Following the cancellation of Xinye's agency rights on the eve of November last year, on October 4 this year, the industry broke out again that TI would terminate Avnet's agency rights on December 31, 2020. However, in less than three days, it was revealed today that TI will terminate its agency rights with Wen Ye and Shiping, a subsidiary of Da lian da, by December 31, 2020. At this point, TI's agents are only one Arrow!
TI has successively cancelled the agent right
On September 28 last year, TI announced that it would terminate its agency on December 31, 2018. TI said at the time, "We have been evaluating our global distribution network and making the necessary changes." There were numerous factors used in these assessments, and based on recent assessments, this decision was made. ”
After cutting down Xinye, TI added Wenye to become its new agent. At that time, it was rumored that Wen Ye had a close relationship with ti's senior management, so Wen Ye became the biggest winner of the previous TI agent adjustment.
However, who would have thought that in just one year, Wen Ye was terminated by TI.
Today, according to Taiwan media reports, TI plans to stop its agency relationship with Wen Ye and Shiping Xingye, a subsidiary of Daun Union University, by December 31, 2020. TI's business accounted for 11.28% of the total purchases of The United Nations, 22.1% of the total purchases of Shiping Industrial, and 20.05% of the total purchases of Wenye.
Subsequently, Wen Ye responded that it had received a ti notice. Wen Ye CEO said that he will develop more product lines, control costs, and improve operational efficiency.
At the same time, the internal email of the CEO of Shiping to the team was also exposed. In the internal letter, the CEO of World Health said that it respects TI's decision and will do its best to ensure a smooth transition for customers and minimize customer disruptions. At the same time, the product portfolio will be optimized and operational efficiency will be improved.
A few days ago, according to Afly's filing with the U.S. Securities and Exchange Commission, TI told Avnet on Tuesday local time that "due to the development of TI's strategy, TI plans to terminate its distribution partnership with the company by December 31, 2020." ”
The data shows that TI products currently account for 10% of Avnet's annual sales.
Avnet said it will continue to seek opportunities to support its current and future customers while reducing operating costs. "Over the past few years, we have been developing our distribution network to better build closer, more direct relationships with our customers." Texas Instruments said. "As we establish these direct relationships, we won't have too much business flowing through distribution channels and we'll need fewer distributors."
At this point, TI's agent is only Arrow. Although on the surface, Arrow has become the biggest beneficiary of the TI agent adjustment, but how long can Arrow's agency qualification be maintained?
It is worth mentioning that in July this year, the EBV in Europe was also disqualified by TI.
Obviously, TI is accelerating the withdrawal of agency rights, and the external cooperation model seems to be accelerating to direct sales. Ti said in its external statement that the cooperation model between TI and customers will not change immediately in the short term. The implication is that there may be major changes in the future.
What's the reason behind it?
Generally speaking, in the electronics industry, the relationship between the original chip factory and the agent should be interdependent. Of course, this relationship is also dynamically changing. When the original product is not strong enough, it is necessary to rely on the agent's channel development ability and sales ability to help the original factory compete for the market; when the original product is strong, the agent can also help it serve more small and medium-sized customers, provide faster technical support and customer service, and also help the original factory reduce inventory pressure, reduce capital pressure, and reduce personnel investment.
So why did TI cut off a number of agents in succession, leaving only the Arrow family?
Some insiders believe that in recent years, under the wave of mergers and acquisitions between upstream original factories, TI has not made corresponding moves, although its product line is very wide, the market share is also very high, but it has almost reached the top, so TI in order to further enhance efficiency, naturally need to transform, "from bigger to stronger." That is, grasp the high gross profit margin product line and high-quality terminal customers, and abandon the low-end market. The gross profit margin that agents can contribute is not high in itself. Coupled with the impact of the trade war and the trend of "de-beautification" and "domestic substitution" selected by major domestic customers such as Huawei in component brands, TI had to make strategic adjustments.
Similarly, some netizens said that these "agents' inaction is a very important reason for being abandoned!" Agent positioning and the same as the original factory, only stare at the big factory, no value-added services! There is a problem with the application, and no one cares! The price is more expensive than the market! In addition, abandoning agents means that TI does not want to do market volume, but to be lean and strong! Can be 100% sure, as long as there is interest, agents are willing to push alternative products, TI will only do what others can not do! ”
Some netizens said, "The current agents, Shiping, Wen Ye, and Arrow are too big, the command is not moving, there are too many ideas, and it is also the reason for the cancellation."
Netizens "will repair the computer program ape" on the breaking news, "Wen Ye and Avnet once dissuaded customers to do zigbee, originally TI's cc2538 and cc2652 in terms of stability is to hang silabs em35x and efr32, Wen Ye and Avnet a strong singing decline zigbee, the result of the market zigbee products are the use of silabs program, Easy and Shiqiang promotion of zigbee is very credit. ”
Another netizen said, "I don't think TI expects agent value anymore." I think it is enough to grasp the direct service of key customers. Agents do not have much value, the inventory is TI's own, apply for samples customers to get their own, technical support in Deyi subport, BOM can be TI website directly to the analysis. After the small customer TI official website directly placed an order. Big customer TI supports itself. But now I wonder if TI has established a logistics support system? There will be no billing period in the future. Leave the profits of the agent to the customer. Worst let Arrow bottom out. But Arrow won't be comfortable either. Low profits, long account periods, love to do not do. This is contrary to Arrow's profit requirements. ”
Some netizens said, "For TI, the agent does not have much value, for the agent to do TI is the least invested in the largest income, small customers have TI store, large customers TI direct sales." ”
On the whole, TI's policy adjustment, the internal factors of "doing fine and stronger" and the external factors of the weakening of the value of agents and the external factors of domestic "de-beautification" and "domestic substitution" may be both, but in the end, whether this change will succeed or fail is still unknown, perhaps because of this, TI is not too radical, but still retains an agent of Arrow.
