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Growth in both the electronics and semiconductor industries has been accelerated by the global pandemic and greatly challenged by global chip shortages. When the pandemic took hold, remote work became the norm for many, and this has unexpected consequences. The overnight increase in demand for technologies that supported working from home, such as laptops, monitors, cameras, phones, exacerbated the already increasing chip consumption trend. As a result, fabs focused on fulfilling those orders, in addition to the adoption of 5G and Internet of Things (IoT) technologies.
by Alan Porter, Vice President of Electronics and Semiconductor Industry Strategy
At the same time, the automotive industry predicted that the need for new cars would fall drastically due to the pandemic with travel restrictions and lockdowns in many countries. This prediction came true; during the depths of the first pandemic peak in mid-2020, sales of new vehicles fell, many dealers closed showrooms and auto plants were shuttered. That said, consumer vehicle retail sales rebounded far faster than anyone forecasted; it turned out that many people preferred driving instead of taking public transportation or airlines.
Interestingly, since employees could work from almost anywhere, the demand for recreational vehicles rose dramatically. As in many industries, manufacturers in this space were overwhelmed with orders, causing the further impact on the backlog and IC shortages. All these factors drove and continue to drive that increased demand for automotive ICs from the fabs.
There is no doubt that the demand for microchips will remain high through 2022 as the market demand will be strong for products that are smarter, more functional, constantly connected, higher quality and less expensive. So, the big question for the electronics and semiconductor industries is what can be done to ease the pressing chip shortage?
The long-term solution, of course, is to build more fabs, but that will take years, cost billions and represents a brute force approach. Conversely, there is risk that at some point we will return to over capacity. At Siemens, we believe that in 2022 companies can go a long way towards anticipating and solving IC supply chain problems by taking advantage of their existing manufacturing processes and the data inherent within it. By using solutions to extract data from smart manufacturing, it can be analyzed, processed and leveraged throughout the product lifecycle to improve productivity and cost reduction through digital transformation.
If companies can focus on automation and factories can run remotely, they can maintain production, even in the face of another pandemic or other major disaster or disruption. Automation software within the smart factory can collaborate with the supply chain ecosystem to get more real-time insights and companies can act accordingly and react more effectively when disasters strike.
The IoT keeps everybody connected to any machine, system, or database in the factory. When combined with a low or no-code development platform, companies are very quickly able to gain insights into their data without having to learn the intricacies of the underlying technologies. Dashboards can be built and shared, while workflows pushed to mobile devices or phones allow employees to respond to their assigned issues in real-time. Then all the players in the chain have access to what they need to know based on their role in the chain.
IC shortages also means companies are urgently looking for alternative suppliers. This means that their understanding of the resiliency of their supply chain must be in place to determine first and second sources and to mitigate the risks associated with switching vendors quickly.
If a company is desperate to get the product out the door, it might be tempted to skip these concerns. But being smart about which vendors to trust is critical for companies because of security issues and the risk of relying on potentially untrustworthy sources. Additionally, companies whose IC designs embody their intellectual property (IP) must consider IP security and be wary of counterfeit components. One of the many reasons the genealogy of the component, IP, or the chip must be traceable.
Integrating into an intelligent digital marketplace system is also a must for the workflow in terms of electronic components. The current component shortage environment has genuinely exposed the fragility of supply chains and creates a mandate for digital transformation and intelligent decision making. A strong Design-to-Source Intelligence (DSI) ecosystem with engineering and supply chain professionals worldwide can transform how businesses design, source, market and sell products in the global electronics value chain.
When all these approaches are used together, they can not only help semiconductor and electronics manufacturers to be more efficient and boost output with their current manufacturing assets, but, more importantly, they now can be resilient and react proactively when the next unknown crisis emerges.
Digital Transformation provides the backbone of the smart factory of today and the future and will continue to be a powerful facilitator of advanced technologies, innovative designs, and tighter collaboration. Digitalization can allow the industry to turn design complexity into competitive advantage while continuously improving quality and reliability. Those who commit to a comprehensive digitalization strategy will be in the best position to lead the industry of tomorrow.