Excellent point. In fact, at the NEDA conference ealier this week, former Arrow CEO Steve Kaufman pointed out suppliers are losing their power in the channel by spinning off into smaller businesses. As a single unit, Motorola Semi could say jump and its channel would ask how high. As seprate businesses, the spin-offs have less clout. I hadn't considered this from the standpoint you mentioned--that consolidation at the disti level was also a factor.
I think this is a good basic analysis. But I think you missed one point I believe that further Supplier consolidation will occur also as a result of the continual buying spree by Avnet and Arrow (most recently NuHo, Richardson).
As there are fewer Distis available to do demand creation for the smaller Suppliers, because we all know the Big 2 will only use their FAE resources to support the "Top 10" or "Top 30" lines, smaller Suppliers will actually seek to be bought by the TIs, Alteras, Xilinxes, Intels, NSCs, LTCs, ADIs, etc, in order to have their product get mind share at the Disti level. This, or they hire more FAEs themselves and marginalize distribution as fulfillment-only engines. Burr Brown and Unitrode products might not exist today if TI had not bought them 10 years ago. See also Maxim's purchase of Dallas Semi.
Actually, there are two different things going on. When distributors win a design they are "paid" by the supplier. When they provide a value added service to an OEM they are "paid" by the customer. The latter--being paid for VA services--is the battle distributors have been fighting forever. They've had mixed success.
Distributors' design and engineering services aren't paid for by the customer. Distributors have to provide them just to get in the door. So suppliers compensate distributors for this in the form of a commission or a bigger profit margin on the fulfillment order. This is transparent to the customer as long as the customer gets what they pay for.
So on demand creation, it's actually the supplier that control the compensation, not the customer. The customer can influence the price of the fulfillment order, but it's up to suppliers to make sure distributors get paid.
Barbara, Distributors fought over the last few years to raise their margins by offering more value added services but they have also refused to give these away without getting paid for it--what OEMs and EMS providers wanted. If distributors now must fight over every design win would that erode their ability to charge for extra value services? Will they now have to yield to the pressures they resisted once successfully?
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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