In addition, behind TI's policy adjustment is TI's strong market position. According to IC Insights, in 2018, TI continued to firmly occupy the first position in the analog IC market with sales of $10.8 billion and a market share of 18%, both in terms of revenue and market share (18%), which were far ahead of other manufacturers (twice that of the second place ADI). And this is also the bottom line of TI to cut off a number of agents.
Finally, from the perspective of TI's development history, although Texas Instruments' revenue has not grown rapidly in the past many years (the compound annual growth rate in the 6 years from 2011 to 2018 is only less than 4%), the net profit has increased by 217% in the past 6 years, with a compound annual growth rate of 36.2%, and the profit margin has also increased from 16.2% in 2011 to 35.4% in 2018. Gross profit margin has also already exceeded 60% (65.1% in 2018).
From the above data, it is not difficult to see that from 2011 to 2016, TI's revenue has hardly increased, only a substantial increase of 11% in 2017, but the net profit has only increased by 3.67%, and the profit margin has declined. Although revenue increased by only 5.5% in 2018, net profit soared by 51.5% (mainly due to the strong support of its analog IC product line, especially in the automotive and industrial sectors, and the cost-effectiveness of two 12-inch analog fabs), and the net profit margin also increased to 35.4%.
Overall, in recent years, ti's focus seems to have been not to increase the scale of revenue, but to improve profits and profit margins. However, as the gross and net profit margins of the products rise to a higher level, it will become more and more difficult to further improve. Under the background of strong products and leading market share, reducing agents and providing more direct supply to customers is expected to help TI further improve the profit margin of products.
Is the dropshipping model the future?
In fact, TI is not the first chip factory to take the agent to open the knife. In recent years, with the intensification of mergers and acquisitions between upstream chip original manufacturers, the downstream agent pattern has also undergone great changes.
In 2015, Avago acquired Broadcom for $37 billion, and after the merger was completed and the new Broadcom was established, it immediately made major adjustments to the distributors, among which the original agents Amfour, Arrow, Shiqiang, Yideng, AsiaXun, Wenye and Dachuan were out, leaving only Xinlei, Ketong, Xinye and Quanke.
In 2016, Analog Devices announced the acquisition of Linear for $14.8 billion. After ADI completed its acquisition of Linear and parted ways with Avnet, which had been strategically working together for more than a decade, Arrow became its sole global distribution channel partner, with Shijian International and Junlong Hong Kong as regional agents.
In 2018, following TI's cancellation of Xinye's agency rights, CYPRESS also issued a notice announcing that it had adjusted its sales channels and cancelled the agency rights of cocon core city, Shixunjie and Chuangxing Electronics.
In June this year, Infineon announced the acquisition of CYPRESS for 9 billion euros in cash, and if the transaction is successful, it is expected that the downstream agent channel will change dramatically again, and the number of agents may be further reduced.
With the intensification of mergers and acquisitions between upstream original factories, the original factory of the head will become more and more powerful, in contrast, the role of agents will gradually weaken, and the right to speak will be further reduced. It is worth mentioning that many chip original manufacturers have also begun to test the waters of online direct sales.
At the Alibaba Cloud Habitat Conference on September 21, 2018, Alibaba Cloud IoT joined hands with China Mobile Internet of Things Co., Ltd., Cypress, Renesas, STMicroelectronics, Gigabit Innovation, Broadcom Integration, Quectel Communications, Nuvoton Technology, and many other well-known semiconductor companies at home and abroad to announce the grand opening of the "2018 Tmall Chip Festival", and launched 18 chip modules on Tmall Online at the same time.
After the second Tmall Chip Festival in March this year, Alibaba Cloud and Tmall said that the chip festival brought great traffic and customer sources to merchants, with the total turnover increasing by nearly 5 times and the number of chip module brands doubled.
Although the current direct sales model has a very limited contribution to the original factory, it does give the original factory a new direction.
This time TI cut three agents in one go, leaving only One of Arrow's seedlings, which also made the outside world generally believe that TI will soon move towards the "direct sales model". Driven by the leader TI, other chip giants may continue to follow.
Will TI's transformation succeed?
However, many netizens are not optimistic about TI's "change" this time, nor are they optimistic about the direct sales model.
Netizen "Huan**" believes that TI cancels the agent, "is a simple eye red agent that little profit, eat alone, do not explain so well, whether it can be successfully transformed is difficult to say, the world is not without middlemen to earn the difference is beautiful, middlemen share too much of the original factory risks and responsibilities, not that little profit can be measured." ”
Netizen "Xue **" also said, "TI's direct sales, no benefit sharing, will make more people to replace it, I think, now is the beginning of TI's decline." ”
Netizen "Stick" said, "small and micro enterprises are more focused on centralized procurement, the value of the agent is reflected, the agent's FAE is not the same as the original factory's salary system, do not agree that the original factory's technical support can replace the agent, other such as stockpiling, customs declaration, accounting period, financing, legal affairs, etc., agents have obvious advantages, foolishness: the effect of direct sales is risky." ”
In addition, many netizens believe that TI's move may be counterproductive, which will prompt large agents to sign more domestic brands in order to fill the lost product line, thereby accelerating domestic substitution, promoting the growth of the domestic chip market, and accelerating the erosion of foreign brand market share.
Editor: Xin Zhixun - Lin Zi / Lang Ke Sword