The Need for Innovation in Semiconductor Industry
The semiconductor industry – the backbone of all modern-era digital devices and future technologies – has registered multi-fold growth in the past decade in terms of revenue generation. As these companies chart their future growth story, the 300mm silicon wafer market is expected to increase in 2021 by 5% in comparison to 2020. To support this demand, companies must keep up with their innovative streaks. Companies need to rethink how they can compete and create value in the future. While on the one hand, semiconductor companies have tools & processes in place to accomplish innovation, on the other hand, the chips are getting complex with tighter product introduction schedules and rigorous resource requirements. To win over these complexities, companies must possess established innovation processes, global manufacturing, design locations, Intellectual Property (IP) organic growth processes or licensing mechanisms, and the right equilibrium of technical capacity & capability to keep up with the latest technological trends.
Top Challenges that Come in the Way of Innovation
Semiconductors – the unsung heroes of the technology world – are expanding their scope in next-generation smartphones, cars, medical equipment, etc. they are fast becoming a necessary technology for nearly every electronic device. If the recent innovations are anywhere to go by, semiconductor chips will need to rise beyond customers' expectations to capture a greater market share. With fierce competition in place, a logistical mishap, lax cost control, or misconstrued demand can severely impact a company's ROI. In tune with this, leading-edge chip design and manufacturing companies need to solve the maze obstructed by challenges enlisted below and start their journey towards continuous innovation.
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Fragmented and Siloed Teams
A semiconductor manufacturing capacity comprises complex nodes such as varied wafer sizes (100mm, 150mm, 200mm, 300mm, and the futuristic 450mm) and processes (from 350nm to 5nm), demanding a specific supply network. With such complex requirements to achieve, which requires them to deal with several internal & contractual manufacturing sites and distributions centers, no single semiconductor company can ever be self-sufficient. Additionally, they work with fragmented teams across the globe, requiring greater visibility and constant collaboration. If the semiconductor industry had continued on the yesteryear growth path, such fragmentations wouldn't have been challenging for companies. The moment new-age technologies started taking center stage, the need for innovation in the semiconductor value chain became evident.
Such a complex web of the nonconnected network makes supply chain visibility difficult, leading to excess inventory growth and poor customer service. To simplify the productization, lessen engineering development cycle time and WIP (wafer-in-process) requirements for New Product Introduction (NPIs), companies need to expand their platform-based product design across families of products and generations, using the open sharing of technology roadmaps between customers and chip designers, again making a good case for PLM adoption in the semiconductor value chain.
Struggles With Data Management
Several research reports have confirmed that any strong advanced-analytics effort must start with the conception of a robust data set encompassing all necessary inputs – one that can be stored effectively and permits easy retrieval. This is a daunting task to achieve. In manufacturing, most leading-edge fabs have well-defined data models for individual tools. Each model requires sorting through 300 individual variables per tool or process steps. Some of these variables can be collected every few seconds or milliseconds, resulting in large volumes of data. In addition, inputs for each model may vary, depending on equipment or sensors in use or whether data is being analyzed while a process is underway or is completed.
Many companies find it challenging to align data sets or make comparisons. Overcoming these challenges warrants companies to go back to the original data and ensure aggregated consistently. Added to this are data latency issues arising out of data becoming stored in multiple disintegrated systems. In the absence of modern technology tools such as PLM, semiconductor companies find managing such a complex value chain challenging. This also calls for collaborative efforts to develop an interactive and agile supply chain that takes care of greater capacity, performance, and manufacturing costs.
Broken Processes and Extended Ideation Cycle times
According to a McKinsey study, on average, companies lose 33% of the PAT with the product shipment delay by six months compared to the losses of just 3.5% even if 50% is overspent in product development. The most successful semiconductor companies place a major thrust on first-pass success for new Integrated Circuit (IC) designs and product solutions. Low-quality first-pass designs also result in unacceptable yields, driving up cost, reducing profitability, and upending the final release and qualification requirements.
To give you a recent instance, one semiconductor company had to delay the launch of its flagship processor because of multiple design re-spins and low production yields, which resulted in angry customers and third-party developers and a huge dent in the company's market share. This example reflects that a successful first-pass design reduces market & development costs and amplifies new product revenue life. Design re-spins and software kit update massively enhance development costs and prolong the time-to-market for new products, frustrating customers.
Maximizing the ROI from Available Budgets
Attaining R&D leadership is not simply a tool for winning the market. It is also essential for controlling costs. For instance, the cost of building & equipping a facility with 5 nm production lines now runs about $5.4 billion—more than three times the $1.7 billion required for a fab with 10 nm production lines. Most of the cost increase is associated with the greater precision required to manufacture small structures. Additionally, as chip size gets smaller, R&D becomes more challenging because the researchers need to deal with quantum effects, minor structural variations, and factors that can complicate development. In the future, the R&D costs are only going to escalate, especially for leading-edge products.
While semiconductor companies need to dedicate billions of dollars to new fabs, they don't see an immediate RoI, which takes about 12 – 24 months to build a shell of a fab and install the required tools, with another 12 – 18 months for ramping up total capacity. Even after all these, if the demand falls beyond projections or if costs exceed expectations, the anticipated returns could be far lower than anticipated. While this is just one part of the problem, the semiconductor industry also needs to maintain a reliable track record for steady technological improvements to sustain its competitive edge. This calls for semiconductor companies to quickly find the right equilibrium between investment and R&D to garner sustainable RoI in the long run.