Mutual benefit

Mutual benefitAltera Europe’s managing director Nigel Toon sees the customer and distributor relationship as the important factor in addressing the programmable logic market. Here is his blueprint for success. Programmable logic is one of the fastest growing semiconductor markets today with a total market size of over $2.1bn in 1997. Altera’s business model for addressing this market involves the distributor as an important value-adding partner in the relationships with a large number of customers that use programmable logic technology. The flexibility of high-density programmable logic provides numerous advantages over masked gate array technology. Speed of design, no Non-Recurring Engineering (NRE) charges and the ability to change the devices in the system are all key drivers for the success of the technology. With the growth in density and the shrinking costs being brought about by the move to ever more aggressive semiconductor manufacturing technologies, such as the 0.25?m five layer metal technology, programmable logic is starting to gain an ever larger share of the broader Asic market place. This has been very good news for distribution involved with programmable logic. Gate array is a custom product developed exclusively to a single customer’s individual requirement. In this type of relationship a distributor is unable to provide significant value and as a result most gate array business today is serviced on a direct OEM basis. The customer has had to bear the full responsibility for managing the supply chain, with long lead-times and limited flexibility in terms of increases or decreases in production requirements. Programmable logic on the other hand is a standard product which is configured by the customer, so the distributor partners have been able to provide significant quantities of local inventory servicing a large customer base and to provide value added services such as programming or tape and reel services. The result is that customers benefit from a flexible supply with ex-stock availability or short lead-times. There is also the ability to cope with manufacturing fluctuations. Recognising this, Altera from an early stage developed a very strong partnership with its distributors. The key decisions were to limit the number of franchised distributors in an individual market so that the they could benefit from the business which they generated, and then to treat the distributor as an extension of our sales organisation. This in turn placed a great deal of responsibility on the distributor and developed a true win-win partnership which hindsight has shown to be extremely successful. The relationship is both a commercial partnership and perhaps more importantly a technical partnership. Customers are jointly identified and developed, the distributor providing the regional sales coverage as well as a highly efficient logistics service and a range of value added services. However, as with most high technology products the ultimate decision-maker with programmable logic is the design engineer and design management. They decide which technology to use and select vendors based on technical merit, levels of support, as well as commercial factors. In recognising this suppliers must work with distribution partners to create successful field application engineering (FAE) groups. In our case these groups are made up of qualified engineers who work with the latest VHDL logic synthesis design methodologies, and report design opportunities and exchange technical information all as if they were direct Altera employees. However, they are employed by and work to benefit the distributor. The relationship which these distributor FAE’s work to create is not just to focus on individual design wins, but to technically support and work as part of the customers engineering group. To integrate into and enhance the customers top down design methodology and to service the customer from the very earliest system definition stage right through the design implementation and manufacturing stages. The aim is to create a true link with the customer at the engineering level. This partnership strongly benefits the supplier, but also its distributors. In the 1970s and early 1980s the distribution business grew on the back of the explosion in demand for semiconductor devices. TTL was the dominant logic technology and distributors would try to provide a broad range of all the various 7400 series devices, trying to match the exact device needs of their customers. During the 1980’s gate array took over as the dominant logic technology and although some distributors invested in workstations and design centres, the concept of gate-array through distribution never took off. Now with programmable logic, the our distributors are once again participating in the mainstream logic market. As device cost is driven down and with the increase in density range to 250k gates and beyond more and more of the $5bn worldwide gate array market becomes available to our distributors. This creates one of the strongest areas for growth in the semiconductor distribution market today. Nigel Toon is managing director of Altera Europe

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