How the Semiconductor Industry is Taking Charge of It’s Transformation
Semiconductors are the unsung heroes of technology, providing high-speed processing power for computers, flat-screen displays, smartphones, and other electronic devices.
But while semiconductor revenues are hitting record levels, recent geographic and product shifts are upending long-standing business plans. Moreover, R&D budgets are rising by about 6 percent annually because of new technological and business challenges, such as increased complexity in coding, testing, and verification.
Three developments in the semiconductor industry—the evolving demand for automotive chips, the availability of new productivity tools, and the growth of China as a revenue source—provide opportunities to increase performance.
If you walked into an electronics convention today, you might see hundreds of exhibits from automotive OEMs. Their displays typically focus on new car features?that rely on sophisticated electronics, such as mapping applications and automatic-braking systems. This emphasis on innovation has helped increase revenues for automotive semiconductors from about $7 billion in 1996 to almost $30 billion in 2015. Automotive chips now account for about 8 percent of total semiconductor sales, and current projections suggest that they will see about 6 percent annual growth through 2020—higher than the 3 to 4 percent growth predicted for the sector as a whole. That would put yearly revenues from automotive semiconductors in the $39 billion to $42 billion range.
The new electronic systems are shifting demand for semiconductors among the major application segments—body,safety, driver information, power train, and chassis. For instance, the safety segment only accounted for 17 percent of total demand in 2015, but this figure will rise to 24 percent by 2020, since OEMs are now developing more applications in this area. Similarly, the growth of?electronic vehicles?is shifting demand among device segments (such as memory, micro-components, logic, and optical and sensors).
Although all semiconductor companies are tracking these trends, the highest performers will go a step further by identifying emerging pockets of growth within each segment. Take safety again. Most growth in this burgeoning segment will come from collision-warning systems, which will account for $4.1 billion in sales, far surpassing other segments. The best semiconductor companies will also begin considering strategic questions now, including tactics for differentiating their offerings, addressing opportunities and challenges within the Chinese market, and collaborating with automotive OEMs or tier-one suppliers.
Like their peers in other industries, many semiconductor companies have embarked on ambitious programs to decrease costs and boost productivity using better data and analytics. Most of their efforts have focused on streamlining basic engineering tasks, such as chip design or analyzing component failure. But with costs continuing to rise, semiconductor companies are applying advanced data analytics to engineering management, with the goal of deriving fresh insights that will improve decision making.
This new analytical approach, which we term “Moneyball for engineers,” relies on pattern recognition and machine learning to uncover counter-intuitive management insights, typically delivering productivity gains of 20 percent or more for engineering groups. Data from our analyses identified five staffing parameters—including some overlooked measures—that had the greatest impact on team performance in engineering management: team size, team-member fragmentation, collaboration history, individual experience, and geographic footprint. Semiconductor managers can transform their engineering groups by taking a new look at these parameters when assembling teams. In addition to providing a competitive edge, the new team structures should also help employees gain greater satisfaction from their jobs.
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