Jul 13, 2012

High-tech adoption needs high-touch distribution

Analog circuit technology, once considered mature if not commoditized, is experiencing a renaissance in growth due to its essential role in a wide range of new devices. According to GBI Research, the analog circuit industry can look forward to attractive expansion through 2020 as new OE product platforms proliferate around smartphones, tablets, radio base stations, portable device batteries, medical imaging scanners, electric cars, and a wide variety of other industrial and medical applications.
But my discussions with decision-makers and technical users at a range of OE end-users in North America suggest that analog circuit manufacturers face significant barriers to getting their newest innovations adopted in the fast-growing small- and mid-sized horizontal OE market:
§         After years of digital technology adoption, today’s product development engineers at small- to mid-sized OEMs lack a deep understanding of analog technology and its latest developments.
§        Lack of analog expertise means that most OE product and purchasing engineers will default to familiar legacy brands and trial-and-error component selection and procurement. The supply chain process is seen as cumbersome, risky, time consuming and inadequate.
§        Rapid consolidation of semiconductor distribution means that the bulk of today’s analog products are distributed through a small number of global players offering extensive assortments, ease of order entry, and competitive prices. Promotional materials by these players aside, the reality on the street is that the field application engineering support craved by small- and mid-sized OEMs is wholly inadequate.
§        The pinched economics of small- to mid-sized OEMs requires a multi-year lifecycle approach to customer development and demand creation investment that large global distributors and traditional manufacturer reps find hard to square with financial pressures. Streamlined websites and proliferating online data sheets or webinars are great but not the high-touch assistance smaller OEMs require.
The bottom line for analog circuit manufacturers investing heavily in technology innovation and product differentiation for industrial and medical OEMs is this: incremental growth will come from building new demand creation capacity and competence in their distribution channels. In next week's blog post I will detail steps that forward-looking manufacturers can take to make their distribution channels their engines of growth.

No comments: