Succeeding by Cutting Costs, Not Corners

Even though the past five years have given birth to the emergence of a slew of competing technologies – iPhone vs. Blackberry, E-reader vs. Kindle, Garmin vs. TomTom – many of these products share many components in common. While competition among component makers is fierce, the somewhat uniform demands of OEMs are  putting pressure on component makers to create devices very similar to their own competitors’, which is turning the market for components into a commodity market – a market which, until recently, seemed too innovative and fragmented to succumb to the same fate of SEMs or memory manufacturers. Increased competition in a market that demands increasingly similar products promises to put pressure on prices and squeeze margins. Component manufacturers are therefore in the position of having to weather what will undoubtedly be a long sustained but not unending period of decreased pricing power. But with smart business planning, they can avoid the margin compression that has plagued peripheral sub-industries like the memory manufacturers or SEMs.

While raw material costs for high-tech production could see inflationary pressure from a surge in demand for components, prices for equipment used in production could also rise as equipment makers seek to capitalize on increased demand from component makers, whose profitability will only be realizable at a certain margin of production volume. Reducing equipment costs is therefore not just one of the only ways, but is also one of the best ways that component makers like semiconductor companies can maintain healthy margins during a time that will be a boon for volume but not for pricing. Companies that are able to able to create greater capacity for less than it costs their competitors while funding new technologies for use in new devices will be the industry’s winners.

Increasing capacity for less requires having a welding equipment and supply strategy that employs lower-cost equipment. One way producers can save is by buying re-manufactured equipment. In so doing, the best welding equipment and supply company for a producer to use is one that not only acts as broker but who also adds value through the restoration of the depreciated equipment with its own resources. A company that has expertise not only in selecting and selling equipment, but also in maintaining and restoring it, will be able to offer producers the best possible used equipment at the best possible price.