CE Demand Driving Tighter Collaboration Between Manufacturers and Semiconductor Players

The past few years has seen the demand for consumer electronics (CE) products surpass the demand for PCs as global consumers benefit from technological advances in products including TVs, wireless handsets, and automotive applications. This has resulted in a boom for CE manufacturers and new growth opportunities for semiconductor manufacturers that traditionally focused on PC or communications markets.

This increasing demand is putting pressure on semiconductor suppliers to work more closely with CE producers to improve design processes and bring products to market more quickly. At the same time, CE producers are designing and developing their products faster than IC suppliers can design the necessary chips, indicating that the ongoing success of the CE industry is highly dependent on the continued coordination and improved speed to market of the relationship between CE and semiconductor players.

Advisory firm KPMG LLP, with the Global Semiconductor Alliance (GSA) and the Consumer Electronics Association (CEA) examined these and other related issues in a survey conducted early this year of more than 350 senior engineering executives at CE and IC manufacturers, and in its subsequent report, “The consumer electronics boom: How semiconductor and consumer electronics companies can improve cost, time-to-market and product quality.”

Among the key findings: approximately two-thirds of IC respondents currently derive 60 percent of their revenue from supplies for consumer products. In 5 years, this group expects to derive 80 percent of its revenue from these consumer products – a 33 percent jump, KPMG noted.

The growing reliance on CE sales is increasing the challenge for semiconductor companies to design, manufacture and deliver products to market faster with the typical product development cycle for CE devices running about 6 months shorter than the IC suppliers’ cycle to deliver the underlying circuitry. The gap is likely to widen as CE manufacturers step up competition on price and strive to be first to market to ensure profitability, the company believes.

KPMG believes that in order for CE and IC manufacturers to manage the rising demand for CE products, they must find common ground on their issues and determine the best ways to coordinate and collaborate on production.

A barrier to this however, is that CE and IC companies approach the development aspect differently: CE manufacturers, which are closer to the consumer and distribution channels, want flexibility and approach product development opportunistically, looking for earlier involvement and faster development from IC suppliers to speed products to market.

On the other hand, KPMG observed that IC suppliers work with elaborate design and expensive production processes and therefore look to lock in the design as quickly as possible for best manufacturability, aiming to reduce costs through the volume of the learning curve, not necessarily by being first to market.

With that said, CE manufacturers must involve IC makers much earlier in the design process and educate them as to which system elements are fixed and which are flexible, as well as think two to three generations out and work with IC suppliers to develop the appropriate semiconductor platforms.

Electronic Business, a sister publication of EM Asia