IC makers hit by pricing practices

Semiconductor companies may be losing billions of dollars in annual revenue because of ineffective product pricing policies, according to a new survey from management and consulting firm Accenture Inc.

"Our analysis of this data suggests that for every billion dollars in revenue, the average semiconductor company is losing between $16 million and $23 million in sales annually because of ineffective pricing management," said Alan Moore, a senior executive in Accenture's semiconductor industry practice, in a statement.

Accenture's survey of sales executives found that more than 90 percent of respondents said their companies have formal organizational roles and responsibilities for setting and approving prices. Yet, approximately three-quarters of them (77 percent) indicated that they "treat each deal uniquely" and more than half of them (56 percent) said they "use ad hoc discounting practices" sometimes or often.

The study also found that 40 percent of respondents acknowledged that their companies do not understand the cost to service different products, channels and segments. A contributing factor may be that 38 percent of respondents indicated they "often" use different price points for the same product in the same region.

Recognizing these deficiencies, the most urgent item on the industry's 2007 pricing agenda—nearly doubling the rate of any other item—is improving the ability to measure profitability of each sale.

- Mark LaPedus
EE Times