How can semiconductor companies establish a foundation to scale and profitably grow?
The semiconductor industry is projected to experience substantial growth over the next five years. How can semiconductor companies position themselves to take advantage of this growth and increase their profits? What challenges should they overcome to scale and grow the business?
Based on a survey of 207 semiconductor and high-tech professionals, this research study examines semiconductor companies’ growth strategies. It identifies challenges related to new product introduction (NPI) challenges that hinder their progress. The research reveals best practices for overcoming these challenges and shares recommendations for establishing a foundation for scalable and profitable growth.
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Table of Contents
- Executive Summary
- Plans for Profitable Growth
- NPI Challenges
- Identifying Top Performers
- Establish a Foundation for Profitable Growth
- 1. Support Digitalization with a Digital Thread
- 2. Focus on Process Efficiency
- 3. Adopt a Product Lifecycle Management (PLM)
- Become More Sustainable
- Recommendations and Next Steps
- About the Research
- Acknowledgments
Executive Summary
Significant Opportunity
It is an exciting time for the semiconductor industry as it once again becomes a key enabler for the next evolution of technology and experiences substantial growth. This growth is so significant that many project the global semiconductor market to reach $1 trillion by 2030. In fact, 2024 saw global sales increase a tremendous 19% year-to-year, and double-digit growth is expected to continue. This growth is fueled by progress like the rise of artificial intelligence (AI), investments in electric vehicles, advancements in autonomous driving, connectivity growth in industrial machinery, and an increasing demand for data storage. This presents a tremendous opportunity for semiconductor companies. However, to capitalize on this potential, they must have the right foundation to support profitable growth.
Growth Plans
Semiconductor companies aim to grow by broadening into new industries, extending their portfolio, and accelerating their time to market. At the same time, since 2020, customers expect more. They now demand higher quality and faster NPI. To successfully achieve this, there are several NPI challenges they must overcome. They must improve change management, understand dependencies, centralize requirements, and enable traceability. To meet these needs, the most successful companies are adopting Product Lifecycle Management (PLM), supporting digitalization, and improving process efficiency. By doing so, they can meet increased demand and achieve greater success.
Integrating Design and Manufacturing
One major difference between Top Performers and Others is that they are more likely to integrate their design and manufacturing data. This integration allows them to:
- Improve project visibility
- Manage risk
- Improve NPI efficiency
As a result, they achieve higher yields, better quality, and increased revenue. PLM can play a critical role in enabling this integration by creating a digital thread and supporting digitalization, which leads to improved process efficiency. This, in turn, provides a solid foundation for profitable growth.
Plans for Profitable Growth
Growth Opportunities
With the expected growth in the semiconductor industry, semiconductor companies must strategize to determine the best ways to tap into these opportunities and profitably grow. Over the next five years, they plan to grow by broadening into new industries, extending their portfolios, and accelerating their time to market (see graph).
Expand Offerings
By venturing into new industries and broadening their portfolios, semiconductor companies can leverage their existing expertise and innovation investments while tailoring offerings for different use cases. For example, AI, electronic vehicles, and autonomous driving all require specialized chips. By adapting their offerings for these various applications, semiconductor companies can unlock new revenue opportunities. Additionally, reworking existing offerings for specific applications reduces development costs for adjacent offerings, thereby boosting profit margins. Moreover, diversification can help mitigate risks associated with fluctuating demand in specific segments, as experienced with mobile phones in the past. However, overseeing the development of various offerings introduces complexity that must be managed, especially to encourage and support reuse.
Accelerate Time to Market
The cyclical nature of the semiconductor industry means timing is crucial. Being the first to market allows a company to seize emerging trends and technological advancements ahead of competitors, thus gaining a competitive edge by capturing market share before rivals respond. This strategy also maximizes the revenue potential of new offerings before the next generation emerges. To achieve this goal, companies must find ways to improve process efficiency.
Innovation
Semiconductor companies face many opportunities for innovation, especially to meet the demanding requirements of AI applications. Those that can improve performance and reduce power consumption better than competitors should capture a substantial share of that market segment. Capabilities that foster collaboration and leverage existing expertise should help to generate new ideas and solutions to accelerate innovation.
Become More Sustainable
Sustainability Strategy
Once semiconductor companies establish a foundation for growth, another important consideration that can provide a competitive advantage is sustainability. While only 15% of companies reported that sustainability is part of their growth plans, an impressive 97% of Top Performing semiconductor companies have implemented a sustainability strategy.
A well-defined sustainability strategy can give a semiconductor company a competitive edge. Many customers increasingly focus on producing energy-efficient, sustainable products with a reduced carbon footprint. Consequently, these customers are more likely to engage with semiconductor companies that prioritize sustainability. The graph shows the top actions taken by Top Performers to become more sustainable
Leverage the PLM Foundation for Sustainability
With the integration of data through a semiconductor PLM platform, companies can also utilize this information to support their sustainability initiatives. By employing digital technologies such as digital twins, simulations, analytics, and BOM roll-ups, companies can evaluate sustainability factors like the carbon footprint from the early stages. This helps understand the impact of different scenarios or options, enabling businesses to identify the best strategies for achieving their sustainability goals. The collaboration tools, supplier management capabilities, and integrated data provided by PLM can assist in capturing the necessary information for these assessments and enabling more informed decision-making.
Recommendations and Next Steps
Recommendations and Next Steps
Based on industry experience and research for this report, Tech-Clarity offers semiconductor companies the following recommendations to scale and support profitable growth:
- Support digitalization with a digital thread. Digitalization provides capabilities to improve efficiency. A digital thread creates the traceability needed to overcome many of the top NPI challenges that slow semiconductor companies down and hurt quality.
- Focus on process efficiency. In the semiconductor industry, time to market is critical to success. Focus on digital workflows to achieve greater levels of efficiency.
- Integrate design and manufacturing data. Integrating data creates a digital thread and traceability, supporting digital processes and streamlining change management.
- Adopt PLM. PLM serves as a platform to integrate design and manufacturing data, create a digital thread, and support digital processes.
- Become more sustainable. While sustainability may not be an important growth strategy, it can offer a competitive advantage, especially with customers focused on reducing their carbon footprint.
*This summary is an abbreviated version of the ebook and does not contain the full content. For the full research, please visit our sponsor, Siemens (registration required).
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