As businesses seek a return to growth during the COVID-19 pandemic, they will need to control operating costs and get better products to customers, faster.
Semiconductors are vital to both of these objectives. We expect demand for next generation capabilities to drive recovery of the technology sector.
At the Wipro Semiconductor Summit in March, we surveyed 50+ C-suite and senior executives handling IT and Business portfolios in leading, US-based, Semiconductor organizations. This research highlighted five imperatives every semiconductor organization must consider as the rest of the year unfolds.
Imperative I: Drive innovation
Next generation electronics, machines, medical devices, and beyond will all require new and better semiconductors. Over 7% of all new vehicles will have Level 3 or higher autonomous driving capability, with high-volume production starting after 2020. Over 40% of security surveillance cameras will ship with on-device real-time monitoring and analytics functions within the camera, up from less than 5% in 2018.
These shifts will accelerate efforts enabling and powering 5G, AI, Edge Computing, IoT or HPC onto chips. Companies also need to look at customization to balance power, performance, and cost for the required use case. The need of the hour is to move from the cloud to the edge to enable new architecture that allows more tightly coupled processors and memory.
According to a KPMG Global Semiconductor Survey, AI / cognitive / deep learning moved up from the tenth to the third spot for driving semiconductor revenue in 2019.
Add to that the continuing rise of IoT and Digital supply chains and it’s no surprise that for 45% of respondents, technology innovation is urgent, with M&A not far behind at 35%.
Imperative II: Get M&A right
To deliver innovation, semiconductor companies must build strength, scale, or both. Dialog acquired Creative chips and Adesto technologies to broaden its IIoT presence. Micron announced a powerful new set of high-performance hardware and software tools for deep learning applications (for IoT & Edge computing) with the acquisition of FWDNXT. Marvell unveiled their first generation of client SSD controllers designed to meet needs for lower power and higher performance in next-generation data centers and edge devices.
Instead of buying a company based on current market share, think long-term about what complements your core business, and about how you will integrate talent.
Imperative III: Ramp up the right expertise faster
The next wave of development will see semiconductor companies go beyond providing basic underlying solutions to creating the full systems and intelligence above it, developing increasingly superior chips for each. This ‘Hyperconvergence’ is one of the key features of the new economy and the semiconductor industry is its bedrock.
Often, an external partner will be essential. By 2022, over 50% of enterprises will deploy AI accelerators in their server infrastructure, up from less than 1% in 2018.
Talent will be needed in ASIC/FPGA design, high-speed board development, firmware development, not to mention verticalized, use case driven chip customizations.
Imperative IV: Manage cost pressures
Even the smartest investments in innovation, M&A, and ramping up expertise will take time to pay out.
Indeed, our research shows that managing cost pressures was the most important challenge identified by industry leaders.
But organizations cannot shrink their way to greatness. Costs must be managed, not avoided altogether. For example, semiconductor manufacturers should examine their supply chain strategy and operating model to address risks of geographical concentration and lack of resiliency. Consider moving to an “agile supply node network” model—which is flexible and allows for multi-pathways that help eliminate single points of failure. Spread concentrated capabilities to near-region (e.g., fabrication, A/T, tool manufacturing & support) and qualify alternate sources of supply.
In the Agile/DevOps way of software development, the semiconductor industry needs to improve how it manages distributed development/delivery. To be a viable contender in the software tool support market, semiconductor vendors should, at a minimum, support major open source software frameworks such as TensorFlow, Caffe2, Theano, CNTK, MXNet and Torch.
Imperative V: Take the next step to full-fledged digital transformation
Our research revealed that semiconductor industry leaders say they’re ready to tackle larger digital transformation (50%), and most felt they would be ready soon.
Our experience shows that successful digital transformation is determined by getting key moments of truth right:
- Looking at a problem differently
- Readying the organization for change
- Transforming talent around the transformation
- Managing the process of change
- Realizing business value
Pivotal moments sometimes happen when business is booming. But more often, they happen in times of crisis and change like the one we’re all facing now.
Semiconductor companies that address the key imperatives now will set the stage not just for recovery, but revitalization.
Read the Full report here