Hans Wu, Taipei; Esther Lam, DIGITIMES [Tuesday 20 May 2008]
Soon after meeting with distributors in the Asia Pacific region, NXP Semiconductors Asia Pacific sales and marketing vice president, TL Chow met with Digitimes and shared his comments about doing business with NXP, as well as how NXP differentiates itself from other semiconductor vendors.
Q: Distributors have long been stressing the importance of "one-stop shopping," do you think this concept is suitable for channel management in the future?
A: The advent of the one-stop shopping concept stems from the pursuit by customers for a complete solution. But I think it is time to revise this concept.
I think a very key strategy for channel management is differentiation. Distributors must provide customers with added value as customers do not necessarily have to source components from one distributor. They can easily buy different components via the Internet.
Distributors are not playing the role as a "trader" anymore. They have to have the power to perform "design in" for customers. We have a distributor named ZLG in China for the distribution of micro-controller units (MCUs). Since this distributor just distributes MCUs, and has devoted considerable efforts to designing a wide array of solutions for customers, their business model is very successful I think.
Q: How much of NXP's sales will be contributed by distributors? And, how will NXP achieve this goal?
A: About 30% of our sales were generated by distributors in 2007, and I expect the ratio to grow in 2008. Our slogan for distributors are "focus," "engage" and "grow" this year.
In the aspect of "focus," we will establish specialized team to serve big customers such as WPG Holdings. I think this is something that other vendors can hardly do. We will also continue hosting distributors/agents meetings on a periodic basis in key regions in order to strengthen our ties with distributors.
Q: How does NXP differentiate itself from other vendors in terms of product portfolio? And how does NXP motivate distributors to dedicate more focus to marketing NXP products?
A: Global semiconductor companies are narrowing down their differentiation. The key to motivating distributors to dedicate more focus to marketing NXP products is to let them realize that distributing NXP products is "easy" as they do not have to report their distribution status as other vendors request. We do not think many status reports will help business. We aim to offer customized service for every single customer, as well as a proven gross margin.
Q: What kind of support are NXP's distributors looking for from NXP? And what is the biggest challenge that they are now facing?
A: Most of them are looking for more technological support from NXP alongside business growth. We have been very concerned about this issue in the past and we have grown our technological support for these partners when their sales scale expand.
NXP currently has more than 30 distributors in Asia Pacific. We will not necessarily grow the number of distributors in the future but we will either add or reduce the number of distributors by consistent performance reviews.
I think distributors from Taiwan are doing a good job. They help a lot in terms of expanding our sales in the region and our partnership is "easy."
Also, we do value our partnership with China-based distributors, given that the market is huge. According to estimates, about one-fifth of sales have to be made through distributors.
This interview was translated from Chinese.
