While today’s microprocessors provide more computing power than was present on Apollo 11 during the first moon landings, most cost considerably less than a tall skinny latte from Starbucks. While this is clearly good news for the consumer, it is not a great situation for semiconductor designers and manufacturers.
Further, in line with Moore’s Law it is clear that the integrated functionality and performance of semiconductors continues to improve exponentially, and at the same time, the prices of these devices continue to erode.
These trends allow manufacturers to continually improve the capabilities and performance of products ranging from computers and mobile phones, to set top boxes and TVs without prohibitive cost penalties. What’s more, the performance and price points allow for the most basic of devices – from toasters to disposable pregnancy testing kits – to integrate some form of semiconductor processing.
Designing and creating semiconductors is both resource-intensive and costly, but the combination of pressure on pricing, plus the number of parties between the semiconductor design, and the end user product, makes realising the value from investment more and more difficult. This is why companies are looking to raise their position in the semiconductor value chain, which, ultimately, necessitates getting closer to the consumer.
Of course, consumers are not going to buy chips, and in almost every case they don’t truly care or know about semiconductors. They just want to know that the end product they buy delivers or gives them access to the service or services they want with minimum or, better yet, no complications. By playing a bigger role in supporting service delivery – for instance, enabling access to mobile TV on a Smartphone – companies can add more value (and, thus contribute more to the bottom line) than they could by just providing the underlying ICs and software.
For a company to evolve to address end user needs requires an embrace of new business models with a proper re-assessment of the supply chain. We know that end user purchasing habits are very different to the decision making units (DMUs) of traditional OEM customers. Semiconductor companies may benefit from co-branding with OEMs and collaborating with companies in the development of enabling software, and from there it is not too much of a leap to imagine companies that started life as semiconductor designers and manufacturers supporting an ‘app’ style business model, in which the enabling software can be purchased or downloaded directly by the consumer – possibly at the same time as they sip their tall, skinny Starbucks latte.
