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Industry watch: Specifications, prices and strategies

Colley Hwang, DIGITIMES, Taipei 0

In his speech delivered at the 20th anniversary of Monte Jade Science and Technology Association of Taiwan, Morris Chang stressed several times that TSMC would not resort to pricing strategies, but pricing was often his trump card to win customers' orders. In 1974, Chang became VP of Texas Instruments (TI). He stressed in a media interview: "TI to continue cutting prices on TTL." At that time, Texas Instruments accounted for more than half of the global TTL market share. But why did Chang decide to reduce prices? We came to realize that Chang is a "learning curve believer." Price is a learning curve designed to raise barriers to competition and deter competitors. Therefore, behind Chang's price cuts lie the corporate strength and strategy.

Delivering consulting services for the IT industry, we often encounter "price" issues. But the key to land a deal is mutual trust, and then the price. However, the gap between the two sides most likely lies in "specs." If there is a consensus on specifications, price is not an issue based on mutual trust and long-term cooperation. On the other hand, for manufacturing industry with revenues of billions of dollars, consulting service fees are a drop in the bucket. The bottom line is how you convince your customers.

In recent years, IT firms have more understanding of consulting services. They are willing to pay an appropriate price to secure related services. In 2021, the total revenues of Taiwan's 800 publicly listed companies are to exceed US$900 billion and expected to forge an enormous industry with combined revenues of US$1 trillion in 2022. The environments surrounding the industry are getting so complicated that it is difficult for top management to make all decisions. Their employees may be smart, but they and their employers still need professional training.

As we all know, the IT industry is evolving from the top-down decision-making model to the "matrix" pattern. "Employee empowerment" has become the key to success.

"Customer engagement" is the new normal. The explosive growth of demand for professional information is to occur in the new era. The point now is "who can provide services"? The new era has flipped supply and demand. Plus, few people have a comprehensive understanding of and insights into industrial dynamic changes. Price can be an issue. Above all, whether the meaningful specifications can be hammered out is the key for the consulting company to land a deal.

A while back, a company that would like to do in-depth study on semiconductors came to inquire about our consulting services. Our customer service did not take the offer since what the company needed was in-depth technical analysis, which is not what we are good at. But I think since this is an iconic company, though we cannot offer in-depth research, we could still provide industrial analysis and training programs for their employees.

For example, we can help to identify business opportunities for terminal sectors of semiconductors and study the development of other countries as a research project.

If this is acceptable, both sides can maintain relationships. We know where to cut in for future in-depth research projects. What's more, they can use the data provided by DIGITIMES as references for comparison and help them identify the root cause of various problems. No research firms have all the know-how. They look at the customer's watch to tell the time. Each consulting company has its own strengths with different positioning and pricing.

The customer is knocking on the door. The key to landing the deal is "price and specifications." What the customer service can do is not close the door, but instead create a potential win-win position with specifications agreeable to both sides, even if it is just a small opening for future cooperation.

Credit: DIGITIMES

(Editor's note: This is part of a series of analysis of Taiwan's role in the global ICT industry.)

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.
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