The fundamental structural changes in the electronics industry over the past several years will force semiconductor makers to adopt new design strategies to remain competitive.
Previously, explosive growth from a steady stream of blockbuster applications like PCs and mobile phones drove revenue increases. But fewer markets are being created. A smaller quantity of new hardware platforms are arriving on the scene. And more often now, older applications offer the most attractive combinations of fast growth and large size.
Research firm iSuppli Corp. has examined the potential relative growth and size of various electronic equipment categories from 2002 to 2007. Even the fastest-growing areas—like DVD-R, flash cards, wireless broadband, and digital TV—represent only a drop in the ocean compared to the overall market. Some of the largest applications, like desktop PCs, are generating slower but respectable growth. Yet because of the smaller number of blockbuster products, there will be fewer major electronic equipment makers. Fewer design wins will then be available.
The largest increase in demand for electronic products will come from China, where 10% of the population already can buy to Western standards. This will spur continued price pressure on both the electronics hardware and semiconductors used within those products.
To be successful, chip designers and their managers must accommodate the fragmentation in demand. To address the multitude of electronic product markets, each typically generating less than 10% annual growth and each smaller than $5 billion in size, they will have to produce many designs very quickly. And, they must do it at the lowest possible cost.
This will require an intimate understanding of each application market and each product's varied design and technology environment. Designers will have to get even closer to their medium-size customers, not just their largest. Semiconductor design tools, then, are going to become more valuable and a greater competitive differentiator for chip suppliers.
Chinese products as well as products designed for the Chinese market tend to employ lower-cost and simpler designs than their Western or Japanese counterparts. Thus, "keep it inexpensive and simple" should be the basic design philosophy when addressing Chinese customers.
The structure of the worldwide electronics industry has changed. So too must semiconductor design strategies.
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