Motorola Inc.'s decision to spin off the Semiconductor Components Group (SCG) from the rest of its chip business is likely to affect the chip maker's overall distribution efforts, which have been managed by SCG executives.
Distribution-industry executives last week said Motorola planned to use the move as an opportunity to abolish its shelf-sharing policy, which limits the number of Asian competitors its distributors can represent. The executives, speaking on the condition that their names not be used, said Motorola privately relayed those intentions, but was not yet ready to make a formal announcement.
A Motorola spokesman said last week the company has no plans to change its distribution lineup or its policies at this time.
After decades of banning Asian competitors from its North American channel entirely, Motorola in late 1997 modified that policy to allow its distributors to carry a single Asian line.
"That decision came about after an enormous amount of study and examination of the [customer-related] issues, and management doesn't see anything in separating the SCG from the SPS that would dictate a change in that policy," the Motorola spokesman said. "We want to be able to continue to use the channel most effectively, but at the same time maintain our competitive position."
For nearly two years now, the distribution operations for Motorola's Semiconductor Products Sector have been handled out of Geneva by Steve Hanson, who will head up the soon-to-be-independent SCG. Hanson has also been instrumental in establishing Motorola's distribution policies.
Motorola didn't say who would oversee distribution for the Semiconductor Products Sector. But the Motorola spokesman said both SPS and SCG plan to stick with the same distribution roster, which in North America includes Arrow Electronics, Avnet, Future Electronics, Wyle Electronics, and the Newark Electronics catalog.
As reported by EBN last week, Motorola said SCG, which primarily sells standard discrete, analog, and logic semiconductors, would be more effective as a stand-alone entity. The company believes SCG's high-volume, low-margin business model contrasts with that of SPS, which focuses more on solution-oriented products, such as microprocessors, microcontrollers, and DSPs.
With OEMs' continuing efforts to reduce the number of vendors with which they do business, dealing with two Motorola semiconductor entities may not be seen as as advantage, according to some distributors. The commodity-oriented SCG doesn't have the same appeal as Motorola's high-tech semiconductor products and may be viewed as a "me-too" offering, they said.
Others see the SCG separation as an opportunity for increased focus both inside and outside Motorola SPS.
"I think there's incredible intrinsic value in the Motorola name, so the portion of the business that remains within the Motorola organization, focusing on proprietary products, is an extraordinary franchise to have," said Michael Rohleder, chief executive of including Wyle Electronics Inc. "The history and the legacy of Motorola will carry through in the new SCG business.
"If you look at the game plan," he continued, "the discrete business has the resources of Motorola behind it, the customer reach, and the involvement of Motorola in the overall business. You add to that the ability to make the business more cost-effective and service-oriented, and [what distributors have] is another really good line."
Steve Church, president of Avnet Electronics Marketing, Phoenix, said he viewed Motorola's move as "both a positive and a negative. The positive is that Motorola is obviously making a decision to become more focused, much as National and AMD have. Motorola wants to be able to focus on commodity products through SCG and focus on its technology products through the SPS, and they feel they need a different sales and marketing effort in those two different areas.
"The only downside is, we-and by extension the customer-have to interface with two different groups, losing the synergy of a single Motorola. At the same time, we're gaining a more viable and efficient supplier because of their decision to focus."
About 25% to 30% of SPS' volume is handled through the channel, and Motorola is one of the broadest-based suppliers of semiconductors to distributors and their customers. As such, the company has a tremendous amount of clout in the channel, and last year enforced its "one-Asian" policy with Future. Currently, Arrow Electronics is seen as testing the waters. Arrow acquired Bell Industries Inc.'s Electronics Distribution Group, which sells several Asian lines.