TEAMING WITH DISTRIBUTOR PARTNERS

Samsung Semiconductor Inc— Emphasizes distributor's role in memory market "In a single stroke, we’ve allowed them [distributors] to participate in selling memory in ways that they haven’t been able to do in many years," said Bob Eminian, vice president, marketing and corporate communications for Samsung Semiconductor Inc., San Jose, Calif.

amsung Semiconductor's focus on the memory market has greatly impacted the semiconductor maker's approach to distribution. In fact, the company is emphasizing the role of distribution while other companies are deemphasizing their importance. The IC maker also sells TFT panels, ASICS, micro-controllers, and other non-memory products.

"About eight years ago, we switched to a modified commodity program for our distributors," said Eminian. "That means we no longer offered price protection and didn’t encourage our distributors to stock product. The memory business is very volatile and commodity- like so it was difficult for our distributors to justify buying parts and keeping them in stock without price protection."

In those days, the distributor had about twenty local and regional distributors. Today, it has shaved the list to include only four: All American Semiconductor, Arrow Electronics Inc., Jaco Electronics, and Reptron Electronics. "These companies are a balanced mix in both size and geographic focus," Eminian said.

When the company offered stock rotation and price protection, they found that more than 50 percent of the DRAMs they sold were rotated back from the distribution channel. Today, their distributors are allowed to rotate only a small amount of product back to the semiconductor maker each quarter. In the future, the Internet will play a key role in how Samsung works with its distributors. Last fall, the company launched its MyMemoryStore.com site to sell SDRAM modules online, including a full line of PC133, 256Mbyte and CAS Latency 2 (CL2) modules. The site also includes comprehensive product information, news and analyst reports and links to product information.

Most recently, Samsung invited its distributors to become key customers at the new site.

The online store virtually offers them risk-free buying. They can check availability, buy the products online and get them shipped directly to the end customers. "In a single stroke, we’ve allowed them to participate in selling memory in ways that they haven’t been able to do in many years. Our distributors have responded positively. They see it as a way to get leading-edge parts in a tight market at a fair price, and in an oversupply market at a really good price," Eminian said.

Samsung has also placed links to their distributors' Web sites at the online store. If the company doesn’t have a particular product, the buyer can follow a link to the appropriate distributor.