Distributors do it all!
For IC makers, demand creation to order fulfillment opportunities
are being pursued by distributors…and they’re delivering.

BY HAILEY LYNNE MCKEEFRY

emiconductor manufacturers and distributors have worked hand in glove for as long as both have been in business. In fact, just about every major chipmaker has alliances that reach back several decades or more. Meanwhile, changes in the business landscape have forced these semiconductor giants to evolve their strategies to meet the changing needs of their OEM customers. For example, over the past three decades, major shifts in the distribution landscape have included consolidation as a result of top-tier distributors joining forces.

Today, distribution has become majority owner of semiconductor sales. "Overall, it is clear that more semiconductor distributors are moving more product through distribution than is going through the direct alternate channels," said Robin Gray, executive vice president of the National Electronic Distributors Association (NEDA) in Atlanta, Ga.

"One reason for that is the desire by component manufacturers to focus on their core competencies and outsource those things that don’t fall within their core values, such as technical support or engineering skills," Gray said.

Although distributors were once tapped to focus on the needs of small to mid-sized customers, increasingly even the largest OEMs are making distributors part of their procurement strategy, hoping to leverage the distributor’s superior design and logistics services. Semiconductor manufacturers are asking their distributors to have dedicated design talent for their product lines in hope of catching new business opportunities while potential industry giants are still small fish in the technology pond.

"Semiconductor companies may want to deal with some large companies direct, but they haven’t the time, the resources, the personnel or the desire to work with hundreds, or in many cases, thousands of customers who don’t use their products on that scale," Gray said. "That’s where the distributor comes in. Increasingly, you have larger distributors with field application engineers helping spec in the principal’s products."

NEDA has recently commissioned a long-range study on what quantifiable benefits distribution brings to the customer.

"This has been an important role for distributors for a long time, but it is getting even more important," said Clarke Walser, principle, Walser & Associates (Arlington Heights, Ill.) "Manufacturers are recognizing that this is a valuable service that distributors provide and are trying to develop ways of compensating them for it."

The down side, however, is that design and engineering talent is scarce and costly, so that distributors are looking to their semiconductor manufacturers to reexamine the way that designins are tracked and how distribuors are paid for their efforts. In the future, compensation will become a key question and vendors and distributors alike struggle with how to track product designins as more end products are sourced and manufactured on a contract basis. "It is a universal problem and one that needs to be solved by component manufacturers if they want their distributors to be more involved with demand creation, regardless of whether they get the production order or not," Gray said.

Learn how five of the top semiconductor makers are taking advantage of distribution's expertise through partnerships that span years. You'll find that manufacturers are utilizing distributors in new ways that help them capture design opportunities at both industry giants and emerging up-and-comers.

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