How Should Chip Manufacturers Use Tech to Overcome the Ongoing Industry Crisis

Jan 25, 2022
High-Tech | 8 min READ
IDC predicts the global semiconductor market to grow by 17.3% in 2021 versus 10.8% in 2020. According to this research, the industry will show signs of normalization by the middle of 2022, with a potential for overcapacity in 2023 as larger-scale capacity expansions begin to come online towards the end of 2022. On the back of rising demand, the semiconductor market is set to reach US$600 billion by 2025 with a CAGR of 5.3%. Such spectacular growth calls for new-age agile manufacturing practices that strengthen the supply chain matrix and ensure topline performance for the organizations.
Nitin Jindal
Nitin Jindal

Digital Partner

Communications, Media, and Telecom


Volatility in the Semiconductor Industry
Rapidly changing market dynamics in the semiconductor industry and demand moving in different directions and to different extents, depending on the application areas, is pushing companies to fast adapt to these changes and plan their journey toward the next normal via bold and timely moves.
With demand rising from consumer and business customers in 2020, semiconductor companies witnessed high double-digit returns, even after facing supply-chain issues and growing divergence in global trade. With the pace of digitization on the accelerated path in the post-COVID-19 world, semiconductor companies stand to gain from developing strategies that address the shifts in the competitive landscape.
Burgeoning investments in self-driving cars, IoT, and AI, along with the coming shift to the 5G connectivity standard, offer tremendous opportunities for growth and specialization. The industry is continuously moving toward the fabless production model to leverage the benefits of leading-edge technology.
Apple's M1 chip (for notebooks, low-end desktops, the Mac Mini, and tablets) demonstrates this move towards in-house chip design, which leverages foundries to develop products. Today companies with well-established in-house manufacturing facilities, such as Intel, are also going for partial outsourcing to chip foundries to leverage greater production flexibility and cost reductions.
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How Should Chip Manufacturers Use Tech to Overcome the Ongoing Industry Crisis
Driving Flexibility in Manufacturing and Fulfillment
Manufacturing flexibility improves a semiconductor firm's ability to react promptly to customer demands and enhance the productivity of the production system without incurring high costs and excessive spending resources.
The emerging technologies in the Industry 4.0 era and their application, such as cloud in semiconductor industry or industrial AI in semiconductor industry, make way for new flexible production systems. Autonomous mobile robots (AMR) offer a suitable alternative in decentralizing material flow because of their strong onboard computational power. Decentralizing material flow can deliver more flexibility for production systems. Volatile market conditions and fast-changing customers' requirements only strengthen the case for driving flexibility in semiconductor manufacturing & fulfillment.
The high cost of chip production in the semiconductor industry makes it logical to attach electronic components to each wafer carrier or Front Opening Unified Pod (FOUP), improving production efficiency. The data collected into the siloed models and analytical software used in Industry 4.0 in semiconductor industry makes it easier to account for the cost of each item, resulting in better intelligence for business strategy and product pricing.
To reduce production costs and produce more customized batches, automaker OEMs and their suppliers use machine-to-machine (M2M) communications and machine learning-based processes to upend production flexibility. In the smart factory, the machines and robots are equipped with the technology – hardware and software – that enable M2M communication and interoperability, facilitating the transfer of data from one machine to other machines in the same factory and the infrastructure and users connected through the Internet. The rules and patterns involved in M2M communication enable unprecedented flexibility in production.
How Should Chip Manufacturers Use Tech to Overcome the Ongoing Industry Crisis
Business Imperatives for Semiconductor Manufacturing in Volatile Times
Next-generation electronics, machines, medical devices, and beyond – all need new and enhanced semiconductors. ABI Research estimates around eight million consumer vehicles that will be shipped in 2025 will feature SAE Level 3 and 4 technologies, where drivers will still be necessary but can shift safety-critical functions entirely to the vehicle under certain conditions, and SAE Level 5 technology, where no driver will be required at all.
Over 70% of security surveillance cameras will ship with on-device real-time monitoring and analytics functions within the camera, up from less than 5% in 2018. This transformational landscape enables and powers 5G, AI, Edge Computing, and IoT onto chips. Continued focus on structural growth drivers in the emerging technology space will aid the semiconductor companies to create a more resilient and reliable future for the world.
How Should Chip Manufacturers Use Tech to Overcome the Ongoing Industry Crisis
Manufacturing Execution
The ever-increasing complex, geographically dispersed, and constantly changing global marketplace necessitates semiconductor manufacturers to continuously innovate to serve the demand for unstinting quality with higher efficiency and lower cost. To respond effectively to rapid and frequently volatile change, enhanced visibility and greater collaboration across supply chain networks are paramount.
With the dire need for flexible technologies to meet these requirements, semiconductor MES takes center stage in the technology strategy of semiconductor manufacturers. It is focused on proactively enhancing processes, such as preventing quality problems. Semiconductor MES enables agile, interconnected workflows indispensable to today's semiconductor manufacturers.
Real-time information exchange supports collaboration and better decision-making across the extended enterprise.
Manufacturing Operations
With the COVID-19 crisis interrupting supply chains and increased geopolitical tensions, semiconductor companies are keen to accomplish end-to-end design and manufacturing capabilities. More than one trillion chips were manufactured worldwide in 2020 – about 130 chips for every person on earth.
