You won’t find Transcend Information Inc.’s flash cards or memory sticks on retail racks at Best Buy, Walmart, Fry’s Electronics or any other brick-and-mortar retailer.
Odds are that you haven’t heard of the company unless you’re an avid online consumer of gadgets and accessories.
That hasn’t stopped the quiet, Taiwan-based memory products maker from riding the wave of online retail to take market share from larger competitors. Transcend has more than $1 billion in annual sales, with its Orange-based U.S. operations accounting for about $120 million.
Deal
A recent “seven figure” deal to supply Seattle-based Amazon.com Inc. with more than 600,000 memory products for the holiday shopping season brought a boost for its fourth-quarter outlook, with sales and shipments now projected to increase 40% to 50% from a year ago.
The deal underscores Transcend’s strategy in the ultracompetitive world of data storage. It signed the Amazon deal less than two months before products were shipped. Most were packaged in bundles with digital cameras, digital photo frames and tablets.
“We’re a lot more nimble than the other guys in the industry,” said General Manager Clarence Chan.
A systems overhaul this summer improved efficiency, logistics, data entry, inventory management and distribution.
3-Week Max
The company typically sticks to a two-week timetable for inventory, with a three-week maximum.
Brick-and-mortar retailers that sell competitors’ products often count on having eight to 12 weeks of inventory available.
“Holding that much inventory hits our earnings pretty hard,” Chan said.
The company’s growth is closely tied to consumers’ changing buying habits and growing preference for online purchases through Amazon, newegg.com, buy.com and other e-tailers.
Online sales are pegged to increase 12% from last year’s holiday shopping season and eclipse $92 billion, according to Shop.org, the digital division of the National Retail Federation trade group. Consumer electronics are a strong category for online retail, which benefits accessories such as Transcend’s memory sticks and other products.
The holiday deal with Amazon continues a long-term relationship. Transcend first hooked up with Amazon in 2005, when the online retailer had $5 billion in annual sales. Amazon expects revenue will top $55 billion this year.
“Our business has obviously grown with that expansion,” said Sales Manager Andrew Hinkle. “We are one of their top vendors in the electronics business.”
That helped Transcend move ahead of Fountain Valley-based Kingston Technology Inc.—the world’s largest memory-products maker for computers and consumer electronics, with an estimated $5.8 billion in annual sales—to the No. 4 spot in flash-card shipments globally in 2011.
Transcend now has about $500 million in annual sales in the segment, good for a 6.1% share of the market, according to Stamford, Conn.-based market tracker Gartner Inc. Kingston has 5.5% of the flash-card market, good for about $450 million in sales a year.
Transcend was No. 3 in market share for USB flash drives in 2011 with a 7.9% share, up from 7% in 2010. The recent gain pushed it past Adata Technology Co., also based in Taiwan.
Transcend has “platinum” vendor status with Amazon, which brings prime exposure for its brand in merchandising and marketing efforts, as well as the site’s daily deals that are blasted out to millions of subscribers.
“It’s good to be in business with them and change the landscape in retail,” Hinkle said.
Amazon’s global expansion has helped Transcend penetrate growing markets in Germany, France, the U.K., Japan and other regions.
The company sends representatives to Seattle every month to meet with Amazon executives to discuss new partnerships, product road maps and marketing strategies.
Transcend’s product lineup is vast, with more than 2,000 memory products, including MP3 players, digital photo frames, portable hard drives, multimedia products and accessories.
About 40% of sales are through retail channels, with the rest split between the higher-margin business-to-business and original-equipment-maker markets.
Many of its products are embedded in products ranging from MRI machines at hospitals, slot machines, ATMs and in-flight entertainment systems, among others.
The company gets most of its memory components from South Korea-based Samsung Electronics Co. and Boise, Idaho-based Micron Technology Inc., which helps it keep a steady supply during high demand cycles.
Transcend’s products are designed and developed in Taiwan. Manufacturing is handled in Taiwan and China, where it employs the bulk of its 24,000-person work force.
U.S. Operations
About 50 employees are in Orange, including U.S. headquarters’ staff and marketing, sales, finance and administrative personnel. The location includes a 52,000-square-foot warehouse that handles all U.S. distribution.
It has other U.S. offices in Maryland and Florida, as well as in Germany, the Netherlands, Hong Kong, U.K., Japan and Seoul, South Korea. The company plans to open two more offices on the West Coast in the coming months.
Transcend was founded in 1988 by Peter Shu in Taipei, Taiwan.
The company expanded to the U.S. shortly after being established, with its first office in Temple City near California State Polytechnic University, Pomona.
It moved to Orange County in 1995 to be closer to other memory product makers such as Toshiba, Kingston and STEC Inc., along with the area’s burgeoning chip sector.
