On today’s Manufacturing Geek podcast, Julie Fraser, principal at Iyno Advisors, will discuss her outlook on the semiconductor industry.
This podcast includes a discussion on:
- The general outlook for Semiconductor Manufacturers in
- What semiconductor companies can do to keep themselves healthy
- Are semiconductor companies the weak link in the “smart products” revolution
- Will Semiconductor manufacturers get a return on the investment in information systems
- How the automotive industry is impacting makers of semiconductor chips
- Advice for semiconductor manufacturers for the new year
Will the semiconductor industry have a good year in ?
The outlooks that I’ve seen for indicate we’ll have some growth this year; better than last year, which isn’t saying too much. But the ranges I’ve seen are dramatically different, which can be attributed to the general global economic uncertainty. I’ve seen forecasts ranging from 2 to 16 percent growth, but I would say growth will fall somewhere in the middle of this range, around 8 percent.
As always in semiconductor, new applications and new devices will drive companies who haven’t been there before to enter the market. Unlike other manufactured goods markets, it is not so much consolidation we see as a continual shifting. For the semiconductor market, it should be a pretty good year. For any individual company, it will depend on who they are, their market strategy, and how they respond to changes that will take place.
What can semiconductor companies do to keep themselves healthy? Last year was difficult overall. How will companies cope in the coming year?
To stay healthy, the key is to stay close to your customers and what they are developing. That’s always been the case with semiconductors. Also, be thinking about new applications for your core capabilities and technologies.
As the U.S. economy begins to recover, these are the key questions: How do we invest to make sure we’re well positioned to capture the available growth? Where do we invest? That latter question has been a thorny issue for many companies. They haven’t invested where and when they needed to.
Some investing should be in sales and marketing; but it’s also important to invest in operations. With so many new opportunities and demands, sometimes the products and processes are adequate to meet them. But new competitors will challenge if you don’t invest in new products, new ways of making products, and perfecting those products and processes. So I think there is a clear need for many semiconductor companies to evaluate their operational investments.”
You have warned that semiconductor companies may be the weak link in the smart product revolution. Why?
Yes, I have been saying that semiconductor companies are potentially the Achilles heel in the smart products revolution.I’ve done research recently that indicates nearly a third of semiconductor companies are using systems over a decade old, which are truly antiquated to run their production lines.
It would be one thing if their customers were doing this too; but they’re not.
Very few of the companies that semiconductor firms are “built into” have such antiquated systems. They expect their suppliers to provide them with not only high quality products, but also information to see how and why they can do this consistently.
Other manufacturers (e.g., automotive, aerospace, and electronics) can do this because they’ve made the investment in operational information systems. Many semiconductor companies are spending countless man-hours to provide operational information, and that’s just not a sustainable business model. They really need to learn to run more like their customers, to get and deliver that information efficiently.
How can companies facing constant price pressure and low margins invest in production information systems with confidence? Will they get a return on investment?
Great question! How can I buy a new system and get a return on investment? I think it’s the number one issue that has kept companies from investing. In my research, I discovered that many people just don’t understand how to make the business case. Many who have made the switch to a new system find they don’t need to shut down production, and the benefits start to accrue almost from the moment they turn the new system on. If you’re able to get a view of how you are doing in real time, it can be incredibly valuable.
The first step for companies is to get a handle on the real costs of what they are doing now. How many people does it take? How much time does it take? Also, start to estimate missed opportunity. A few companies may not be able to make a strong business case, but most will. At the very least, purely from a risk perspective, it’s critical not to be reliant on completely outmoded technology for your core manufacturing operations.
As more chips go into automotive applications, how is that changing the industry?
Automotive applications are growing really fast, so they’re a great opportunity for semiconductor companies. But the automotive companies are extremely stringent in their quality requirements. They’re accustomed to making their vendors deliver improved price and performance every year.They raise the bar not only on the quality of the chips you ship them, but also on the quality of information about them.
Here’s a good example: you need to go beyond basic binning to deliver each batch within a tight range of specifications. The best way to do that is to capture the information during the production and testing process. If you don’t have a current system, that can be a problem.If you do have the information systems available, then you can document how you’re creating those batches and deliver all that information along with the product, with no extra effort.
What advice would you give operating teams at semiconductor companies?
Take a close look at your work environment.If you don’t think that things are as smooth or information as available as you think it should be, it might be time to make the business case to management for investing in new processes and IT systems.You deserve to work in an environment worthy of your talent. If you’re taking time digging through data manually, fixing COBOL or Fortran code, ordering spare parts on eBay for some hardware that hasn’t been on the market for 15 years, you know what I mean.
Start looking at it from the executive standpoint:
- Are your customers raking you over the coals?
- Are you called on the carpet for quality problems?
- Are your competitors eating into your market share or making inroads on your relationships?
- Are your margins thinner?
- Are your investors happy?
If any of these questions hit a nerve, you can begin to document your current situation in operations, and then approach quality, IT, and other groups that touch what you do.
Make the business case. Research what the new systems can do, go see them in action, and create a vision for what could be different. Then work with your accounting team to put a dollar value on all the time and effort you put in now and all the benefits you can get from working with a new system.