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Semiconductor Product marketing
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Chapter 1: Roles of sales and marketing in the design process
What are you about to learn in this module?
� You will get a clear picture of what are a design-in and its main categories
� You will see what the ultimate goal of sales & marketing is
� You will be introduced to business cycle
1.1 What is a design-in?
First of all, Design-in is the general term used to describe the set of design, engineering, marketing
and selling activities which result in a customer approving us to become part of his system design.
And then, what is a design-win? Design-win happens when we receive the actual order from the
customer: it is the result of a successful design-in process, and the consequence for us will be
more billings
1.2 From design-in to design-win
For sales & marketing people, a design-in often begins with a BOM (Bill of Material) analysis.
And in the following, you will be introduced to the business cycle.
Before that, what are the definitions of Billing, Booking, Backlog and BiBa?
The backlog is simply our order book, the booking is the firm orders entered into our order book.
Billing, in semiconductor industry, after the parts shipped, we send the customer an invoice. At
this stage the order is said to be billed, meaning that the customer owes us the money. So, billing
is a measure of the money due to vendor.
Biba means billing plus backlog, it is a projection of the total billings over a period of time
(general the full year). It comprises the billings already done, plus the orders to be delivered.
Let’s state a fundamental rule: the ultimate goal of sales & marketing is to get billing
After having seen the concept of design-in and design-win, let’s have a look at an important
concept: business cycle. The business cycle comprises 6 fundamental steps. There are:
prospecting/selecting, relating, discovering, create the solution, advocating& closing, support.
The first step is related to design-in process and the last one covers the design-in into a
design-win.
In these 6 steps, we will see what is a role of a buyer, a sales person and a marketer along with the
business cycle. As you will certainly notice, everybody is involved all along with this cycle, at
different levels.
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1.3 Prospecting & selecting
Buyer’s side: definition of sourcing strategy, market research on potential supplier, pre-selection
Sale’s side: market research on potential customer, competitive intelligence, selection of target
applications and contacts
Marketer’s side: market research, competitive intelligence, definition of target markets/customers,
preparation of marketing plan, new product proposal
1.4 Relating
Buyer’ side: initial meetings, gets to know supplier, capabilities, trust
Sale’s side: initial meetings, gains trust, builds relationship, presentation of your company, its
competencies and products
Marketer’s side: prepares presentation material for his/her product line and targeted markets,
gains the trust with company and during customer visits, supports local sales & marketing
1.5 Discovering
Buyer’s side: discovers supplier’s competencies, clarifies nature of needs, agreement on next
steps to receive proposal from a short list of suppliers, send RFQ (request for quotation)
Sale’s side: detailed understanding of customer’s needs and personal motives, expectations and
competition. Formalization and sharing of customer’s needs within your company. Leads the
definition of the next step to prepare a proposal
Marketer’s side: understanding of the nature of the needs
1.6 Creating/Evaluating
Buyer’s side: updates specification and RFQs, informal progress meeting with some suppliers,
request for samples
Sale’s side: conductor to develop the solution, coordinates with various product division, keeps
communication with customer to get his informal feedback
Marketer’s side: create the offer, orchestrates all the resource involved in product division,
generate promotion materials, demo boards, competitive intelligence, provides samples
1.7 Advocating and closing
Buyer’s side: meets with supplier for a deep understanding of their proposal, negotiations,
purchasing decision, order/contract
Sale’s side: defines and organizes the presentation of company proposal to the customer, showing
benefits for the customer, in order to win the business, negotiation if necessary, and wins the sale.
Supports the customer in his decision phase
Marketer’s side: product qualification, supports sales in advocacy phase.
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1.8 Supporting
Buyer’s side: requires commercial and technical support
Sale’s side: controls and facilitates implementation of project, organize regular communication
activities with the customer (such as tech days, visit, etc)
Marketer’s side: close follow-up of projects, planning and margins
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Chapter 2: Company Organization
What are you about to learn in this module?
