Top 3 Ways to Negotiate Lower Semiconductor Prices
How to Reduce Cost and Increase Efficiency
The increasing cost of semiconductors is a major concern in electronics manufacturing because semiconductors are a fundamental component of electronic devices such as smartphones, computers, and cars. The global shortage of semiconductors and other components continues to have serious consequences for electronics manufacturers, leading to rising costs and higher prices.
Commodity and procurement managers can use three methods to find cost savings:
- Take advantage of economies of scale – lower pricing may be available for larger orders
- Bid on parts from different manufacturers
- Combine data across business units into one system
1. Economies of Scale
Contract manufacturers may be willing to offer lower prices if you commit to larger orders, as they can reduce their costs and increase their profits, while also providing you with a better price. This can be beneficial to both parties, allowing you to reduce costs while also helping the manufacturer increase profits.
For a company with multiple business units, if the same part is used across several products, these can be combined into one larger order.
2. Bid Between Multiple Contract Manufacturers
You can find lower pricing for the same part by bidding between multiple contract manufacturers. By sending out a request for quote (RFQ) to multiple contract manufacturers, you can compare their prices and choose the best deal. This process can be time consuming, but it is often worth the effort as you can save money by selecting the lowest cost option.
3. Manage Costs with Visibility Across Business Units
Companies can find cost saving opportunities by using visibility software to combine BOMs and pricing information from multiple business units. The software allows companies to access an up-to-date view of their inventory and the associated costs and volume for each part. The software can also help companies to identify discrepancies between pricing and costs across different business units, allowing them to quickly address any issues and reduce their costs.
In the example below, two business units have combined the pricing of 6 shared components into one system, allowing them to identify the best prices and negotiate for them across the entire account.
This level of visibility allows companies to get an account-level view of quantity and pricing. The best pricing per part can be found and orders can even be pooled together to gain a large bulk order discount.
Within the unified Cost Management Tool, not only is pricing aggregated, but risk as well. By using SiliconExpert data, a part may be flagged for obsolescence, inventory, or supply chain risk. This information can drive decisions to find a new alternative part with longer lifecycle or place an immediate order before inventory is depleted.