TEAMING WITH DISTRIBUTOR PARTNER

Motorola Semiconductor Products Sector — Demand creation makes an impression "We believe that distributors are key in providing discovery activity for us," said Alberto Macchi, director of worldwide distribution sales, at Motorola Semiconductor Products Sector (SPS) (Phoenix, Ariz.)

otorola has employed distribution services since the 1970s, but over the decades the company’s approach to its distribution strategy has evolved steadily as distributors have taken on more responsibility for demand creation. "In the early days, distributors targeted the mass market so they acted more like a sales rep - taking orders and shipping parts," said Macchi, "It was a broker model."

The semiconductor company worked with about 200 small mid-sized distributors worldwide in the 1970s. About 18 to 20 percent of its sales went through the channel, Macchi said.

In the 1980s, globalization was the buzz word. "Customers wanted to place orders in North America and still have support all over the world," Macchi said. "That changed the scenario as a number of local distributors were acquired by the biggest global distributors." Distributors started to focus more on value-added services, such as kitting and programming and the percentage of business that channeled through distribution continued to rise. Distributors also started to hone their design skills in an effort to support customers with a higher level of technical expertise. By the end of the 1980s, about 22 percent of the total avail-able sales went through distribution, said Macchi.

At the same time, the number of distributors that the semiconductor supplier worked with continued to decrease. In the 1980s, Motorola worked with about 45 distributors. In 1990, that number shrunk to only 19. "In North America and Europe, we had only four distributors in 1990, while the rest were in Asia," Macchi commented. "In Asia, there is fragmentation and a lot of local distributors."

Today, Motorola SPS puts all of its business through four global distributors - Arrow Electronics Inc., Avnet Inc., Future Electronics and the VEBA Group (Wyle Electronics). In addition, it has an agreement with catalog house Newark Electronics and works with Richardson Electronics to sell its RF offerings.

Sales through distribution will only continue to rise for Motorola. "At the end of 1999, the percentage of our TAM (total available market) handled by distribution was about 25 percent. This year, we expect that distribution will handle more than 30 or 35 percent of the business. " More customers are asking distributors to be included in the supply chain,” Macchi said.

Initially, Motorola looked to the channel primarily for order fulfillment. Today, the company relies heavily on its distributors to discover new design-in opportunities in the mass market and to offer supply chain and logistics services to customers. "We have big investments in networking applications where new accounts are showing up every day," Macchi explained. "We believe that distributors are key in providing discovery activity for us. In addition, distributors are taking over the supply chain for the customer and providing value-added services to them,“ Macchi said.

In response to these changes in the channel, Motorola sold off its ON Semiconductor Division and created The Standard Embedded Solutions Group (SESG), (Austin, Tex.), to provide focused service to distribution and emerging accounts.

"We believe that this will let distribution recognize our leadership in this market and prove that they are willing to help us create demand and discover new accounts.”