� You will review the matrix organization, by groups, regions, business units and product
units
� You will see what is the role of sales and marketing
� You will have a detailed picture on the regional and divisional sales and marketing job
structure, job description, objectives and mappings.
2.1 Matrix Organization
A company top level organization is always a matrix of product groups on one axis, regions on the
other.
Company matrix organization
Product group creates and manage products, based on core technology (memory, microcontroller,
analog, etc) and sometimes applications/market segments. They are “marketing” organized.
Regions look after customers in a specific region and are primary “sales” organized, although they
usually have both sales and local marketing.
So, now let’s look at closer to the product groups, we can also divide product groups into 2 kinds:
Standard products group: devices that any customer can use, there is a direct competition on each
order fro this kind of products (flash, STD liner)
Differentiated products group: category includes dedicated integrated circuits, customized ICs.
Product Group
Group 1 Group 2 Group 3 Group 4
Region
Europe
America
AsiaPac
Japan
Emerging
market
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Differentiated products are characterized by stable demand and pricing. (Wireless, wire line, SOC)
2.2 Business unit and segment
Normally, we can see in one region, we also organized into business unit. For example, we may
have: Telecom BU, Consumer BU, Computer BU, Automotive BU, Industrial BU, EMS BU, and
Distribution BU. All of the above BU correspond to 6 (maybe even more as you may see) market
segment (telecom, consumer, computer, automotive, industrial), EMS and Distribution BU are
sales channels.
We must also mention the Competence Center, it is a team of marketers, application engineers,
eventually designers, dedicated to a market segment, and located in the region, close to customer.
Product 1
Pro
duct G
roup
B
(can
be
D
iffere
ntia
ted
pro
duct g
roup )
Product 2
Product 3
Product Groups
Product A
Pro
duct G
roup
A
(ca
n b
e S
tanda
rd
pro
duct g
roup )
Product C
Product B
Distribution BU
EMS BU
Industrial BU
Automotive BU
Computer BU
Consumer BU
Telecom BU
EuropeEmerging
MarketJapanAsiaPacAmerica
Regional Sales and
Marketing
support
feedback
Market
Nokia, Motorola
Philips, TCL
Dell,
Seagate
Foxconn
Arrow, Avnet,
Future
…Product 1
Pro
duct G
roup
B
(can
be
D
iffere
ntia
ted
pro
duct g
roup )
Product 2
Product 3
Product Groups
Product A
Pro
duct G
roup
A
(ca
n b
e S
tanda
rd
pro
duct g
roup )
Product C
Product B
Distribution BU
EMS BU
Industrial BU
Automotive BU
Computer BU
Consumer BU
Telecom BU
EuropeEmerging
MarketJapanAsiaPacAmerica
Regional Sales and
Marketing
support
feedback
Market
Nokia, Motorola
Philips, TCL
Dell,
Seagate
Foxconn
Arrow, Avnet,
Future
…
Product Group, Business Unit and Market
As we see from above chart, a product group deals with regional sales and marketing, the sales
force will work on one side with their regional marketing and on the other side with the customers.
The sale is the main interface between company and our customers, so we always call the sales
“customer owner”.
2.3 Sales and marketing roles in an organization
We can define marketing roles as below:
� Marketing people, no matter in region or product group, is responsible for finding profitable
new markets for the company
� Marketer selects which profitable market to target
� Marketer defines the optimum sales channel to satisfy the end customer
� Drives the creation of products and services which will serve the targeted markets and needs
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� Communicates what our offer is, and its value, to the targeted markets
� Provides technical and training support to sales
Same, we can define sales’ roles:
� Sales take the markets which have been selected by marketing, and look for profitable
customers in these selected markets
� Sales are the prime point contact with the customers and are the primary people responsible
for developing relationship, trust, understanding, with them
� Develop a deep understanding of the customers’ needs and federate the resource necessary to
satisfy the clients’ needs
� Sales address the commercial concerns and take the order. Then, they serve and support the
customer through to repeat the purchase
2.4 Sales and marketing mapping
After having seen the sales and marketing fundamental roles, let’s try to understand what are sales
and marketing internal and external “mappings”. Yes, sales and marketing people are linked to a
dense network of people within and outside the company.
