The burgeoning shift to contract manufacturing has limited the ability of distribution companies that want to provide increasing amounts of design help, because they aren't sure they'll be compensated if manufacturing moves offshore. Royal Philips Electronics recently moved to assure that financial rewards go to distributors, which could encourage those distributors to expand their design service offerings.
Philips lately began what it calls the Global Design Win program (http://rbi.ims.ca/3852-515), which uses the RosettaNet standard to track shipments for systems, regardless of where they're manufactured. It addresses the growing problem that arises when products designed with the aid of distributors move offshore for manufacturing. The revenue stream often shifts to the manufacturer, leaving distributors with little or no compensation for their efforts.
Track down and reward
"If we don't find ways to track business in a better manner and provide the proper rewards, companies may walk away from business in a region like the U.S., which would not be good for anyone," says Pascal Langlois, Philips' senior vice president for channel management and multimarket semiconductors. The Philips program began with Arrow Electronics Inc. of Melville, NY and Avnet Inc. of Phoenix, but will soon be expanded to other distributors. Other companies, including Intel and connector-maker Molex, have begun similar programs, but Philips is the broadest supplier to offer such a program, as well as a leader in semiconductor sales through distributors, observers say.
There's a fair chance that the new program will spur increased design assistance efforts from distributors. "Distribution definitely benefits a lot from initiatives of this type, as does the supplier," says Lalit Wadhwa, director of worldwide business migration at Avnet (http://rbi.ims.ca/3852-517).
Vinay Asgekar, research director at AMR Research (http://rbi.ims.ca/3852-518) feels distributors will soon be able to provide more design assistance for time-strapped engineers. "This kind of arrangement provides more incentive for distributors to support field application engineers. They can get into design services with confidence they'll get paid for their efforts," he says.
Because component makers typically provide payment for successful programs built around their parts, reward programs like this aren't expected to impact the cost of components. "This should be revenue neutral, and should be beneficial because it will help us capture new business and increase volumes," Langlois says.
While dramatic shifts in global marketing prompted the change in the financial stream, it's the emergence of technical standards for communicating via the Internet that make it possible to track design wins throughout their lifetime. The RosettaNet standard that began seeing use at the start of the decade makes it simple to give a project a unique number that stays with it throughout the product's lifetime.
That means that a successful design will bring a commensurate level of payment for the distributor that helped create it in the first place. "Systemic connectivity is important, and RosettaNet is the vehicle that provides systemic connectivity," Wadhwa says.