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TI-NSC Merger a Positive for the Channel

Whenever there is a merger or acquisition among component makers, there inevitably is uncertainty within the supply chain. In a case such as {complink 5703|Texas Instruments Inc.} and {complink 3614|National Semiconductor Corp.}, the distribution channel in particular is affected.

Only about a decade ago, such a merger would have channel partners wondering whether the duo were going to retain both franchises after the deal. TI and National could have competing distributors; competing product lines; too much overlap or simply too many distributors. Distributors would be dropped, and customers would need to find another source of supply.

It's unlikely that will be the case today. Just after the {complink 577|Avnet Inc.} earnings call yesterday, Harley Feldberg, Avnet's president of global electronics marketing, spent a few minutes on the phone with EBN.

Avnet is the largest global distributor for both Texas Instruments and National Semiconductor. Feldberg had just met with the CEOs of both companies this week, and he believes customers will benefit from the merger because TI has a massive field sales force that will bring National's analog portfolio to market:

    Keep in mind National has a 50-year market history and is well entrenched in a lot of [designs], and TI wants to grow in analog. Analog products are so difficult to design; analog engineers are difficult to come by. TI is buying already accepted designs and the design and manufacturing team behind National. We believe that sales organization will drive greater revenue growth than National could do on its own — it’s a scale issue. TI for the last couple of years has been investing in its field sales resources and has more sales and marketing than many of its competitors.

TI's and National's distribution networks have Arrow, Avnet, Digi-Key, and Newark in common; TI also distributes through Mouser and National through Future. Both suppliers also have specialty and regional distributors throughout the globe, and each has pared its channel down over the years. There may be changes in regions where the companies feel they are over-distributed, but Feldberg points out the merger is still many months away.

To return to that earnings call: Avnet Electronics Marketing reported sales of $6.7 billion for its third fiscal quarter ended March 31. Record revenue of $3.93 billion was up 36 percent year over year, while pro forma revenue grew 18 percent. (See Avnet Reports Q3.) Avnet and leading competitor {complink 453|Arrow Electronics Inc.} — which reported total sales of $5.22 billion for the period — both performed better than some of their suppliers and customers, a situation that was noted on earnings conference calls. Feldberg points to Avnet's broad customer base and geographic balance as reasons for its record performance.

“I think this is a really good time for distribution,” says Feldberg. “If you look at us geographically, you'll see we are split exactly one-third in the Americas, one-third in EMEA, and one-third in Asia/Pacific. To be a global distributor you have to be strong in every region, and I think we hit that spot.”

7 comments on “TI-NSC Merger a Positive for the Channel

  1. saranyatil
    April 30, 2011

    Barbara good post,

    This is definitely a good move it will improve the distribution channel with avnet being in the picture. everyone goes to avnet most of the cases to provide support now it gets simpler for all the field engineers.

  2. jbond
    April 30, 2011

    This is great news knowing that things will actually be easier in the supply chain instead of getting harder. I think they made a good choice in combining their system instead of merging them completely, eliminating one, or having them both run independently. this should definitely make things easier.

  3. Backorder
    April 30, 2011

    Speaking of the revenue split mentioned in this post, Avnet has a one third distribution in US, APAC and EMEA. However, keeping in perspective the manufacturing balance, shouldnt it be concerned? At least half of the revenues should be flowing out of APAC-Japan. Is Avnet facing a tougher challenge from Asia-strong disties?

  4. SP
    April 30, 2011

    Well its difficult to find good analog engineers.

  5. Anand
    May 2, 2011

    @RIch,

      Its true. True analog designers (be it design or layout design) are really hard to find. Analog desingers are the highest paid in the semiconductor industry  and companies find it very hard to fill the  vacancies.

     

  6. eemom
    May 2, 2011

    GOOD Analog engineers are hard to find.  Companies that employ them, work hard at keeping them.  Digital is a little easier.

    I don't doubt that from a product and engineer personnel perspective this is a positive move for both companies.  I do still believe there will be a huge fallout once the merger happens and other positions in marketing, sales, etc. will be cut. 

    Overall, this should remain positive for both companies.

  7. Taimoor Zubar
    May 3, 2011

    The merger does seem a good event for the distributors. Would Avnet and other distributors be able to achieve cost savings through this merger?

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