the core takeaway today can be summed up in one sentence: You think you’re selling chips, but what you’re actually doing is cyclical trading.

Selling products is just the surface; judging cycles, market sentiment, and rhythms is the underlying capability.

The Nexperia incident has sent us a clear signal: the global supply chain has shifted from "who can supply goods" to "who can see the market clearly". The distribution industry has also moved from "competition for supply sources" to "competition for judgment capabilities".

02

What stage are we in now?

Today, we are not discussing short-term market trends, but rather where we stand and where we are heading over the next five years. The chart below is a cyclical model applicable to many industries, divided into seven phases: the Embryonic Phase, Growth Phase, Maturity Phase, Consolidation Phase, Rebirth Phase, Harvest Phase, and Transformation Phase. Once this framework is applied to the distribution industry, the industry’s current position becomes extremely clear.

First, the global chip market is sliding from the Maturity Phase to the Consolidation Phase.

The golden age of global semiconductor growth has passed, and the industry is now shifting from the Maturity Phase to the Consolidation Phase. The characteristics are distinct:

 demand for mobile phones and PCs has peaked; profits are declining and costs are tightening; the memory chip sector is monopolized by three companies; major manufacturers are engaging in continuous mergers and acquisitions; and computing power is even dominated by NVIDIA alone. This means the global industry has entered a cold cycle, but it also implies that structural opportunities in areas such as AI, automotive-grade chips, memory, and computing power are being amplified.

Second, in China’s chip distribution market, demand is still rising, yet profits have already entered the Consolidation Phase.

Several distinct characteristics define the Consolidation Phase: upstream suppliers are moving toward direct sales and de-distribution; leading distributors are accelerating mergers; information asymmetry is rapidly disappearing; and the Matthew Effect is intensifying—20% of distributors capture 80% of the profits.

This marks the first time that China’s distribution industry has transformed from a "human-driven industry" to one of "structured competition". Those who can improve structural efficiency, matching efficiency, and judgment efficiency will capture the remaining profits.

Third, demand for domestic chips is booming, but the industry as a whole has prematurely slipped into a period of chaos.

The period of chaos has three typical characteristics: First, oversupply on the supply side. From 2017 to this year, the number of Chinese chip design companies has surged from 1,380 to 3,901. Companies focusing on MCUs, analog chips, power management chips, interface chips… are everywhere. It seems bustling on the surface, but in reality, there is extreme oversupply. Among the 3,900 companies, only 20% have annual revenues exceeding 100 million RMB.

Second, brutal price wars. Components priced at 50 RMB can be undercut to 5 RMB or even 2 RMB. Amid such chaotic competition, even excellent original manufacturers (OEMs) are vulnerable to being driven out of the market.

Third, chaotic channels, weak brand recognition, and unestablished standards. Original manufacturer self-operation, agency, and trading coexist in disarray; pricing systems are unstable, and terminal engineers lack trust. Additionally, while many claim they aim to become "China’s TI, NXP, or ADI", this goal has not yet been achieved and requires further accelerated industry consolidation.

With these three cycles overlapping, the core logic for the next five years is extremely clear: supply-side contraction → industry restructuring → standardization → emergence of leading domestic players → the entire industry entering the Harvest Phase.

03

The Changing Role of Chip Distributors

Over the years, the role of distributors in the industry has evolved five times. This is not because we have "suddenly become stronger", but because the industry environment has been extremely volatile and ever-changing, forcing distributors to continuously step up and fill the gaps.

2018–2020: From "Product Allocators" to "Firefighters"

During those years, supply cut-offs, embargoes, and delivery disruptions turned everything into chaos. Production lines couldn’t stop, and customers were in a panic. Whoever was reachable by phone and willing to act immediately had to step up first. This wasn’t because distributors were particularly "heroic"; it was "demand forcing distributors to step forward". Whenever the industry ran into trouble, distributors were often the first to be called upon. Using their "three core capabilities" (spot stock guarantees, cross-border logistics solutions, and technical alternatives), they first kept their customers’ production lines running.

2020–2022: From "Firefighters" to "Risk Controllers"

During the three-year chip shortage, prices fluctuated wildly, product batches were disorganized, and counterfeit chips were rife. You would notice many distributors began building high-standard quality inspection labs—not to show off how advanced they were, but as a basic survival measure driven by market conditions. Because without risk control, they would be the first to suffer heavy losses and go under.

2022–2024: From "Risk Controllers" to "Stabilizers"

As inventory destocking kicked in, the entire industry plummeted from frenzy to slump overnight: original manufacturers slashed orders, customers suspended orders, channels dumped goods at rock-bottom prices, and inventory piled up… At such times, the value of distributors boiled down to three things: maintaining delivery stability as much as possible, keeping prices stable as much as possible, and preserving cash flow stability as much as possible, giving both upstream and downstream partners a way out. It wasn’t about "propping up the supply chain", but about "doing their best to maintain basic order".

During that period, all distributors could do was avoid making things worse.

2018–2025: Engineering Enablers of Domestic Substitution

Whether domestic substitution can be truly implemented depends not on PPTs or empty slogans of "supporting domestic products", but on tangible actions: helping customers test samples, verify compatibility, provide supporting peripheral components, clarify potential risks in advance, assist customers with trial production, and onboard the second, third, and more clients...

