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95-731: Business Strategy and Electronic Commerce Homework 3 | Business-to-Business | 02-15-2000

Semiconductors

Lisa Bembenick | Naresh Bhaskar | Yi-hsin Chen Yuan Chen | Teguh Djojoargono
Heinz, CMU | Spring 2000

Major Semiconductor Players: US


Broadcom Corporation TriQuint Semiconductor Micron Technology Inc. Altera Corporation Intel Corporation AMP Cooperation KLA-Tencor National Semiconductor Applied Materials Micrel Semiconductor www.broadcom.com www.triquint.com www.micron.com www.altera.com www.intel.com www.amp.com www.kla-tencor.com www.national.com www.appliedmaterials.com www.micrel.com

Semiconductor Industry Association: members account for 90% of U.S.-based semiconductor production www.semichips.org

Semiconductor Industry Outlook


Today's global sales numbers represent an 18.9% growth rate for the semiconductor industry in 1999. With year-end global sales reaching $149 billion, 1999 broke all predictions and industry sales records and was an exceptional year of record growth and productivity for our industry. Sales Trends in billions of US $ as of Dec 1999 - George Scalise, SIA President

Source: www.semichips.org

PHLX Semiconductor Index


Growth trend in stock price of semiconductor industry from Philadelphia Stock Exchange (PHLX)

5-year chart of index 1995 - 2000

1-year chart of index 02/1999 02/2000

Source: www.cnbc.com

World Semiconductor Market


Semiconductor World Revenue Trends by Region (in $ billions)
90 80 70 60 50 40 30 20 10 0
America Asia/Pacific Europe Japan

1999 2003

Source: www.infopower.com.tw/

Semiconductor Product Definitions


Products are broadly categorized in two forms: Packaged or encapsulated die or chips Die, chips or wafers which have not been encapsulated Diodes: General purpose signal and switching diodes Small Signal and Switching Transistors: RF and microwave small signal transistors, dual transistors, field effect transistors Power Transistors:Transistors (power dissipation >= 1W) Rectifiers: Discrete rectifiers (0.5 AMPS average or greater) Thyristors: Unidirectional and bi-directional thyristors Sensors: Devices whose electrical properties can be translated into physical, chemical or biological measurements Opto-electronics: Opto-sensing and emitting semiconductors Integrated Circuits: Both digital and analog circuits

Customers
Semiconductor Industry has numerous customers in/across several industries
Internet Startups (Intel) Universities (Altera) Aerospace and Defense (AMP) Automotive (AMP) Electronic Appliances (Altera) Computer Manufacturers (Intel, KLA) Communication Companies (Triquint)

Attracting Customers: 1
In General, major players market through: Well-established off-line business relationships (AMP, Intel) Online advertising (All) Trade Magazine ads (Broadcom, AMP) Product information on website (All) Free product samples (Altera) Downloadable annual company report (Triquint) Group affiliation (Intel, National)

Attracting Customers: 2
Broadcom established strategic customer relationships with partners in other industries, including 3Com, NortelBay, Cisco Systems, General Instrument, Motorola, Panasonic and Scientific-Atlanta Altera created a University Program whereby it provides free educational software to universities that purchase Altera hardware AMP developed a tailored sales program aimed at electrical subcontractors purpose is to aid subcontractors in the sale of AMP products -- program includes product promotions, profit opportunities, fast access to on-line info

Online Order Comparison


Well Designed
Online Order (National)

Poor Designed Online Order (Triquint)

Online Support Comparison


Complete on-line
support (Intel)

Insufficient online support (Micron)

Basic Value-Add
Value proposition of online presence: Various items to choose (Micrel) Automated system for tracking the status of customer complaints (National) Glossary of Technical Terms (Broadcom) Offers application note, brochure, manual and reliability report of products (TriQuint) Online search channel to quickly locate regional sales reps and distributors (TriQuint) Current stock price of the company (TriQuint)

Additional Value-Add
Customer training classes on product installation (KLA, Altera) Customer Service support 24/7 -- order inquiry, emergency service, technical service (KLA) Customized Engineered Semiconductors Program enabling the placement of specialty orders (AMP) Expert recommendations on product design (National) Website Hosting for customers (Micron) Provide ecommerce strategy solutions (Micron, Intel)

Repeat Customer Generation


Cross reference database that customers can access to compare products and prices of various semiconductor manufacturers (AMP) Product catalog/price lists and updates on new solutions and products (Altera) Keep offering next generation products and solutions (Broadcom) Establish joint development program with major clients to deliver better service (Broadcom)

Our Recommendations
Integrate semiconductor suppliers online ordering system with large customers ordering and billing systems Implement leading-edge equipment as a primary research method and makes teardown research available to clients on a custom basis Use partnership and alliance with major customers to build vertical marketplace