In order to read correctly following contents, you need to know some definitions:
� CS: customer service
� FAE: field application engineer
� FQS: field quality service
� FSE: field sales engineer
� KA: key account
� PME: product marketing engineer
Marketing person typical internal mapping:
Sales team:
FSE, KA Manager
Planning:
CS, Product group planning
dept
Other Marketers:
PMEs
Technical:
FAEs, Product group
engineering, Quality engineering,
design team
Legal dept for contracts
Sales team:
FSE, KA Manager
Planning:
CS, Product group planning
dept
Other Marketers:
PMEs
Technical:
FAEs, Product group
engineering, Quality engineering,
design team
Legal dept for contracts
Sales team:
FSE, KA Manager
Planning:
CS, Product group planning
dept
Other Marketers:
PMEs
Technical:
FAEs, Product group
engineering, Quality engineering,
design team
Legal dept for contracts
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Salesperson typical internal mapping:
Marketing team:
Product group, field
Planning:
CS, Product group planning dept
Quality: FQS
Technical:
FAE, PME, Product group engineering
Legal dept for contracts
Marketing team:
Product group, field
Planning:
CS, Product group planning dept
Quality: FQS
Technical:
FAE, PME, Product group engineering
Legal dept for contracts
An important point is that, besides meeting people at the customer, we can also meet them while
attending seminar, conference, etc. actually every place is good to enlarge one’s network.
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Chapter 3: Job Description
After having seen the matrix organization of a company, it is right time to have a
closer look at the job structure, job description and objectives.
3.1 Regional Sales & Marketing job structure
As we see clearly here, regional sales & marketing can be divided into 3 main activities:
marketing, sales and applications. Let’s see in details a description of each job.
Product marketing: responsible for a range of product lines (P&L)
� Identifies locally new markets and potential targeted customers and advise the product group
on the product required by the market
� Ensures the promotion of his/her products
� Organizes product trainings for regional sales and customers
� Supports sales team on his/her products, fully takes part to the design-in process
� Objective is to position company as a key player in terms of turnover, market share and
profitability
Technical marketing: responsible for applications within a market segment
� Defines, promote full function solutions at system level
� Coordinates technical support from various product group
� Works together with Field Sales Engineers and Field Application Engineers
� Objective is to succeed on design-ins
Marketing, Sales and
Applications
Marketing Sales Application
Product Marketing
Technical Marketing
Communication
Sales
Customer Service/
Supply Chain
Business Management
Field Application
Engineer
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Communication: responsible for the local marketing communications
� Supports the sales team within his/her geographical territory with marketing communication
material produced by product group
� Maintain local customer mailing lists, conduct mailings
� Organize local conferences, seminars, trade shows, etc.
