Smith Market Blog

Components and Regions Undergoing Major Shifts


2015 will be a period of transitions and changes, both to regional balances and market share, as well as to component design, materials, tools, and the innovative solutions these changes bring for end-devices. These two major shifts will have lasting impact on our industry's supply chains and on the direction taken by important growth drivers, like IoT.

China & India will be game changers

A market change that we expect to gain momentum this year is the shift in China and India from low-cost, emerging market, manufacturing hubs to globally competitive, quality-driven, technology hubs providing respected components and end-devices. As discussed in the just released Smith MarketWatch Quarterly (available now with a free subscription), China and India both, in their respective ways, are set on a course to develop industries that will provide long-term, high-tech and high-quality products that are made in those countries. The reason behind these shifts is these governments, facing slowdowns in growth, are working to ensure long-term, strong, GDP growth for the countries, support their emerging middle classes with both white- and blue-collar jobs, and increase pride in domestically manufactured products, especially high-tech, to compete and gain market share in the global arena.

The industrial shifts in China and India will directly challenge existing supply chains in our industry as well as the make-up of global OEM and EMS leaders. We expect that this will be the start of very real competition with a highly-local and/or regional favoring of goods and services. With this shift, local relationships will matter greatly, as Bolaji Ojo importantly points out in his recent article in Electronics Purchasing Strategies. It will be even more important to strategically review suppliers and distributors. Those companies, like Smith & Associates, with long-standing, local relationships, offices, and knowledge are strategically positioned to support these significant supply chain shifts and help companies successfully navigate this exciting and innovative period that we are entering.

Changes to components wide-spread

The changes expected in component architectures, manufacturing and packaging are equally far-reaching and dramatic. There have been significant CAPEX investments and equipment worldwide over the past year plus. As discussed last week, according to SEMI, the year-over-year growth in equipment sales hit 20% and Gartner tagged semiconductor revenue growth in the 7.9% range for the same year-over-year period for 2014.

This momentum has begun and these changes will have significant impact on the industry, as discussed in this interview with Dr. Lucio Lanza and Electronic Design after the recent announcement of him receiving this year's Phil Kaufman Award: "In recognition of his advancement of the EDA and IP industry through his generous business and technical mentoring, and financial support of numerous innovative companies […]." As Dr. Lanza states: "My view is that the semiconductor disruption is happening and we cannot stop the future. EDA is under the disruption and is impacted by the laws of silicon. The EDA industry has to change what it’s designing now and in the future." More specifically, as he continues later in the interview:

Think about it one step at a time. The chip in XX years from now may be designed in 3D with the same concept as a skyscraper of yesterday or today. It will be simple layers with a central post for all utilities. The way data is stored and managed will be transformed. We’ll move from horizontal design to vertical design. One design will become a platform. Because everything is a plane, all layers could be different. No tools today can support this type of design. It will be so much more complex and built in a modular fashion. We’ll need both the methodologies and tools to manage the complexity of the next computer as we move from horizontal design to vertical design. EDA will acquire dimensions.

Changes are occurring at multiple levels: materials, architecture, methodologies, tools, EDA, among others, each supporting innovative chip and device solutions. These new solutions, in turn, are promoting new ways of thinking about architecture and about middleware. IoT is not just about the end-devices for consumer and industrial electronics for sale today that will be cobbled together and increase data collection. No, the IoT that we may be on the cusp of seeing will come out of these significant changes that reach into the heart of semiconductor design, materials, and production. Truly a monumental shift as radical as we've seen and hand-in-hand with major regional shifts that will also challenge our current views of the industry and supply chain.

Change has always been a constant in our industry; thankfully, 2015 will bring us more changes in component design and in regional market share.

Lisa Ann Cairns, Ph.D.
Written on Tuesday, 20 January 2015 21:36 by Lisa Ann Cairns, Ph.D.

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