A new study focused on collaborative innovation in the global semiconductor industry was recently released, a joint effort between GSA, an association focused on the fabless ecosystem, and The Wharton School of the University of Pennsylvania. The research was spearheaded by Rahul Kapoor, a management professor at The Wharton School.
The results of the two-year study are based on detailed responses received from senior engineering, marketing and supply chain executives from 37 publicly-listed and 25 private fabless semiconductor companies, with the publicly listed companies representing 45% of total 2009 public fabless semiconductor industry sales.
In the report, Professor Kapoor notes that semiconductor companies are subjected to intense pressures with respect to time-to-market, product differentiation, cost structure and IP management. The key to addressing these pressures lies in understanding the ecosystem, not only externally but internally.
Overall, most fabless companies have formed extensive collaborative relationships with their suppliers, customers and "complementors." However, there are many others that seem to be working at an arms-length and perhaps not benefiting from the synergies that exist in a collaborative ecosystem, Kapoor observes.
Complementors, for example, are often other semiconductor companies that develop complementary ICs used in the customer’s application. "Managing relationships with complementors seems organizationally more complex than managing relationships with suppliers or customers. While there are well-defined departments for managing relationships with suppliers and customers, the relationship with complementors seem to be managed in very different ways both within and across companies," the report notes.
The extent of collaboration between fabless semiconductor companies and their manufacturing suppliers was evaluated in three different ways: (1) the extent to which a supplier shares different types of information with the fabless company, (2) the extent to which a supplier is involved in the fabless company’s value-creating activities and (3) the extent to which both the fabless company and the supplier customize their activities towards each other.
The study found that foundry and assembly & test (A/T) suppliers extensively share information on existing production, future technology development and capacity expansion. However, these suppliers are generally tight-lipped with respect to cost information.
Both foundry and A/T suppliers are very involved in fabless companies’ cost reduction and technology roadmapping activities. Their involvement is much lower for new product development and customer-based activities.
Fabless companies, on average, seem to customize their products and operations more with respect to foundries than with respect to A/T suppliers. On the other hand, A/T suppliers seem to tailor their manufacturing processes and operations more extensively to the fabless company’s requirements than do silicon foundries.
There are large differences among semiconductor companies in the extent to which they collaborate with foundry and A/T suppliers. Firms that have high collaboration with foundry suppliers on any one of the dimensions (information sharing/supplier involvement/customization) also have high collaboration with A/T suppliers.
Fabless semiconductor companies generally perceive their foundry and assembly suppliers’ performance to be good or very good with respect to suppliers’ technical competence, process quality, responsiveness to problems and inquiries, and capacity allocation. However, they seem less satisfied by the suppliers’ price competitiveness, and this effect is stronger for foundries than for assembly & test suppliers.
The study also showed that a company’s ability to effectively develop and commercialize new innovations is enabled not only through collaboration with external partners, but also through collaboration between internal functional groups and partners in the ecosystem. Here, companies differ significantly in the extent to which the marketing, engineering and supply chain groups collaborate with each other inside the company. In short, companies need to manage both external dependencies with suppliers, customers and complementors as well as internal dependencies between supply chain management, marketing and engineering functions. "It may only take one ineffective collaborative link to undermine the total value created by the firm within the ecosystem," the study concludes.
Solid State Technology | Volume 54 | Issue 3 | March 2011