� Local advertising support for distributors
Sales: responsible for growing billing, and market share with their customers
� Defines and implements sales strategy at the customer
� Build and maintain relationship with customer, promotes company’s image and products
� Ensures customer’s satisfaction
� Makes TAM and SAM analysis
Customer service/supply chain management
� Ensures the order entry and the follow-up of the orders till the final delivery of the parts to
the customer
� Interface between the sales and product group planning
� Provides customer with delivery information, in case of delivery problems, gives early
warning to the customer
Business management
� Handles quote desk
� Manages ship and debit system
� Manages the quote and design-win programs
Field application engineer
� Promotes at customer company’s technical solutions
� Supports technically the customers and sales team
� Follows up the design-in in cooperation with the FSEs and product groups
3.2 Product group marketing job structure
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Strategy and business development: responsible for mid and long-term marketing
� Generates marketing plan, including strategy, turnover, market share, etc
� Identifies and creates new opportunities (new markets, segments, products, customers,
applications)
� Initiates the New Product Requests
Product marketing: responsible worldwide for a range of products
� Defines and implements marketing strategy for products
� Manages the product portfolio
� Prioritizes the activities, optimizes the allocation of resources
� Follow up the product margin, defines price lists
� Promote and train of products
Program management: responsible for successful introduction of new products (time-to-market,
cost, quality, specification, etc)
� Federates and coordinates all the resources necessary to meet the program’s objectives
Communication and technical documentation: responsible for the promotion of products on the
market place
� Defines the communication plan and is responsible for carrying out
� Plans, develops and provides the communication and promotion tools
� Responsible for web marketing
� Manages advertising, shows, press releases, etc
Application technical support
� Provides detailed technical support to optimize our products’ utilization through an
Marketing and Applications
Marketing Applications
Strategy and Business
development
Product Marketing
Program management
Communication and
Technical documentation
Technical support
Hardware/Software
development
Hardware
Software
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application by means of user manuals, application notes, presentations, data sheets, demo
board, cross reference, etc
� Trains marketing and sales in the application
� Supports sales and marketing to promote applications
� Supports marketing to define new products needed in applications
Hardware/Software development: is hardware or software specialist
� Resources for the customer, provides them with detailed technical support to implement
company’s solution, through assistance when necessary with tools and programs
� Trains marketing and sales on the application
� Support sales and marketing to promote application
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Chapter 4: Marketing tools and processes
What are you about to learn in this module?
� You will review basic vocabulary of sales and marketing activity
� You will learn the processes and tools associated to the prospecting and selecting
� You will learn the processes and tools associated to the creation of a solution
� You will learn basics of planning, forecasting, order management
In this module, we are going to learn a certain number of processes and tools, it is important to
clearly define some usual marketing words and acronyms.
TAM (Total Available Market) corresponds to the sum of all semiconductor purchases. We also
can define a TAM per customer, segment or type of product.
SAM (Serviceable Available Market) is the part of the total market covered by your company’s
product range.
Market Share is company’s share of the market. We compute it by dividing the billings by the
TAM. A market share can also be defined per customer, segment or type of products.
Product Portfolio refers to the overall catalogue of devices offered by company.
Previously, we have talked about 6 fundamental steps in business cycle which are:
prospecting/selecting, relating, discovering, create the solution, advocating& closing, support.
Selecting is focusing on a target customer/segment/product etc… and is the fundamental
responsibility of positioning company on the market. Positioning is one of famous 5 P’s which we
will involve deeper later.
In the prospecting phase we must search for potential business opportunities and gather data about
these opportunities. We also have to select, prioritize, which opportunities we want to support. We
must know the environment in which we evolve. And here we conclude 3 C’s for the main actors:
the customers, our competitors, and ourselves (the company).
Now, let’s see what will happen if we are not aware of our environment:
“I think there is a world market for maybe 5 computers.”
Thomas Watson, 1934, Chairman of IBM
“There is no reason for any individual to have a computer in their home.”
Ken Olsen, 1977, Digital Equipment’s founder, president and chairman
4.1 The first C: The Customer
In our prospecting phase, we need to be well-informed about the customer’s situation, needs, and
environment, evolution and future trends. That is to say, we must know the marketplace.
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Some company has market research group or team to be responsible for communicating our
environment trends and for anticipating the future trends of the market. They provide macro level
market research data, selected news from the semiconductor and electronic industry, presentations
on the semiconductor industrial trends, forecasts, economy, and market indicators updated on a
regular basis (monthly, quarterly) for global team.
In addition to the corporate market research, each of us must perform a market research on the
environment he/she is responsible for. One of our main roles is to dig out new business
opportunities. These new opportunities will broaden our knowledge of the TAM, SAM and our
market share.
4.2 The second C: The Competition
It is obviously that we are not alone in the marketplace. So we cannot evolve in the semiconductor
environment without knowing extremely well what are doing the other players in this market: their
offering, pricing strategy, strength and weakness.
