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At the Core of Semiconductor Market Disruption

Adapting to evolving market dynamics to gain competitive edge

The semiconductor industry is facing a seismic shift and the strategies that drove success may no longer suffice. Many semiconductor companies that have enjoyed success in the past are, at their core, engineering organizations. However, success now won’t simply be driven by great technology, but will also require creativity in how these companies think about collaboration, leverage, portfolio management, marketing and risk mitigation. Explore how CEOs who challenge their organization to think differently about people, processes and systems will start down the path of changing their cultural DNA.

Meet our subject matter experts


John Ciacchella
Semiconductor Practice Strategy Leader
Principal, Deloitte Consulting LLP

Scott Angel
Semiconductor Practice Leader
Partner, Deloitte & Touche LLP

Transcript

Scott Angel: The semiconductor industry is heading toward a seismic shift and you need to be ready. The strategies that drove success in the past likely won’t be enough anymore. As a CEO, you need to prepare.

True, the semiconductor value chain has experienced its share of disruption in the past. The dominance of defense applications up until the mid ‘70s was disrupted by demand for enterprise applications in the ‘80s and ‘90s. Then, at the turn of the century, we saw consumer devices exploding on the scene, but now, with the rise of the Internet of Things and embedded systems technologies, a new inflection point is upon on us and with it comes a new set of problems and opportunities that upend our traditional practices. So how can companies take advantage of the opportunity?

John Ciacchella: Unlike past market disruptions where we have seen a shift from one dominant market like PCs to another dominant market like smartphones, this time the industry will likely see an emergence of multiple medium-size markets as it diversifies. Mobile and computing will certainly still be key large markets, but they likely won’t be the same double-digit growth like in the past years. But the real growth will be fueled by embedded systems applications powered by the Internet of Things. The products and technologies within these market segments will be varied and complex. Just like in past cycles, market leaders will rise and fall, but unlike past cycles, the winners can’t just hitch the wagon to new dominant applications and markets. Instead, they will need to be diverse in their application focus and perhaps most importantly versatile. This need for product diversity and versatility creates a new challenge for traditional semiconductor companies.

When there is one big market, it is easier to focus efforts — R&D, technology, IP, products, sales and marketing. Instead of focusing on a single market, now companies will likely have multiple medium-size markets to understand. If you then compound this market fragmentation with Moore’s Law, the increasing cost of innovation, you may face enormous investment cost if you want to innovate across multiple chip application.

As CEO, you will need to make a fundamental shift in the way you think about business model — people, processes and systems of the company. Many semiconductor companies that have enjoyed success in the past are at their core engineering organizations, but now success won’t simply be driven by great engineering and technology born of the left side of the brain, but also will require more right brain thinking, requiring creativity and how you think about collaboration, leverage, portfolio management, marketing, risk mitigation, business development, etc.

In this new environment, CEOs who ask themselves the hard questions will start down the path of changing their cultural DNA. What collaborative relationships and alliances can you make to share investment cost and risk? How can each investment be used across multiple products with technologies? How do you prioritize R&D? How can the company use a single platform to serve multiple market-specific products? How can cycle times be compressed? How can new or existing IP be leveraged across multiple applications? How can your marketing organization target with greater precession? How can portfolios be strategically optimized? How can your salesforce become more versatile to engage across multiple markets at the end-user level? In the technology sector, the adage "adapt or die" is often overused, but succeeding in this new environment will likely require a complete rewiring of the genetic code.

Scott Angel: This is an exciting time not just for the semiconductor sector but for technology industry as a whole. If semiconductor companies can learn to compete efficiently across multiple markets, the opportunity for tech advancement across the board will only grow. As the axiom goes "If you want to understand where the tech industry is heading, follow the chips."

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