Obstacles to innovation: Three challenges facing the semiconductor industry
Tushar Sahney and Chandra Mahale
Learn how connected and streamlined digital ecosystems can have a dramatic impact on overcoming some of the biggest challenges facing high-tech companies and the semiconductor industry today.
Semiconductor manufacturers and other high-tech companies are at the cutting edge of some of the most advanced technologies in the world. Despite that fact, many are still lagging in a critical component of their digital transformation. That’s certainly not a surprise given recent circumstances—many of these companies have been forced to focus the majority of their resources on meeting the dramatic spike in demand amidst the global shake-up of the COVID-19 pandemic.
So what is that critical, lagging component? There are many possible answers, but one of the most compelling is integration.
Supply Chain Management
Even before the pandemic, a rapid increase in demand for semiconductors was putting strain on the manufacturing capacity and logistics of the semiconductor industry. COVID-19 increased that strain dramatically in a number of ways.
First, it disrupted the supply chain both by complicating the shipping and transportation industry and by reducing access to labor. Unlike some other manufacturing operations, semiconductor factories are far too technical to continue operating effectively with 25% of their highly skilled workforce home sick or quarantined.
Second, the pandemic further accelerated demand for semiconductors by kickstarting a new wave of digital transformation and remote work. Digital transformations of products, services, and processes are significantly more complex and require larger data management and analytics on cloud platforms. At the same time, distributed workforces have driven up demand for edge devices, sensors, and mobile devices like phones and laptops. All that technology, of course, is built on chips which are built with semiconductors.
It’s easy to see how these factors have made supply chain management a significant pain point for semiconductor and high-tech companies—but what is the role of integration in this challenge? The key to better supply chain management is efficient communication and information exchange. Everyone involved needs to send and receive data quickly to adapt to constantly shifting circumstances.
An integration platform like MuleSoft dramatically improves the speed, security, and efficiency of collaboration and information-sharing across the supply chain through APIs. With an API-led digital ecosystem, semiconductor companies can transform and optimize their internal operations, partner collaborations, and data visibility in an agile, secure, and scalable manner.
The Shift to Data and Services
More semiconductor companies than ever are making significant moves to diversify their business models by offering data and services in addition to products and materials. Moving up the stack makes a lot of sense from a strategic perspective, given the competitive climate and the increasingly specialized goods that high-tech companies are producing.
As chips become more tailored to specific capabilities and applications (e.g., autonomous vehicles, 3-D printing, and high-end graphics for gaming), semiconductor companies’ specialized knowledge and data become even more valuable.
The move toward data and service-based business models is an ambitious shift with a lot of potential for growth. But companies are likely to bite off more than they can chew without highly efficient and cohesive software ecosystems. Not only does integration streamline the operations for the new business models, it also improves access to the data-driven strategic insights that are necessary for leaders to prioritize and optimize their efforts. There’s also customer service to consider—the standard for seamless customer experiences is rising across industries in general, and in services specifically.
Mergers and Acquisitions
Anyone who follows the semiconductor industry closely knows that there is a high volume of mergers and acquisitions. Analog Devices-Maxim Integrated, AMD-Xilinx, and Intel-Mobileye-Tower are just a few recent examples. These transactions represent amazing growth opportunities, but they also come with a variety of complex challenges. It’s hard to think of a better example of the need for integration of business processes and data pipelines. Integrating various business functions—from finance, supply chain management, and manufacturing, to customer service and partner management—is a highly complex and nuanced challenge.
For example, imagine Company A has 15 key partners, and Company B has 11. If six of those partners overlap, the process of consolidating those partnerships and presenting a newly united front for your business often requires significant time and resources. Add on to those complexities the priority of ensuring smooth operations of critical business functions, and it’s easy to imagine why company leaders want to maximize the value of acquisitions or divestitures by streamlining the steps of the process.
With an integration platform like MuleSoft, semiconductor leaders can overcome the challenges in M&A faster and with greater efficiency—reducing time-to-value and increasing ROI. MuleSoft also reduces the risk associated with this level of data transfer with built-in security features and adaptable deployment options. On top of that, as was the case with supply chain and diversifying business models, the improved data visibility of a cohesive digital ecosystem is invaluable for developing the strategic insights that leaders need to track performance and stay competitive in a hyper-competitive industry.
Interested in learning more about the latest trends, opportunities, and challenges facing the high-tech and semiconductor industry? Register now to join Deloitte Digital and MuleSoft’s upcoming Semiconductor Industry webinar.