The purpose of competitive intelligence is to gather, analyze and share information about the
competitor’s activities, in order to adapt accordingly our strategies. The competitive intelligence
team is also responsible for anticipating and analyzing the strategic moves of the various players
of our industry value chain. It also recommends strategic actions to company staff so as to be in
line with our objectives.
The competitive intelligence team optimizes the flow of available information from outside and
inside the company in order to make them available with the best cycle-time, through e-tools.
Raw data collected in many information sources (newspapers, contacts, customers, etc.) are
gathered and analyzed and finally transformed into intelligence. This intelligence can then be used
for decision making.
Intelligence can be used in strategic analysis tools such as SWOT which stands for Strengths,
Weaknesses, Opportunities and Threats.
SWOT
Build
Strength
Overcome
Weakness
Explore
Opportunity
Minimize
Threat
SWOT
Build
Strength
Overcome
Weakness
Explore
Opportunity
Minimize
Threat
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A SWOT gathers in a 4-cell table a competitor’s major strengths and weaknesses (factors internal
to the company), and its major opportunities and threats (external factors from the business
environment).
4.3 The third C: The Company
In prospecting phase we cannot only know about our customers and about the competition! We
also have to know our own company. We need to be aware of what is our company (our
organization, who dose what, our mission, our strategy, our results, etc.) and what are our
capabilities (what we can offer, what are our new products, etc.)
In other words, at the customer you need to know your company to demonstrate competency.
Moreover, the quicker you answer your customer, the better you support him/her.
4.4 Company’s mission
What is a mission statement? It is a definition of what an organization is and what it does.
What is your company’s mission?
Besides a mission statement, company also will have vision which provides us with precise
objectives, leading to the effectiveness of our company.
Now, try to find below information to know better about your company and support your
customers:
� Corporate, product and segment presentations
� Advertising campaign
� Trade shows, conferences, seminars
� Up-to-date materials such as datasheets, application notes, PCN (product change notification),
PTN (product termination notification)
� Business information, figures, customer visit report…
4.5 4 P’s
Let’s have a look at another essential phase: creating the solution. The marketing concept
associated to this phase corresponds to so-called “4 P’s”: Product, Placement, Promotion, and
Pricing. (Positioning has talked previously)
Creating the solution is the process of building an offer that meets or exceeds the customer’s needs.
Our solution must be a solution to the customer’s problem rather than just the offer of supply of a
product.
4.6 The product
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A product is not an unchanging and unique that we sell by itself:
� We have to manager the life of our products so as to take the most of them and know when to
start the next generation.
� A product belongs to a specific family and we have to optimize our portfolio to better address
the SAM.
� When we sell a product we must be as creative as possible in order to maximize the value of
our offer.
We can easily draw a parallel between our lives and a product’s life. You can try to match each
phase with the corresponding description:
During the conception phase sales & marketing analyze, define and position our new product
Then, during the birth phase we initiate the business around this product and launch it
The next phase, the growth allows us to expand this product’s market
During the maturity phase we increase the market share, by maximizing the sales, and we
already think of the next generation of products
During the decline phase marketing tries to maximize the profits, and to reduce the costs,
by means of shrink for instance
In the final phase: the death the product is terminated and a new generation takes its place
In different phases of a product’s life, we can code them by means of numbers from 0 to 90 called
maturities.
..
.
.
.
.New product proposal
New product request
Design approval certification
Product qualification
Product termination request
Obsolete
Concept
(Mat 0)
Design
(Mat 10)
Engineering
(Mat 20)
Production
(Mat 30)
Product
termination
(Mat 50)
End of
commitment
(Mat 60)
Obsolete
(Mat 90)
Maturity
..
.
.
.
.New product proposal
New product request
Design approval certification
Product qualification
Product termination request
Obsolete
Concept
(Mat 0)
Design
(Mat 10)
Engineering
(Mat 20)
Production
(Mat 30)
Product
termination
(Mat 50)
End of
commitment
(Mat 60)
Obsolete
(Mat 90)
Maturity
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New product proposal: its purpose is to select new business opportunities that require a new
product development. It is managed by product group marketing.
