This new episode in our ongoing series on the Digital Solutions Economy (DSE) provides an overview of how DSE is impacting the semiconductor industry. Previous episodes in this series include DSE in the Medical Device industry, DSE in Utilities industry, DSE in the Energy Sector, and DSE in Transportation.
Overview
Since its inception over seven decades ago, the semiconductor industry has progressively become a vital part of our everyday lives and a key enabling technology for creating new disruptive markets and fueling overall economic growth.
For most of that evolution, steady advances in semiconductor "chips" were viewed by the public at large as interesting background to the more visible innovations, such as smartphones, wireless networking, cloud-based commerce, electric vehicles, the Internet of Things (IoT), and the rise of DSE. However, in recent years, global forces have brought more attention to the semiconductor sector itself.
For example, the worldwide pandemic and remote work scenarios rapidly fueled even more demand for semiconductor-based solutions. Then supply chain disruptions exposed the underlying fragility of industries that depend on semiconductors. According to Forbes, "The chip shortage has brought car production to a standstill, delayed consumer electronics product launches, and impacted companies’ ability to onboard new employees."
Another important thing to keep in mind is the diversity of the semiconductor industry ecosystem. After consolidating into a few large end-to-end players through the 1970s, the development of the fabless foundry business model in the 1980s and 1990s radically altered the industry landscape while also transforming the speed of innovation.
The rise of pure-play foundries serving the chip manufacturing needs of multiple companies has enabled new fabless entrants to specialize in chip design while outsourcing the capital intensive production processes. While greatly accelerating the pace of new innovation and lowering the cost of the overall processes, this segmentation of key activities also has added complexity and raised the bar for agile cooperative relationships between various players.
Some of the key challenges and disruptive trends in the semiconductor sector include:
- Global semiconductor supply chain disruptions and chip shortages
- Geo-political concerns over where semiconductor manufacturing is located
- Long capital investment cycles for creating new chip foundries
- Intellectual property protection concerns
- Multi-company relationships for chip design, manufacturing and software applications
- Long lead-times for existing chips and even longer start-up timeframes for new designs
How Digital Transformation and DSE Apply to the Semiconductor Sector
Key players in the semiconductor industry are now turning to Digital Solutions Economy and digital transformation methodologies as ways to improve end-to-end processes and manage the key relationships between various collaborators. These holistic digitally enabled approaches foster greater visibility and agility between design, manufacturing and software partners while delivering a higher level of responsiveness to end customers and market dynamics.
According to a recent survey of companies throughout the semiconductor ecosystem, "Nearly half of respondents plan to introduce usage, subscription, or outcomes-based revenue models. Even hardware companies, including those producing chips and equipment, are forging paths toward non-traditional models."
With a long history of serving the needs of key players across the whole semiconductor ecosystem, such as Nvidia, Mentor Graphics, KLA Tencor, IBM, and others, Bramasol is already helping many companies bring a holistic digital transformation approach to improving both their inter-company collaborations and their bottom line business results.
For example, bundling of chips, software and service offerings that involve multiple companies often entail complex revenue recognition and compliance issues, and semiconductor equipment makers offering new usage-based models can benefit from billing and revenue innovation solutions. As new chip foundries are being planned and built, advanced equipment lease management solutions come into play. Also, the ability to leverage comprehensive agnostic analytics tools such as SAP Analytics Cloud will be key to enabling agile decision-making that takes into account timely data from all parts of the end-to-end process.
In addition, from an overall perspective, the forward path to SAP S/4HANA provides a solid roadmap for seamless meshing of all these specific line-of-business capabilities within a high-performance, in-memory architecture that assures both scalability and future-proof extensibility.
For more information, check out these resources:
- Forecasting and Planning for the Digital Solutions Economy
- DSE and RevRec Compliance,
- DSE Data Volume, Velocity, Density and Complexity
- Embedded Analytics for DSE