Advertisement

Blog

Planning With Rivals for the Unexpected

Get ready to swim or sink together — with your toughest competitor. It's a paradox. Yes. But in today's electronics procurement and manufacturing environment, the era of unbridled rivalry is giving way to a new one of supportive competition where components makers, OEMs, and even contract manufacturers collaborate in various ways to achieve mutually beneficial goals.

It's not that the fierce rivalry that characterizes the industry is going away. It's still here and it's not any less intense. It's just that the market has become so interwoven and the level of co-dependence so high that no single company can clinch critical sales, not to mention survive on its own, especially in the purchasing market.

Let me explain with a few anecdotes. No other market is as fiercely competitive today as the consumer communications equipment market, currently dominated by a handful of companies including Apple, Motorola Mobility, Nokia, and Samsung. In addition to their regular marketplace rivalry, these these companies are also locked in acrimonious legal wrangling on various continents. Yet Samsung is the major supplier Apple turned to for the retina display that sets the new iPad tablet PC apart from the previous two versions of the gadget.

And here's the strange twist to the story: Samsung isn't even using the widely praised retina display in its own products, as Wired.com's Mike Isaac points out in a blog. (See: Why Samsung Makes Retina Displays — But Not for Its Own Tablets.) Isaac said further:

    The component supply industry is backwards, convoluted and damn near impenetrable. Like some twisted web of New Jersey mafioso, competing companies will cut opponents' throats on the very same day they cut each other deals.

Here's another example. One of the companies most affected by last year's earthquake and tsunami in Japan was Renesas Electronics America, which had to scramble to restore severely disrupted production at many of its fabs. The recovery took less than six months, but this wasn't just because Renesas performed a superhuman feat of re-equipping the plants and restoring severed power supply. Renesas also received support and various forms of assistance from many of its competitors, according to Ali Sebt, president and CEO of Renesas Electronics America.

Sebt explained at a panel I moderated at DesignCon 2012 West last week in California that rivals supported the company in various ways through the ordeal and contributed significantly to its recovery. The panel focused on the subject of supply chain management and examined how companies plan for unexpected events such as natural disasters. Panelists included Dale Ford, vice president of electronics and semiconductors at IHS; Brad Philips, director of strategic sourcing at Rockwell Automation; and Karl Braitberg, vice president, supply chain operations, global supplier management at Cisco.

The panel members agreed the purchasing environment within the high-tech community is experiencing increased collaboration but noted that this isn't simply based on altruism. Due to the interwoven nature of the supply chain, many of the companies that offered equipment support to Renesas, for instance, felt compelled to do this because the inability of their rival to supply critical components to its customers was hampering their own sales. In order for them to clinch their own sales — and for the OEMs to complete product assembly — Renesas, too, needed to have its factories humming and parts shipping.

Components buyers pay close attention to such issues, and many of the bigger spenders in the OEM community have in times past leaned on suppliers to support rivals. It happens frequently also in the contract manufacturing market where an OEM may direct one EMS provider to ship excess components it has in stock to a rival manufacturing facility that might be experiencing shortages. This network of collaboration is continuously changing, but it does exist even though end-customers aren't aware of the convoluted supply chain that brings the products to them.

So, next time when you read a report about how Samsung would like to take Apple down a notch or two in the smartphone market, remember this: Another division of the Korean giant (the components unit) is also rooting for the American rival, helping Apple sell millions of its devices, supplying the products that distinguish the iPad from the Samsung Galaxy — and making a huge amount of profit for the rivals and partners in the process.

5 comments on “Planning With Rivals for the Unexpected

  1. Barbara Jorgensen
    April 4, 2012

    It's heartening to hear Renases was helped by its competitors–even if it was for their own purposes. Interdependency in the industry is a fact that companies have learned to deal with. It doesn't always make sense to those of us on the outside looking in, particularly when it get as acrimonious as Samsung/Apple. The end result for Renases was it got up and running more quickly. Regardless of the motivation, the result was a net positive for the company, its customers, and its partners.

  2. FLYINGSCOT
    April 5, 2012

    It sounds to me that these alliances all boil down to dollars and sense, either short term or long term.

  3. jbond
    April 5, 2012

    This does not surprise me at all. In today's marketplace it is all about money. And if one division can make money by selling to a competitor, it helps the companies bottom line.

  4. bolaji ojo
    April 5, 2012

    Money is the bottom line and for big companies with multi-business divisions like Samsung, it makes sense to explore opportunities with competitors.

  5. Barbara Jorgensen
    April 5, 2012

    In the days of vertical integration, the lines between partner and competitor were pretty clear. Outsourcing has made those boundaries very fluid. And you all are right–if it wasn't for the business relationships, many of these companies probably wouldn't interact at all.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.