New product request: it is prepared also by product group marketing, to approve the development
of a new product.
Product change notification: it is issued by group level when a process change occurs. The sales
are responsible for sending the document to the impacted customers and to collect their feedbacks.
Product termination request: it is initiated and managed by product group to get an internal
approval (both product group and regional level) on the termination of a product.
Product termination notification: once the PTR is approved internally, a PTN letter is issued by
product group marketing. The sales send this PTN to the impacted customers who have to approve
it within a time period, says like 30 days. The product is terminated and company accepts to enter
last orders during 6 months, or even longer.
A good management of product portfolio also means that when a product is no more strategic in
terms of profitability, growth, we can remove products, or we can add products at the most
appropriate time (time to market).
When a product is in its full maturity phase, we have to prepare the ramp up of the next generation
that will take over.
Another way of managing efficiency portfolio is to diversify it by means of:
� Alternatives to successful products existing on the marketplace (generally standard products)
� Complete families of products to cover most applications of the customers
� Products with high added value (generally dedicated products)
In order to maximize the value of our offer, we need to be creative and propose, besides the
product itself, a real solution to the customer’s problem that may combine the 3 following
elements:
Support Service Technology
�Local resources
�Technical support
�Qualification assistance
�Expertise
�…
�Logistic
�Delivery performance
�Quick feedback
�Training
�Hot lines, website
�…
�Software
�Evaluation kits
�Embedded software
�System on Chip
�Customer products
�…
Support Service Technology
�Local resources
�Technical support
�Qualification assistance
�Expertise
�…
�Logistic
�Delivery performance
�Quick feedback
�Training
�Hot lines, website
�…
�Software
�Evaluation kits
�Embedded software
�System on Chip
�Customer products
�…
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4.7 The Placement
There are several ways of selling a product. It is essential to know well the different channels to
place our products in the most effective way.
In the following, we will talk about the main channels:
� Direct customers, OEMs (original equipment manufacture)
� Distribution
� EMS (electronic manufacturing service)
The products can be ultimately sold to OEMs but the routes may be via 3 main ways:
� Direct relationship
� Indirect relationship via distribution
� Direct and/or indirect via EMS
An OEM is a company that uses product components from one or more other companies to build a
product that it sells under its own company name and brand.
IBM is an example of a supplier to the OEM market, and is at the same time an OEM itself since it
uses other companies’ parts in some of its products.
Some other famous OEMs are Nokia, HP, Dell.
An OEM’s goal is to produce technology products which meet their customers’ needs
(functionality, benefit, and price)
More and more OEMs are giving up their manufacturing activities to the EMS, in order to
concentrate on development, marketing and services, therefore EMS are taking share from OEMs
and distribution, EMS deserves special attention.
Distributors play a vital role in the industry. Indeed, the industry uses the distributors to support
small and medium accounts. We therefore have to treat distributors as an extension to our sales
and support forces.
Some distributors are very big (Arrow and Avnet are much bigger than some vendors) and are
getting ever bigger due to the consolidation of the industry. The distribution channel has become a
key in the supply chain for marketing programs and small customers penetration. They provide
complete warehousing, procurement and payments, and have a strong experience in e-business.
So, what is exactly a distributor’s role?
� Can deliver small quantities
� Holds stocks of components (availability/ speed)
� Stocks a broad range of components
� Provides very flexible delivery arrangements.
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Also,
� Has lots of sales representatives
� Is local, close to customers
� Does mass marketing
� Knows who the small customers are
� Supports these small customers
� Handles credit risk with unknown small customers
And, more technically,
� Has dedicated programming capabilities (micros, flash, etc.)
� Provides local technical support
� Can train larger number of people
The EMS is the suppliers of production and design services for subsystems and electronic
equipment. They are major companies that work above all for other industrials.
