Market Insights

Chipmaking Today: From Product to System

November 03, 2014 by Reinhard Ploss

From a business perspective, the semiconductor industry is a particularly exciting sector. There is hardly any other industry changing as rapidly and significantly.

From a business perspective, the semiconductor industry is a particularly exciting sector. There is hardly any other industry changing as rapidly and significantly. According to “Moore’s Law”, the number of transistors in integrated circuits doubles every two to three years. And about every three to five years, a new technology generation emerges. Infineon, for example, supplies the mobile phone market, which has experienced very strong dynamics for many years by now. Technologies and end devices change almost every year, customers and competitors emerge and disappear again after a short while.

Even the automotive industry that is characterized by longer development cycles recently had to experience how quickly new suppliers can move the market. It was as recent as in 2008 when Tesla entered serial production with the Roadster. Since that time, the company headquartered in California also sells components for the power transmission to established car manufacturers – and the Model S sports limousine. Even Google plays a role as an industry outsider. The search engine giant has pursued the endeavour of making autonomous driving possible with a number of projects and test vehicles since 2010.

A supplier, who does not supply end-device manufacturers such as Apple, HTC, Samsung or Sony directly, but rather their suppliers, must be extremely flexible to adapt to constant trend changes. Thus, it is best to know the strategies of manufacturers already before these are devised. At the same time, an eye must be kept on whether these enterprises that determine our markets today will still exist tomorrow. Perhaps others will enter the market or replace the established companies.

One of the major objectives in the business management of a semiconductor company is, therefore, to recognize new trends at a very early stage and then adjust to them respectively. In this attempt, one often arrives at a central conflict relatively soon. Experience shows how important it is for the dedication and productivity of employees to set a course to success and to consistently keep that course. Once this course to success is found, then the organization is swiftly underway, basically in “autopilot mode” and regular success becomes motivating and lends additional energy.

In a rapidly changing market, however, it is also necessary to consider whether a recipe for success might lead to a dead-end over the longer term. This is especially true when you focus on technology, a key element in semiconductors. Here, it is warranted to find a compromise between continuity and change. How do we accomplish this? Technology must serve a purpose which is of major relevance for our society, and move people and markets. Infineon primarily sets itself apart through innovation and finds substantially more room for developing its strengths in growing markets. Energy efficiency, mobility, security – these three topics are growth fields and of particular importance to Infineon. Our products are installed in trains, wind power and the entire electricity sector. We operate robot technology, medical technology and much more. All are fields of application with strong growth and a great need for technological innovation.

The semiconductor itself is not noticed at all by the consumer. But, even though the semiconductor is hardly visible, up to 90 percent of innovations in vehicles, for example, are implemented today by means of electronics. Progress in electronics, in turn, is based nearly entirely on the pace of innovation in semiconductors. And the pace is tremendous. Since the modern semiconductor industry was founded with the first ICs we have been experiencing a complete innovative overhaul of the technology about every three years.

The traditional basic concept of semiconductor companies is to make chips continuously smaller, increase their performance and make them cheaper. This is how innovation has always worked in the industry. One of the central questions we have to ask ourselves as an enterprise in light of this rapid pace is: “What happens if that changes?” For a long time, we have had great success as a company in that we have developed chips with very specific functions, delivered them on order and continuously improved them in terms of price, size and efficiency. However, an unbelievable race for innovations is unfolding in our target markets in the meantime. It is therefore crucially important not only to improve the semiconductor per se but to develop it further, specifically for the current and future requirements of the market and respectively those of the customers.

This principle can be applied to car headlights. The step from the light bulb to Xenon to LEDs is by itself not a revolutionary innovation. But based on LED technology, not only the road is illuminated but the entire area in front of the car in a dynamic manner. Intelligent LED headlights allow the driver to use the high beams continuously without causing a glare for oncoming traffic or vehicles driving ahead. At the same time, an infrared camera ensures that a pedestrian at the roadside can also be reliably illuminated. This helps prevent accidents and increases safety. If offered all necessary components in one system, the automotive industry will welcome it – also because something like this sells much better than CO2 emissions reduced by 0.2 grams.

This sort of approach forces us in a positive sense to reconcile our own business model of continuously building better performing, more reliable, smaller and cheaper semiconductors with the business models of our customers. We consider the significant challenges our customers face in their markets and adjust our products to the challenges in the best possible way. This means, for example, no longer building just one chip with a specific function, but also designing a complete and complex system architecture for the customer consist- ing of active and passive components. This, by the way, also includes the development of system software more and more.

In the best case, we do not produce customized individual components on order, but supply our customers with what contributes to what sets them apart in their end market. We call this type of conception and action “From Product to System”. This course of action is to ensure that we, too, can set ourselves apart from the competition through continuous innovation and position ourselves as the market leader for the long term.

 

About the Author

Reinhard Ploss holds a Diplom in Chemical Engineering at the Technical University of Munich. He currently works as the Chief Executive Officer at Infineon Technologies.

 

This article originally appeared in the Bodo’s Power Systems magazine.