https://www.techtarget.com/searchitchannel/news/252452301/ON-Semiconductor-distributors-drive-1B-in-revenue
ON Semiconductor, a Phoenix-based semiconductor solutions provider, is counting on distributors to generate business in emerging markets, such as the internet of things.
The company this week said it has reached a channel milestone: It hit more than $1 billion in distributor resales for a single quarter. ON Semiconductor distributors accounted for 63% of the company's third-quarter revenue. That number reflects a steadily increasing business with distributors. In 2017, distributors contributed 60% of the company's revenue, while that channel drove 56% of its revenue in 2016 and 54% in 2015.
"We are very much learning into distribution," said Jeff Thomson, vice president of global distribution sales at ON Semiconductor.
Thomson said ON Semiconductor distributors provide the company with ways to attack the mass market consumer base and create demand in such areas as IoT, industrial and cloud computing.
Masatsune Yamaji, senior principal analyst at Gartner, said distributors let chipmakers outsource the support of numerous long-tail customers, such as IoT and industrial, helping them focus on the largest customers.
"There are more than 180,000 ... electronic equipment manufacturers in the world, while nearly 40% of semiconductors are sold just to 10 big companies, like Samsung and Apple," he said.
While ON Semiconductor is expanding its distributor business, the same isn't necessarily true for all chipmakers. The portion of semiconductor industry sales flowing through the distribution channel hasn't changed significantly over the past 10 years, Yamaji said.
"The share of direct sales is about 75%, and that of resale is about 25%," he said of the industry in general.
Yamaji said he doesn't expect a sharp change in the coming five years, but noted resale's share will gradually increase over the long term due to the growth of IoT and industrial.
Semiconductor distributors operate upstream from the distribution companies through which channel partners typically buy -- companies such as Ingram Micro and Tech Data. ON Semiconductor, for example, sells power management products to hardware manufacturers that embed them in their offerings, which may eventually move through the conventional IT distribution channel.
ON Semiconductor works with 23 distribution partners, having consolidated its roster from 45 distributors. Thomson said most customers use its distribution channel to some degree.
He said 100 customers are direct, while about 500 purchase directly and from ON Semiconductor distributors. But there are "well over 100,000 other companies" where distributors provide the only channel.
Avnet, also based in Phoenix, is one of ON Semiconductor's distributors. The company sells to companies in sectors such as industrial, automotive, and aerospace and defense.
Alex Iuorio, senior vice president, supplier development at Avnet, said the company supports ON Semiconductor with fulfillment and logistics services, also noting the importance of demand creation and design cycle support in the large-scale semiconductor distribution arena.
Two years ago, Avnet sold its Technology Solutions group to Tech Data.
Teridion, an internet routing platform provider based in San Francisco, has rolled out a partner program for selling its cloud-based WAN service, Teridion for Enterprise.
Teridion said the program targets value-added resellers (VARs) and master agents with established software-defined WAN practices. Program benefits include deal registration, lead sharing, a training program and marketing funds for qualifying partners.
"We really feel [the program] is an opportunity for networking and SD-WAN resellers to come in and steal the lunch of MPLS providers," said Morgan Closson, vice president of global sales at Teridion.
Closson said Teridion for Enterprise can be added to partners' current SD-WAN offerings, sold "as an adjacent as-a-service offering."
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09 Nov 2018