Just in Y2005, 35% of semiconductor products were bought by EMS (the figure was 21% in
Y2000, representing a business of >$43B). Big OEMs are handing over production to EMS to
concentrate on development, marketing and services.
The EMS represents nowadays a powerful and growing actor in the value chain, increasingly
owning the purchase decisions, and buying up their customers’ facilities. Huge EMS such as
Foxconn, Flextronics are growing fast, they have had already revenues exceeding $1B!
Why to use an EMS?
� An EMS means easy manufacturing and quick time-to-market for OEMs thanks to its
integrated design capabilities
� An EMS has state-of-art equipments that can drive costs down
� An EMS has worldwide factories and capabilities
� EMS are used by start-up OEMs to avoid manufacturing investments
EMS has a maximum focus on materials management to ensure quality and service, interfacing
with their customer and their suppliers.
It is therefore essential for us –as a supplier- to know that EMS is concerned about the component
suppliers’ ability to service them in terms of:
� Maximizing the use of global pricing strategy
� Sourcing obsolete components
� Purchasing through e-commerce
� Getting enough product in times of increasing lead times and product allocation
� Getting adequate technical support
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4.8 Supply Chain Management
It is now time to mention an important concept: the supply chain management (SCM). In short, we
can say SCM is the oversight of materials, information and finances as they move in a process
from supplier to manufacture to wholesaler to retailer to consumer.
SCM is an answer to the ever increasing flexibility required from a production machine: rapid
changes in the final demand, quick evolution in the norms and features offered, shorter life of end
products, reluctance to have inventories, manufacturing location changes, etc.
The supply chain management implies a partnership between your company, the customer and the
chain actors. In particular, the customer and company are engaged in collaborative planning to
improve the time-to-market of products, reduce costs, and better manage current resources and
plans for the future needs.
� Be as early as possible in the design cycle
� Be an easier company to do business with
� Extending sales and marketing coverage
Indeed, electronics business (e-business) is becoming a new channel to place our products.
E-business is the conduct of business on the internet, not only buying and selling but also
servicing customers and collaborating with business partners.
“In future the big won’t beat the small. The fast will beat the slow”
- J.Chambers, Cisco
Thanks to business partners, we also share information with them; the users see only what they are
interested in and what they are allowed to access. We can broadcast B2B (business to business)
applications such as SVI (Supply chain visibility information) or E-ID (e-immediate delivery).
An extranet can be viewed as part of a company’s intranet that is extended to users outside the
company.
4.9 The Promotion
Having a promotion strategy is essential for all companies. As we are going to see, promotion can
be done in many ways: traditional supports, e-supports, audiences
It is very important for sales and marketing people to be proactive and to be aware of our
promotional activity.
The first promotional supports that we think about are the traditional ones that are in our case:
Advertizing
Press release
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Literature
Annual reports
Ecological and social reports
The internet offers now a new way to promote our company, by means of the e-supports:
Banners
Web seminars
Website sponsorship
Key word purchasing
4.10 The Pricing
The price of a product is obviously a crucial point. Share negotiations between company and the
customer can take place before we get orders. It is therefore extremely important to know what is
behind the pricing of a product to better defend our margins.
We will see:
� Cost structure
� The bottom line effect
� The margin
� The pricing tactic and who does what inside company
Let’s see now what the basic cost structure is.
Sales This is the money we get from a sale…
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Sales
Manufacture
cost
One part of this sale goes to the manufacturing
cost, that is the cost in Fab to produce the part
Manufacture
margin
=
Gross
margin
What remains is called manufacturing margin or gross margin
Sales
Manufacture cost
Manufacture
margin
=
Gross
margin
Manufacture cost
Product division cost
R&Dregions
G&A
Operating
profit
The manufacturing margin
includes the product division costs,
R&D, region and General &
Administration costs
What remains is the operating profit
Sales
Manufacture cost
Manufacture margin
=
Gross margin
Manufacture cost
Product division cost
R&Dregions
G&A
Operating profit
Manufacture cost
Product division cost
R&Dregions
G&AInterests
TaxesOnce removed the
interests and taxes
company must pay, we get our final net profit
Netprofit
The bottom line effect comes from a simple observation.
