A scant two months after the merger of Texas Instruments Inc. (NYSE: TXN) and National Semiconductor Corp., the combined entity has settled on its distribution lineup. (See: TI-National: Power in the Channel and TI-NSC Merger a Positive for the Channel.)
"Our strategy was actually very simple," John Szczsponik, TI's senior vice-president of worldwide sales and marketing, told EBN. "[TI] has spent the better part of 20 years, with the help of the distribution industry, consolidating our distribution network to several global strategic partners and a number of strong regional partners. We looked at [National's] lineup, and it made the most sense to move their products into [TI's] existing network."
TI and National had two global broadline distributors in common: Arrow Electronics Inc. (NYSE: ARW) and Avnet Inc. (NYSE: AVT). A third global distributor, Future Electronics , carried National. Pre-merger, the volume of product that TI moved through the channel was roughly five or six times higher than National's. As a result, the merged company has discontinued with Future Electronics Inc. globally and has added National's portfolio to TI's existing distributors.
The most significant change is in Asia, where Future had a strong presence with National. National's products will now be carried in that region by TI distributors World Peace, WT Microelectronics, and Yosun. National Semiconductor distributor Serial Electronics also carries the combined portfolio. Another Asian TI distributor, Seed, has been acquired by Arrow. "We didn't need another large global in the lineup and TI had several strong pan-Asian distributors," Szczsponik explains.
A merger on the magnitude of TI-National inevitably shakes up the distribution network. As recently as a decade ago, the roster of distributors selling in the Americas, EMEA, and Asia was considerably larger. There were fewer global distributors, so resellers went head-to-head in the biggest regions. VEBA Electronics, a powerhouse in Europe and parts of Asia, competed with Avnet and Arrow in those regions, and later became a global player as it moved into the Americas.
Consolidation within the distribution industry has since pared the roster: VEBA's businesses have been acquired piecemeal by both Avnet and Arrow. Other global distributors, such as Future and TTI Inc.
, have not been as acquisitive but have established greenfield operations in all major regions of the world. So now, a supplier's decision comes down to the best combination of global, regional, and catalogue distributors.
Another consideration in a merger is the portfolio of products that will be sold through the combined entity. TI and National have long been competitors in the analog market and have some overlapping products. Usually, that product portfolio would be pared down.
"The overlap is much less than we thought it would be," said Szczsponik. "It has turned out to be more complementary than anything. National has something like 12,000 part numbers and we have 40,000, but the interesting point is we found the overlap to be lower than we thought. We've heard this repeatedly through anecdotes from the field sales teams as they examined the product portfolio. We are not in any rush to consolidate those product lines," Szczsponik said.
In fact, TI has identified a number of products in the National portfolio that weren't being aggressively marketed for new and commercial applications. "We are revitalizing a lot of those products, and customers are indicating to us they want to buy more of them. So we are taking the existing portfolio and breathing new life into some of these products through our larger salesforce and broader channel," said Szczsponik. "Particularly in Asia, there is a lot of opportunity for existing products."