But despite what their widespread presence might suggest, manufacturing a microchip is no mean feat. To remain competitive & efficient, chipmakers are automating their manufacturing operations, encompassing vertically integrating manufacturing systems and horizontally integrating IoT across the enterprise and semiconductor value chain.
Industry 4.0 tools, in this regard, substantially lower cycle times, improve productivity without expanding the fab footprint or adding capacity, increase automation, and decrease energy costs. Companies should utilize advanced analytics to reimagine time to yield and yield ramp-ups. Chipmakers can also collaborate with equipment manufacturers to apply advanced analytics and accelerate the yield learning curve.
For instance, modeling made possible by advanced combinatorial learning could replace the physical testing of chips and thus decrease the cost of introducing them and their time to market. Innovation in line with Moore's law will certainly remain, but additional advances through system-on-a-chip architectures using 'chiplets' should also be explored.
Capitalizing on the immense opportunities, Bosch has recently invested around one billion euros in the high-tech manufacturing facility, which, once completed, will be one of the most advanced wafer fabs in the world. During the start of the year 2021, Bosch began putting its first wafers through the fabrication process in Dresden.
The company plans to manufacture power semiconductors for DC-DC converters in electric and hybrid vehicles as the next step. These microchip prototypes can now be installed and tested in electronic components for the first time. With ambitious plans in place, Bosch is on the road to achieving many firsts in the semiconductor manufacturing space and leaving a successful trail.
Manufacturing Asset Operations
The semiconductor domain faces the rising complexity of manufacturing processes. It is characterized by high-cost pressure due to increasing competition and customer requirements in terms of quality. Therefore, it is essential to explore and establish optimization technologies that increase productivity to remain competitive.
Driven by emerging Industry 4.0 technologies, Predictive Maintenance (PdM) offers a possibility to improve productivity. The predictive maintenance technique leverages data analysis to detect problems in machine operations and fix them before failure. In other words, PdM optimizes machine utilization and therefore increases overall productivity.
To increase Return on Assets (ROA), leading organizations are implementing digital solutions for Asset Performance Management (APM). These solutions enhance Enterprise Asset Management (EAM) by capturing information and insights related to asset condition and performance to minimalize unplanned repair work, reduce equipment failure, enhance asset availability, and boost asset life without sustaining additional costs.
APM systems track & monitor asset performance and connect disparate sources of real-time & historical operational data to analyze and identify opportunities. This way, it helps improve asset performance, reduce maintenance costs and facilitate smarter decision-making in core business operations.
APM platforms possess data capture, data integration, data visualization, and advanced analytics capabilities to improve the reliability and availability of physical assets. They connect the production floor to a company's balance sheet using data related to the health and output of their assets. These advanced solutions forecast asset failure and enable predictive and proactive maintenance initiatives. They help the operations and reliability leadership understand how and when assets fail, allowing them to make changes and improve performance. Additionally, these systems leverage asset data from other enterprise software, including Automation & Control, ERP, EAM, MES, CMMS, and PLM systems.
Putting Strategy to Execution
An integrated enterprise business planning approach, supported by robust scenario modeling and predictive analysis, can improve planning accuracy and strengthen decision-making.
How Should Chip Manufacturers Use Tech to Overcome the Ongoing Industry Crisis
In a strategy called Copy Exact! Intel develops each semiconductor fabrication plant to the exact specifications, creating interchangeable processes and interchangeable fabs throughout the world. Copy Exact! began in the mid-1980s to cope with the incomprehensible complexity of semiconductor manufacturing. The minutest variation in temperature, pressure, chemistry, or handling can reveal the difference between the quality of the chip.
Once Intel succeeds in fixing the semiconductor manufacturing process at one facility, it copies that process to other Intel facilities, resulting in greater flexibility and operability. Intel can transfer capacity and work-in-process back and forth between facilities to remove manufacturing bottlenecks and defeat disruptions in any given facility. Copy Exact! Has already transformed Intel's global portfolio into a seamless virtual fab. Production of wafers can be modularized using this model without impacting yield. Today, this powerful strategy extends beyond semiconductor fabrication to the assembly and test factories and the contractors who support building PC motherboards and even beyond!
It's undeniable that the world is a different place after the COVID19 crisis, yet we do not know the extent of the changes that we are set to experience. With so much uncertainty in the offing, semiconductor companies should make the best use of opportunities by developing multiple future scenarios, each showing different macroeconomic and virus-related outcomes, as they plan their strategy for coming years.
They should embrace uncertainty as part of their operating model because as we advance, agility & the ability to adapt quickly will be far more crucial facets. Those semiconductor companies that act quickly could emerge stronger, taking a cue from the previous downturns. Modest CAPEX reduction, focus on R&D innovation, and a resilient semiconductor supply chain will aid in capturing growth and creating leading-edge technologies that will be in high demand once the economy begins to recover.
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