There has never been anything static about the semiconductor and electronics industry, so it is not groundbreaking to offer that we are (again) moving through changes in the supply chain structure. Yet current changes are noteworthy and directly affect a wide range of companies, market strategies, and the ebb and flow of component supply and demand trends.
Mobility changes component focus
While PCs are still a notable market sector, the impact of tablet and smartphone sales has slowed the refresh rate for PCs, while also impacting the direction of innovation for this long-standing device sector. With the slowing of PC sales, and the significant and consistent demand for smart wireless devices (SWDs), the balance of components available has also changed, of course. Importantly, the shift in end-device demands and favoring of mobility over stationary computing has directly influenced architectural design of both hardware components and devices as well as the way in which software and operating systems are architected and integrated into the design of end-devices. The reasons are many, but certainly stem from the goal of providing a ubiquitous computing experience, as discussed last week.
The recent Smith MarketWatch Quarterly (delivered to subscribers free and available later this month on www.smithweb.com) focuses directly on the latest disruptive impact of mobility on both the R&D of core components as well as the rolling impact from device design to market sector opportunities due to increased semiconductor and electronics penetration based on mobility demands. As reported and discussed in detail in the Quarterly, the increased demand for mobile devices with their form-factor related demands (space, heat, power, processing, connectivity, battery, etc.) are directly pushing the industry to provide more System in Package (SiP) solutions as we move towards reducing the cost of System on Chip (SoC) production to reach that architectural design solution series.
With market changes, supply chain roles change
Alongside of the end-device and component design changes, there are increasing changes occurring in the semiconductor and electronics supply chain. Certainly, the number of consolidations, particularly at the OEM and leading-edge manufacturing sectors, has increased over the recent few years to the point of decreasing numbers of manufacturers, such as the case in the memory sector, to name a notable recent case. There are many reasons for these consolidations, not the least of which is the rising cost of fabs as well as the equipment itself. Combine these rising CAPEX costs with increasing market volatility due to the still-troubling macro-economic situation and competition is fierce - margins are extremely tight.
In the face of these competitive and component changes, the opportunity to rely on agile, trusted, and quality supply chain partners has increased. Of particular note is the increase in demand for value added services from distributors in order to help with strategic inventory management programs and especially in providing critical, industry accredited anti-counterfeit testing to ensure the quality of sourced parts.
Smith survey underscores ID roles
To better understand the shifting needs of and challenges facing supply chain partners, Smith recently conducted a survey to this end. Among the topics covered, the Smith survey explored the expected role of Independent Distributors (IDs) in the supply chain, and found an emphasis on supplying low cost components, sourcing support, and inventory management solutions. A majority of respondents indicated that that ID’s role should be to supply components at the lowest cost. This was most important to CMs and ODMs. The value-add role of IDs in inventory management was important to a significant percentage of respondents. Respondents, especially CMs, also indicated that IDs play an important role in actively filtering counterfeit parts from the global supply chain, and notifying authorities of irresponsible supplier practices.
More detailed information about the recent Smith Survey will be forthcoming.