High Tech: Are People Getting Hired?

At the risk of being redundant, the answer to this questions many times is "It depends." We're already beginning to hear the words "jobless recovery" bantered about for many industries. Generally, we do not believe this will be the case for the semiconductor industry going forward. There are currently positions being filled every day. It is not a large number, but there is hiring going on.  Most of these positions fall into one of two broad categories. 

The first category includes positions that are high level and strategic in nature. A company needs to replace a CEO or bring on a CTO to focus development. These type positions tend to be filled whether times are good or bad. The second type ties more closely to the level of business. As business strengthens (or appears that it might) companies may add technical resources (designers, apps engineers, etc.), sales staff, or operations personnel.

There is a great deal of caution these days in adding staff due to the uncertainly about the level and stability of future demand. For many fabless companies, this problem is exacerbated by dwindling cash with a dim outlook for future funding rounds. It is "hang on to what you've got" and try to stretch the current organization as much as possible. However, there are fabless companies with significant cash reserves and strong demand that are adding staff.

As with the "it depends" above, much of hiring depends on the supply chain segment, product technology, and end-market focus. 

Are We in the High Tech Upturn?

As much as everyone would like a simple yes/no answer to this question, more often than not, the answer is "it depends." For starters, the total supply chain has several segments, each having relationships to the others. The biggest chunks are semiconductor device companies (both fabless and IDM), manufacturing providers (foundry, probe, assembly, test) and equipment and materials suppliers. The device companies typically see the changes first, then the manufacturing providers, then the equipment and materials providers. Because there is lagtime in the system, the changes get amplified and the equipment guys (caboose) may not realize what's going on until after the device guys (engine) has already left the track. 

A second factor is which device segment you're involved in. During this downturn, the memory guys have been particularly hard hit because of a massive overbuild of capacity that led to price wars that scuddled all hopes of profitability. Other segments (e.g. microprocessors, logic, analog, discrete, etc.) were impacted to varying degrees.

The third factor is end market. The growth rate in PCs, cell phones, consumer products, automotive, etc. have different growth rates, inventory positions, etc.

All that being said, most forecasters are guardedly optimistic about the coming months for most market segments. Some fear there may be relatively minor correction after the end of the year, but generally see positive growth over the next couple of years. A word to the wise, as with car mileage estimates, "your results may vary."

The Issue Around Pharma Bundled Sales

One area of continued focus by pharma regulators is on drug manufacturers’ discounting strategies and their impact on prices the  government pays for particular drugs. In particular, they have focused on the concept of a Bundled Sale, typically where the discount on one drug is conditioned on the purchase of another drug. The main government contention is that in a bundled sale the economic benefit (net price) from the purchase of a particular drug is placed on a different drug (or a different time period), skewing the reported commercial price and used as the basis for the government price for those drugs. Actions by pharma that affect the prices reported to the government have been fertile grounds in the past for the Justice Department and State Attorneys General to file fraud and false claim acts cases with settlements in the $100M to $2B range.

The government response to the issue of bundled sales for the largest purchasing programs (Medicare and Medicaid) has been to require the manufacturer to reallocate the discounts proportionately to the value of each drug sold in that arrangement during that period prior to calculating and reporting those drugs’ prices. Three factors are bringing this issue into new focus:

·        The “clarification” of the definition of bundled sales triggered by the Deficit Reduction Act (DRA) of 2005, which greatly
expanded the scope of arrangements that could be considered bundled sales

·        The increased use of innovative multi-product discounting as a part of many pharma competitive strategies

·        Industry consolidation is placing more drugs onto single agreements and increasing the potential for bundled arrangements

What has been the pharma response so far? Most have gone through an evaluation of their agreements to determine what their potential bundled sales exposure is. Companies with exposure have either opted to change their agreements (and commercial strategies) to reduce or eliminate their bundled sales exposure or to reallocate the discounts. Both options have
their issues. For many companies, potentially changing commercial strategies to something less effective is not an option. For those that have gone down the route of reallocation, they have often had to implement custom  or manual processes to perform the reallocation that are inefficient or have issues providing adequate audit and compliance controls. To address these problems, Model N recently introduced an automated discount reallocation solution that is integrate into its Revenue Management Suite.