TEAMING WITH DISTRIBUTOR PARTNERS

NEC Electronics Inc. — Technical distribution is key to design and discovery efforts The demand for technical expertise is so much greater than the supply that we have to look at distribution as a way of providing technical resources for our design and discovery efforts," said Richie Calogero, national sales manager at NEC Electronics Inc. (Santa Clara, Calif.)

he rapid consolidation of the distribution landscape over the past several years has enhanced the position of NEC Electronics Inc. in terms of its distribution strategy. And the company is projecting that the role of distributors will only continue to gain momentum.

"More and more customers are demanding support through distribution, and it has become a matter of cost savings for them. Our primary goal over the next three years is to move NEC to the top three semiconductor manufacturers in North America for both OEM and distribution sales," he added.

When NEC started selling chips in the United States in 1981, the company had 37 distributors on its roster - with the vast majority of those companies being small or local and regional distributors. Throughout the past 20 years, the company’s list of distributor partners has continued to shrink dramatically. Today, like Intel, NEC partners with four key distributors that include Arrow Electronics Inc., Avnet Inc., Bell Micro Products, and Future Electronics.

The company’s roster of distributors has shrunk rapidly as the top-tier distributors acquired each other.

"We were aligned with a number of distributors who were then acquired by Avnet and Arrow. In the past, because of certain restrictions, we were never aligned with major distributors like Avnet or Arrow. but instead, we worked with second-tier distributors."

NEC has no plans to further reduce the number of distributors on its roster, but it does predict further marketplace consolidation as distributors try to gain more market share through acquisition.

Today, NEC is working to gain the mind share of its distributors. "It’s the biggest challenge that a manufacturer today has," Calogero said. "Distributors have hundreds of lines, but they can focus only on the top ten or so."

Because of tough competition for technical resources in the industry, some semiconductor makers, such as NEC, are offloading technical sales to the distribution channel.

"Today, you can’t hire enough qualified people to have a direct sales force, so we’ve had to offload a lot of those requirements on our distributors," Calogero said.

NEC is looking to the distribution channel to make inroads into the myriad of new companies appearing on the technical landscape. "We are looking to distribution to start doing discovery at smaller accounts," Calogero said. "Many of these accounts explode overnight. Five or six years ago, for example, we had never heard of Cisco but then it and several major companies emerged almost overnight. The demand for technical expertise is so much greater than the supply that we have to look at distribution as a way of providing technical resources for our design and discovery efforts."

NEC is currently at the assessment phase of its distribution strategy. "We have to look at our distributors as real partners. We are working on the assessment of our competencies so we can make solid plans. Moving into the future, we will look at working with distributors who have core competencies that compliment our offerings."

NEC, for example, has strengths in design, development and manufacturing, while distributors provide solid support for OEM customers in terms of sophisticated logistics programs.

In the future, NEC predicts that its new product development efforts will be impacted greatly by the demands of distribution. "In the past, we always developed products for our large customers, but now we are developing products that specifically appeal to those customers who buy through distribution," Calogero said.