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It has taken Intel just three weeks and a conscious decision to absorb 4 percent on its revenues to pronounce a death blow on the Intel microprocessor grey market and to a large extent on the parallel imports of Intel microprocessors.
As reported by www.crn.in earlier, the motherboard vendor announced its decision to bill its distributors directly from India, instead of from Singapore. Hitherto, the chipmaker used to dispatch all its shipments to Singapore, and the products were then diverted to India.
Intel has now confirmed that it will directly ship its products to the Indian warehouses, thus reducing shipment and goods delivery time from 21 days to seven days. The move will also translate into a 0.5 to 1 percent reduction in billing rates for the distributors following savings in transport cost.
This implies that 99 percent of the Intel processors available in the Indian market today originate from the Indian distributors of Intel products, unlike in the past when a significant share ranging from almost 15 percent to occasionally 50 percent of the processors sold in the market used to come either from parallel imports or through smuggler channels.
Intel had earlier announced its decision to help its distributors in India with a direct shipping and billing move from Singapore to the port of clearance of choice of each distributor.
Sandeep Aurora, director (north), sales & marketing, Intel India, told CRN that the products will be now offloaded at Delhi, Mumbai and Chennai. "Through this system our dealers can receive inventory in stock three times faster than they presently do because it will reduce transportation time, while their products will move faster to the market," he says.
However, there is more to it than pure logistics.
Other sources in Intel disclose that the chipmaker will be absorbing 4 percent of the import duty on the processors which will be reimbursed to the distributors. Intel will also be taking care of the freight and logistics costs involved in freight forwarding and clearance.
This represents almost 4.5 percent of the value of each processor sold in India, and in sheer numbers, Intel is willing to bear an estimated expense of almost Rs 10 crore to Rs 15 crore every quarter in managing the logistics.
According Intel sources, the move is largely to ensure a level-playing field in the Indian market, and better control for both Intel and its distributors over the market as well as the prices in the market.
"The market operating price of Intel has been impacted tremendously due to parallel imports as well as the grey market. This is despite a 4 percent import duty. Moreover, spot prices in Singapore and Hong Kong have been much less than the prices offered by Intel distributors for reasons varying from gross spillover from OEM excess outflow to spot-selling from distributors in other territories," says a Bangalore-based Genuine Intel Dealer. "Distributors were finding it difficult to do business confidentlywe just did not have the confidence to stock Intel processors in large numbers."
For these very reasons in recent months there have been numerous complaints from assemblers that there was a shortage in the supply of processors despite their availability in the international markets.
"You need to understand that an importer dumping even a couple of thousand processors in the Indian market at less than distribution cost is enough to bring down the market operating prices of an entire range of products. Resellers often react strongly to a special price offer, and simply refuse to stock and sell the product, fearing instability. This further hampers the confidence of distributors to stock and sell," explains Alok Thakur, sales head at Ralco Synergy, a Bangalore-based independent distributor.
This meant that Intel's distributors played it safe, bringing only those processors (and that too in limited quantities) which they could sell without losing on revenues.
Things are now changing. "Today we can be confident that only distribution products are available, and this brings in a level-playing field. It also brings back the confidence of the channel partners which we had lost in the past few quarters. The decision has already shown results, and you can see the numbers in the coming days," says the sales manager of an Intel distributor.
"There is a definite improvement in the availability of stock among distributors, so no reseller needs to look at alternative channels for Intel supplies. I hope this continuesthis is indeed good news," says Rakesh Mehta, director of Microport, a reseller and system builder based in Bangalore.
Intel seems to have won the battle as far as ensuring more uniformity in its distribution is concerned, and is gradually restoring faith among channel partners. The costly gamble is expected to give the vendor returns over a longer period as the chip major plans to recapture lost marketshare.
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