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ELECTRONICS
DISTRIBUTION SERVICES FAQ
What
are electronics and semiconductor distributors?
Semiconductors and electronic components are the
building blocks for all computers and high-tech
machinery and are used in a multitude of products from
video games to communication equipment to automobile
systems.
Companies
that buy, sell, market, and resell semiconductors,
electronic components and computer products on a
business-to-business basis are considered distributors.
Since the early 1980's, the electronics
distribution marketplace has been growing at a
phenomenal pace.
How
does the semiconductor and electronic component
distribution marketplace work?
The sale of semiconductors and other electronic
products is broken down into three "tiers.”
This system has evolved significantly over the
past decade as the result of a complex chain of supply
and demand.
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The
first tier makes up the vast majority of sales.
These are sales direct from Manufacturers
such as chipmakers AMD, Intel, and Samsung to OEMs
(Original Equipment Manufacturers) such as Compaq,
Dell, and Sony.
The OEMs, in turn, use the components to
manufacture end-user products such as PCs and
televisions.
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The
second tier is primarily Franchised Distributors who
market and distribute semiconductors and electronic
products to OEMs on behalf of the Manufacturers.
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The
third tier consists of all other distribution
outlets. Major
players at this level are the Independent
Distributors, Surplus Resellers, smaller Brokers,
and Value-added Resellers.
Major customers include OEMs, Contract
Manufacturers, and other Distributors.
What
does an Independent Distributor do?
An Independent Distributor operates on a brokerage
business model and buys and sells semiconductors,
electronic components, and computer products on the
"open-market" much in the same way other
commodities are traded.
A
customer places an order and an Independent Distributor
sources the product based upon availability and
inventory. This
means Independent Distributors can provide product
quickly which is particularly advantageous when a
customer is trying to reduce inventories or meet
production deadlines and does not want to have a
"down [production] line."
What
is the difference between a Franchised and an
Independent Distributor?
A Franchised Distributor has formal agreements to
buy and sell specific Manufacturer product lines at set
prices with agreed upon lead times.
And, they must do so for delivery on specific
dates and, sometimes, for sale within limited geographic
regions. Franchised
Distributors generally carry more products in stock but
have a limited number of manufacturers and product
lines.
An
Independent Distributor, on the other hand, does not
have formal agreements with any specific manufacturer.
This provides flexibility in purchasing from a
variety of sources and on a time schedule the
Independent Distributor demands.
An Independent Distributor also purchases and
resells excess and obsolete inventories.
Customers typically purchase from both Franchised
and Independent Distributors based upon their particular
time and sourcing requirements.
What
is the difference between an Independent Distributor and
a Broker?
Although they may operate on similar business
models, Independent Distributors generally stock
product, offer their customers credit terms, provide
value-added services, honor manufacturers' warranties,
provide RMA services, and have strict quality assurance. Brokers
usually act only as agents for their customer in return
for a fee.
Top-level
Independent Distributors, such as Odyssey Electronics,
invest significant resources to expand infrastructure,
hire personnel, and develop markets.
These investments enable top Independents to grow
their businesses with long-term plans and alliances. |
