Friday, June 24, 2005

Who Wins the Services Race?

Who Wins the Services Race? Following on to the "Industry Maturity" post made last week, I thought it would be appropriate to mention a news release made on June 22 at the Sematech website: Basically, Sematech is setting up a tool, spares and services database for member companies called the Competitive Sourcing Database. "This database will help the members of SEMATECH and ISMI improve the key areas of our spares cost reduction initiatives, including competitive supplier sourcing and greater availability of repair and refurbishment services," said Al Garcia, a former SSC chairman. Hmmm... If you are an OEM should you be concerned about this? I would be concerned. Particularly if you have yet to grab your "share of wallet". Everyone that can supply parts, repair, refurbishment and tool maintenance is going to get pitted against each other - compared and benchmarked in one database. More from the press release: "This unique supplier database will help our members improve their efficiencies in the equipment spares supply chain, while reducing their equipment cost of ownership," said John Schmitz, SEMATECH Vice President and Chief Operating Officer for Manufacturing Technologies. In particular, Schmitz said the database will benefit members by providing such advantages as: * More cost-effective procurement and management of spare parts * Pre-screened, capable, competitive sources for spare parts * Lower costs for equipment maintenance * Increased return on investment (ROI) for member companies The second and third bullets, in my opinion, have implications for OEMs. Everyone knows that spare parts and maintenance services have been a high margin business for many in the industry. As I see it, the goal of the Sematech site is to make the competition visibile - doing so helps their member companies. Clearly that is going to have implications for pricing. Can you picture a fab manager looking at the database and then going back to the OEM saying, "XYZ company here in Austin, Texas (or, somewhere in Taiwan/China), is willing to provide the same parts and service for far less than you are proposing. If you want my business, make me a deal!" This whole thing harkens back to the Otis Model I mentioned in last week's post. It seems obvious that OEMs must get their arms around the market - what is in the field - and then pursue a strategy that leverages the existing channel without creating total chaos. Sematech, with this program, is forcing the issue. Nothing like a little exposure.... Carl

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