By Eric Larsen, Vice President of Business Intelligence, ATREG, Inc.
The manufacturing landscape of the MEMS industry will continue to evolve as the market matures to become a higher-volume, less custom business. Companies competing in larger scale consumer MEMS markets will seek to insource manufacturing in order to shorten product cycles times and gain a time-to-market advantage.
According to the key findings of a new global IDM industry study – Managing Complexity & Change in the Semiconductor Ecosystem – initiated by The Wharton School at the University of Pennsylvania and ATREG, Inc., IDM firms are faster to market with new product designs on existing manufacturing processes whereas fabless companies are faster to market with new designs on new manufacturing processes.
The study, instigated by Wharton management professor Dr. Rahul Kapoor, sheds light on a broad array of challenges and opportunities that IDM companies face within their ecosystem. It is based on detailed responses from senior executives at 23 publicly listed IDM companies, including 11 of the 20 largest IDMs (2011 revenue). The average time-to-market, defined as the period from design start to mass production, is about 11 months for a revision of an existing product design. It increases to about 17 months for a new product design. While IDMs are much faster to commercialize new designs on existing manufacturing processes, they seem on average slower to commercialize new designs on new manufacturing processes. This could reflect inherent differences in the extent of design manufacturing customization between fabless and IDM companies. The difference could also be due to the fact that fabless companies essentially contract for a newly available manufacturing process at a foundry whereas IDMs internally develop a new manufacturing process. The IDM study results were compared with those from fabless companies collected during an earlier study conducted by Dr. Kapoor in conjunction with GSA*. Other key research findings include:
- Manufacturing strategy: In general, while the relationship with foundries is somewhat at an arm’s length, an IDM’s balanced manufacturing strategy seems to be paying off at least in the short term. The importance of having internal manufacturing was reinforced not only in terms of having a high level of coordination between product design and manufacturing activities, but also having greater leverage over foundries.
- Intellectual property (IP) reuse: On average, an IDM reuses about 73% of design IP in the revision of an existing product design and about 44% in a new product design.
- Source of IP: A large proportion of IP for IDMs continues to be internal (84%) with some IP dependence on third-party IP firms and foundry suppliers.
- IDM-foundry relationships: There are lower levels of information sharing and involvement in IDMs’ value-creating activities by foundry suppliers. This may be reflective of the conflicts and challenges that IDMs face in working simultaneously with both internal manufacturing units and external foundries. At the same time, this simultaneity also seems to provide some benefits to IDMs as foundries are much more likely to customize their manufacturing processes around the needs of their IDM customers.
- IDM-complementor relationships: Companies providing complementary products integrated in the customer’s application play an important role in enhancing the IDMs’ competitive position. Managing those more complex relationships means that IDMs pursuing collaborative innovation models need to explicitly develop organizational structures to effectively manage these new types of relationships.
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The full Wharton-ATREG research report is available for download at http://www.atreg.com/Wharton_ATREG_IDM_industry_study_Nov2012_FINAL.pdf.
*Collaborative Innovation in the Global Semiconductor Industry: A Report on the Findings from the 2010 Wharton-GSA Semiconductor Ecosystem Survey, Dr. Rahul Kapoor / GSA, http://www.gsaglobal.org/gsa-resources/reports/collaborative-innovation-in-the-global-semiconductor-industry/
About Eric Larsen
As Vice President of Business Intelligence with, Eric oversees all of ATREG’s research-related activities while providing strategic analysis for ATREG’s clients. His ability to uncover valuable information and talent for linking people together makes Eric a valuable resource within the semiconductor industry. Eric’s contributions have resulted in successful transactions on behalf of Sony, IBM, LSI Logic, NEC, Atmel, and Renesas among others.
Prior to joining ATREG in 2003, Eric served as Vice President with global commercial real estate services firm Colliers International. He holds a BA in Business Administration from Seattle Pacific University.