These tasks are far from glamorous. Domestic substitution is not driven solely by distributors, yet distributors have indeed taken on a great deal of the gritty, labor-intensive work that someone has to do.

2023–2025: Nodes of Judgment

Over the past two years, you’ll notice that every player in the industry has been asking distributors: Is this demand real or artificial? Has this price hit the ceiling? Is this market trend viable to capitalize on? Even recently, end customers and even those focused on the A-share market have come asking: How is Nexperia doing? How is Wingtech performing?

Why is that? Because we distributors are closest to the real market—we are the "ducks" in the saying "the ducks in the river are the first to feel the warmth of spring water". Customers come to sound us out, original manufacturers come to check the situation, domestic chip makers come to verify market conditions, and peers come to exchange insights. Everyone needs to consolidate this information to judge whether demand is real or artificial and whether prices have hit the ceiling—and that’s how we’ve become a node of judgment.

Distributors are not market mentors; we are just the closest to the market.

These five shifts also demonstrate that distributors are the irreplaceable "strategic buffer layer" in the electronic supply chain. The more complex the industry becomes, the more important and indispensable this role is.

04

For domestically produced chips to truly take off,

they cannot function without chip distributors.

Last year, we compiled statistics on 87 domestic chip companies listed on the A-share market. Among the 77 companies for which distribution data was available, over half of their revenue came from distributors. Specifically, 40 companies derived ≥60% of their revenue from distribution, 27 companies ≥80%, 18 companies ≥90%, and the top 7 companies relied almost entirely on distribution (≥95%). This is not a coincidence, but a pattern. (For details, please refer to "Recommended Reading" at the end of the article.)

In fact, the essence of domestic substitution lies in engineering and channel science. The push for direct sales that everyone is talking about is merely a tactical move. However, given that domestic chips are not yet strong enough, we still need to "make as many friends as possible" and "target the dominant players to redistribute resources"—which is why distribution is a strategic imperative.

05

How will chip distributors make money in the future?

Amid the market environment over the past two years, everyone can clearly feel that the days when you could live well just by securing a few channels, holding some inventory, and relying on a handful of traditional websites are long gone. Today, those who can survive, thrive, and scale up rely not on a single capability, but on "integrated composite capabilities". What we need most are four things: the ability to see clearly, to stay stable, to act quickly, and to position ourselves correctly.

First, the ability to see clearly—there is too much noise in the industry today, and failing to see clearly will easily lead to costly mistakes. Second, the ability to stay stable: in the past, you might only need to have a few part numbers or secure some components to get by, but now if any one of your products, customers, cash flow, or team is overly concentrated, you will be severely impacted when drastic changes occur.

The ability to move fast is key—after all, the inventory in your warehouse isn’t truly "yours". How well you thrive doesn’t depend on how much stock you hold, but on how much you can secure. The critical question is: how to seize opportunities to win orders quickly and keep goods flowing? Liquidity is what ensures you scale up and grow stronger. Excess inventory can drag you down, but liquidity is the core—and behind liquidity lies the full set of capabilities of your team.

To stand in the right position: today, whether a distributor makes money depends on how customers and original manufacturers (OEMs) "perceive you" in the supply chain. Are you just a vendor they price-compare at random? Or are you the first one they turn to when problems arise? Your position determines how much profit you can ultimately capture.

These years, everyone has struggled hard to break through. In the next three to five years, what can distributors rely on to make money? Let me share the most practical perspective: there are five actionable paths—all feasible, implementable, and profit-generating directions.

1. AI Server Chain

Only those operating in the AI server chain sector are likely to have generated profits in recent years. This domain encompasses a wide array of opportunities, including HBM, memory modules, power supplies, GPUs, and more. For the time being, we lack the capability to manufacture CPUs/GPUs, and breaking into the memory market requires substantial capital investment. However, numerous IC opportunities exist in peripheral segments – these alone are sufficient to help you build and sustain cash flow.

2. Engineering-Driven Domestic Substitution

Domestic substitution is not market-driven in nature; it is fundamentally propelled by engineering execution. Distributors are tasked with extensive on-the-ground implementation work. Some technically competent distributors may pivot to first develop tailored solutions for domestic substitution projects, then evolve into key authorized agents for domestic substitution initiatives.

3. Supply Chain Controllability

Price is no longer the sole competitive factor – "stability and reliability" have become paramount. For example: can you rapidly step in as a replacement when existing partnerships are disrupted? Can you secure inventory during periods of production capacity constraints? Stability has emerged as an absolutely core competency.

4. The Industry’s Third-Generation Platform

We need a comprehensive platform that does more than just secure supply sources and manage inventory – it must also enable us to build and strengthen our core capabilities.

5. Global Expansion and Cross-Border Supply Chain Complementation

While market conditions in Europe and the US remain challenging, tremendous opportunities lie in Southeast Asia, the Middle East, India, and Latin America for global expansion and supply chain supplementation.

06

Conclusion

Over the past few years, we have proven the extraordinary resilience of our industry. However, moving forward, we must leverage clear strategic direction to complete our identity transition. The era of containment may be a thing of the past, but a new course for development has only just begun.