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AzmatMalik
User Rank
Production Synthesizer
A call to arms
AzmatMalik   5/20/2014 11:21:35 AM
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The age old mantra in the semiconductor industry has been 'we'll make it up in volume'. But when we are shipping a few bucks with each chip making it up in volume piles up high rather quickly. There has to be a bit of market power to pull off the suggested actions; if the price is too high in the early stages volume may never pick up to result in reduced costs, and improved margins. One approach that I have toyed with is to have OEMs place a certain amount in escrow, sort of an LoC, that is then an assurance to the seller that if the volumes are not met the higher net price is indeed met, a reverse rebate. Another idea is to have OEMs have a capital stake in the semiconductor plant, not very practical though.

Hailey Lynne McKeefry
User Rank
Blogger
Fear
Hailey Lynne McKeefry   5/19/2014 8:44:06 PM
NO RATINGS

The idea of fear resonates for me. Businesses run by fear often make poor decisions. One saying "That which we fear we create."

FLYINGSCOT
User Rank
Supply Network Guru
too true
FLYINGSCOT   5/19/2014 11:01:19 AM
NO RATINGS
1 saves

Your article really hits home as it always feels like the big OEMs have us semicons over a barrel when it gets to negotiating pricing.  What also helps is not to go after "me too" parts so that the levergae of the cusotmer is less.

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