New business models emerging

BY PHIL GARROU, Contributing Editor

Jim Walker, who retired from Gartner and is now consulting as World Level Packaging Concepts, gave a plenary talk at the recent IMAPS Device Packaging Conference in Scottsdale on the state of the semiconductor industry which contained some interesting perspectives on emerging new business models.

While Gartner 2020 projections show wireless and computer will still account for ~ 50% of the overall market activity, automotive, storage and industrial will show significant growth (7-9%) between now and then and account for ~ 30% of the total market (combined).

Gartner expects consolidation to continue “…with semi companies sitting on $135B in cash and profit margins decreasing there is a need to diversify into new markets” with specifics including:

• IoT related M&A activity will drive consolidation in MCU, analog and sensor technologies.
• Companies will initiate sale of unprofitable divisions and product lines to prepare themselves for M&A (i.e., make themselves more attractive to be acquired).
• China will continue to buy or invest in U.S. and European companies, even as governments impose restrictions.

Gartner sees the industries maturation resulting in traditional business models changes. The traditional semiconductor ecosystem is shown in FIGURE 1.

Screen Shot 2017-05-01 at 1.56.50 PM

Gartner reports that a relatively new problem for some OEMs and Electronics Brands is that they are being bypassed by a direct relationship between the ODM/EMS company and a non- electronics brand owner buyer who could be in any industry. This model emerged with Operator branded handsets, although those were recognizable as say Nokia or Motorola. This (Brand) Direct to ODM/EMS business model is good for chip suppliers but bad for traditional electronics companies (FIGURE 2).

Screen Shot 2017-05-01 at 1.56.56 PM

Another relatively new problem for some chip companies now is that they are being bypassed by a direct relationship between the foundry and the EMS/ ODM company and the OEM –- the OEM Direct model. These could be chips designed by Apple or Facebook (for example) and manufactured by TSMC (FIGURE 3).

Screen Shot 2017-05-01 at 1.57.02 PM

Walker specifically suggests we keep an eye on Hon Hai/Foxconn which appears to be building strong and broad manufacturing capabilities through acquisitions such as Japan’s Sharp (Feb 2016) and a bid on the Toshiba memory business (2017).

Packaging is currently ~17% ($53B) of the $265B electronics market. By 2020, 55% of all packaging is expected to be done at OSATS with foundries like TSMC (and maybe others soon) becoming competitors with their own wafer based packaging offerings like InFO. Walker sees a bright future for IoT packaging, but cautions that it is composed of many small t omid-sized applications, not one big one like the smartphone,and thus will require many custom packaging solutions.


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