To B2B or not to B2B: Obstacles in semiconductor equipment sales
02/01/2001
James D. McKibben
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Over the last few years, we have witnessed the birth and meteoric growth of Internet-based commerce, in both the consumer and business-to-business (B2B) sectors. From its origins in fairly simple items (books, office supplies, etc.), e-commerce has now set its sights on large, expensive, relatively complex goods. For example, a variety of car sales sites have been established, and you can pick up milling machines, injection molders, and who knows what else right from your PC.
The semiconductor supply chain is not immune to any of this. We've seen the start-up of many new companies (and new operations within old companies) that want to use the power of the Net to facilitate transactions between process equipment makers and buyers.
In the best case, this can remove levels of bureaucracy, cut paperwork, and add value for each party by shortening the supply chain. Brokering of consumables, spares, and used equipment is already under way, but B2B developers will clearly want to follow the money, and the money is in sales of new equipment.
It's much too early to make definitive statements about the success or failure of such ventures, but my experience in the industry suggests that there are some substantial obstacles to applying B2B techniques to equipment sales.
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The first obstacle, and probably foremost, is the eternal issue of customization. Let's use cars as an example. Say you want to buy two dozen sedans for your company fleet, but need right-hand drive versions for making deliveries to rural mailboxes. If you went to a B2B web site, they'd be all geared up to ship you two dozen regular cars. Ask for your "mirror image" special order, and they'd probably say something like, "Hmmm . . . it's not listed as an option on any of our forms . . . we'll look into that and get back to you." They would contact the automaker, who might respond that it could be done with certain limitations, and it would take six or eight months for delivery. The B2B site would then relay the info back to you, and there would probably be another round or two of communication as the details were worked out.
The problem with this scenario is that the presence of the B2B intermediary actually lengthens the supply chain.
That might be tolerable for a customer who's not in a hurry, but it isn't a good deal for anyone. In the "quick or dead" semiconductor industry, it's a non-starter. Indeed, we toolmakers ship more "specials" than we do "standards," often having to respond to unexpected requests on the fly. And smart companies set up their sales, engineering, and manufacturing operations accordingly.
If a chipmaker asks, for instance, for a "mirror image" version of a tool in order to squeeze one more system into the corner of an overutilized fab, the correct answer is, "Right away!" You might not have it listed as a standard option, but if your salespeople, designers, and production managers are in touch and able to improvise, you'll be able to do it, and make money (or at least break even while enhancing a money-making relationship).
Second, in order for B2B companies to stay in business, they must add more value to the transaction than they extract, and add value for each party. It's not enough to simply drive down prices for the buyer. The supplier's costs must also be reduced, or else everyone (including the end user) will suffer in the long run. B2B must serve all constituencies well, or it will be viewed by one or both sides as a problem, not a solution. It remains to be seen whether these conditions can be met in the equipment business.
Finally, as anyone who has been in this industry for any length of time knows, personal relationships are critical. In many cases, the difference between a $150 chip and a $35 chip is a matter of a few months. Working at that pace, there isn't always time to do everything by the book; you do what's necessary to keep the line running, and an important part of this is personal trust in the individual you're dealing with.
Sometimes it's as simple as looking a longtime customer in the eye and saying, "Yes, we really can do that." Other times it requires you to troubleshoot a problem half a world away while in your pajamas at home. Again, the ability to analyze on the fly and improvise is crucial, and while e-commerce web sites are good at many things, they can't replace an intelligent human conversation between two people with an established level of trust.
All this is not to say that B2B e-commerce will never find a role in equipment sales. Plenty of bright people are working with powerful technology at the B2B companies, and there's no telling what they will come up with. But the equipment industry is a low-volume, high-customization, rapidly changing business. To date, only people and well-run organizations have had the necessary flexibility to serve it.
James D. McKibben is VP, worldwide marketing and sales at Tegal Corp., 2201 S. McDowell Boulevard, Petaluma, CA 94955; ph 707/763-5600, fax 707/765-9311, email [email protected].