Let’s say that the selling price of a device is $1.0 and that the total cost of this device is $0.8. This
means that our profit on this part is $0.2
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Now, let’s imagine that instead of selling this device $1.0, we sell it at $1.1, the total cost remains
the same, this is $0.8, and our profit is now… $0.3
The increase, in percentage, of our profit is ($0.3-$0.2)/$0.2=50%!
In our example we see that a 10% increase of our selling price means a 50% increase of our profit.
Likewise, if we decrease our selling price, we will dramatically reduce our profit.
Our company must remain profitable and since the influence of our selling price on the profit is
huge, we must be very careful when we negotiating pricing with the customers.
In terms of pricing strategies the first point we have to bear in mind is that the price target must be
market based, not cost based. This means that:
� Sales must define the marketing value of a device based on their experience of pricing at the
customer, on the customer’s target price and on the benchmark company/competition
� Product group marketing must define the market value of the device based on their
experience of market price and on the benchmark company/competition
Together they must find a consensus on the price target before negotiating to the customer.
The second pricing tactic is to control very carefully the profit versus the price.
Sales check the customer’s target price is compatible with the price list and are responsible for
negotiating with the customer.
Product group marketing defines the price list and lowest prices we can propose (low balls), based
on the product manufacturing cost and our targeted profit.
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Chapter 5: Order Management
Once we have quoted a product, the order entry cycle hopefully begins. Let’s see now in details:
� What is this order entry cycle
� The difference types of customer orders
� The different kinds of stocks
Quoting PO Order entry Scheduling
TBA
Order
Acknowledgement
(with CD)
Firm Order
Frame Order
Backlo
g
Here is now a summarized orders entry cycle:
Hopefully, after quoting we get an order, ie a PO (purchasing order). From this PO we enter the
order (order entry). When EDI (electronic data interchange) is used between the customer and
company, the PO and order entry are simultaneous.
Then planning sees what deliveries are required and compares them with what is anticipated to be
available. That’s the scheduling. The RD is the Requested Date (by the customer).
The orders will be acknowledged and we will provide a CD (committed date), allocating to the
customer a precise product from a certain plant and store. In case we need to reschedule an order,
we will provide an LD (last date).
The orders can also be put on TBA (to be advised) if we have no availability or if for instance the
RD is outside our commitment window.
5.1 Firm and Frame order
Now that we have seen the order entry cycle, let’s try to define the different kinds of customer
orders that can happen.
Firm orders
The firm order is the most important order type. It is triggered by a customer’s PO, it will contain
general information (currency, carrier, payment terms…), mandatory information specific to each
order (customer ship to, commercial product, unit price, requested quantity and RD) and
sometimes additional information (customer part number…)
A number is generated automatically. It is called the SO number (sales order number)
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Frame orders
An SFO (shippable frame order) is a capacity reservation in plants for key customers. The purpose
is to create virtual orders to forecast and anticipate customer’s future firm orders.
The capacity reservation means a certain investment of your company since we launch production
although we have no firm orders yet. That is why we must pay attention that frame orders are
accurate and correspond as well as possible to the future firm demand of the customer. This is a
key task of the sales organization.
Non product orders
They can be sample orders, literature orders, etc.
Sample orders are important for our business. They help us to penetrate into new markets, new
projects. Our goal is to respond as quickly as possible to customer’s sample requests.
5.2 Stocks
Stocks can be of different types:
� A dedicated buffer stock is normally physically located in the regional warehouse
� A consignment stock is a dedicated buffer stock which is physically on the customer’s site,
but which legally still belongs to your company
� A regional stock is under region’s responsibility
� A divisional stock is under product division’s responsibility, its availability is mainly used for
manual scheduling