“Innovation is exploding in the semiconductor business because of mobile devices,” says Arvind, leader of Wipro’s global semiconductor business. Why? Because consumers are becoming choosy. “Companies have to keep up with consumers’ expectations. If they don’t, they will become irrelevant,” adds the Wipro executive.
Three underlying market demands are creating the five trends.
The three new market demands include:
- Power demands. Today’s data sucks down power. Two hours of normal use and there’s the dreaded yellow light on your mobile phone. Arvind says nowadays the power has to be as efficient as possible. At the same time, manufacturers have to create a smaller, thinner chip for lighter phones. “The power-performance battle between leading players will be the differentiator that determines who survives in the coming years,” he predicts.
- OEM behavior change. Previously, original equipment manufacturers just wanted a base platform from the semiconductor industry because they wanted to add the software themselves. Today, they demand more than the hardware. They want the manufacturer to include not only the software but basic apps, too.Semiconductor firms are now producing white label phones. He says some companies are designing and manufacturing the phones for Chinese clients. “Everyone expects semiconductor firms to provide the completed product. Now you have to be a one-stop shop,” says Arvind.
- Market knowledge. This changing OEM behavior now means semiconductor firms must understand indigenous market trends in each market they serve. For example, Arvind says the Indian market wants a cell phone with dual SIM cards–one for personal use and the other for business. That’s not true of the Brazilian market. And in Los Angeles, the market demands differ from both of those. “Today a semiconductor manufacturer must understand these differences,” Arvind says.
Semiconductor companies need a new set of strategies to be successful in the emerging markets. “If you look at consumer behavior and buying patterns in India or China, the reason a product succeeds or not is very different from that of other regions.”
These three demands are causing five market trends:
1. Commoditization. A lot has changed since Nokia came out with the world’s first smart phone. Trend 2 above is causing a commoditization of the market. So the holy grail today for semiconductor manufacturers is to come up with something unique that cannot be commoditized, explains Arvind.
The only way to do this is through software. “Hardware is no longer the answer,” posits Arvind. Content is king. “Content drives volumes,” he explains. For example, he says iTunes creates the excitement of the iPad and the iPhone, not the other way around.
2. Tablets. Content and apps are what drives tablet sales, says Arvind. For example, Wipro is helping companies “become a differentiator in the Android tablet market,” he explains. Tablets are fast replacing traditional PCs and newer form factor devices with new use cases are picking up momentum.
3. The battle across four screens. The four screens are a computer, a mobile phone, an automobile and a consumer electronic device like a TV. He says one of Wipro’s findings is that user buttons should be consistent across all four screens. Arvind says Apple and Google, along with the newest player, Samsung, “want consumers to be comfortable with their experience.”
For example, a consumer watches a movie on a smart TV. He hears a song in the movie and wants to know the name and artist. He uses his TV remote to turn the TV screen into a computer screen. A search screen helps him remember the name of that song!
The semiconductor industry has to provide the hardware that sits in the TV sets. “Google is coming out with a software stack. Someone has to integrate it,” says Arvind.
The US experienced this situation earlier when all television programming went from analog to digital. “Someone had to come up with a solution to make everything work together,” the Wipro executive points out.
“Immediacy needs represent a huge opportunity. It is a shift that is sweeping the semiconductor space in terms of how chips are going to be designed. Over the next five years, this immediacy problem will be solved, and it will probably drive chipset sales in a big way,” Arvind says.
This same real-time information phenomenon will affect corporate environments such as data centers. For example, managers will want to know immediately via sensors how certain servers or other systems are performing, how much energy they are consuming and other information related to cost and performance,” he adds.
Wipro has developed a framework that semiconductor firms can use to bring these new products to market faster. Automotive, computing and semiconductors are all focus areas for Wipro. “We can bring our knowledge to bear across all four screens,” says Arvind.
4. Enterprise mobility. Today, everybody wants everything mobile-enabled. “The technology is already out there,” says Arvind, especially with software-as-a-service apps. Wipro is now helping enterprises make all their business processes mobile-enabled, while being concerned about both security and regulatory requirements.
Bring your own device has become the workplace demand. To understand how this works, Wipro has allowed its employees to bring their own devices to work. “We wanted to see how it played out,” he explains. Wipro is sharing that experience with its semiconductor clients.
Lastly, Arvind says traditional IT budget funds, which paid for data centers and hardware, now are flowing to cloud, analytics, big data and mobility.
5. Application development. iOS. Adroid. Windows 8. Intel. “Everyone is developing apps for them. The winner will be the one with the most apps,” says Arvind.
He predicts by 2015 both television and computers will be touch screen. Windows 8 anyone?
Combine these five trends with two current challenges.
- Consolidation. Arvind says the industry is consolidating as every firm struggles with these five trends.
- Capacity. Sometimes the foundries that manufacturer chips can’t meet demand, creating a shortage. This obviously creates problems for those companies that must buy chips.
The bottom line: “Semiconductors are a cyclical industry that is not for the feint-hearted,” says Arvind. And that’s where Wipro comes in.