We help our customers develop breakthrough products and services within their market.
At Cambridge Consultants we are lucky enough to have deep engagements with clients across a wide range of industries. Through those engagements we get insights into the economics of their businesses and what motivates them.
Recently I’ve seen a fascinating and emerging trend: a growing number of OEMs are now developing their own semiconductor devices. This isn’t entirely new, as companies often develop devices where there is nothing available off the shelf that would meet their requirements, and indeed we have our own busy ASIC development capability.
What is new is that OEMs are now developing devices for which the function can be satisfied by off the shelf devices and, unlike with the traditional ASIC market, the volumes are well into the millions. Or to put it another way, these are unit volumes that would normally interest a typical semiconductor company.
So why is this happening?
There are several reasons...
Firstly, today there is a lot more silicon IP available to satisfy the requirements of most products, even wireless IP - which until quite recently has been a barrier for many.
Secondly, semiconductor companies tend to be more interested in developing multi-function SoCs fit for a broad range of applications, rather than simpler lower cost single or dual purpose devices.
Thirdly, in many cases the industry verticals in question simply don’t need the differentiating and value-add features that semiconductor companies strive to provide. These additional and advanced features increase the cost of devices, in an age where many are trying to integrate technology into products that sell for a fraction of a dollar. This means that for a high volume application there can be a business case to develop a custom, minimum viable semiconductor device. It’s a compelling case: It allows the OEM to integrate at cost, to better protect any proprietary IP, to have control over the supply, avoid end of life worries, and at the same time enable a real advantage for their product in their market, even if the cost of development is in the millions of dollars.
But there’s still a gap. Although the business case is often attractive, what these companies would prefer to avoid is the management of production yielding, management of inventory, supply, distribution, etc. These headaches are a distraction from their core business. This provides an opportunity for semiconductor companies or even for new companies to spring up to provide a service to manage this for them.
How might this DIY trend impact the semiconductor companies?
Today, the number of OEMs developing their own devices is growing, but relatively small. However, we do observe a growing interest, underpinned by eroding costs and a realisation that DIY is commercially viable. That being said, the semiconductor industry is constantly changing, with some semiconductor players entertaining the development of ASICs and cut down devices for OEMs. This is why we invest in our relationships spanning the semiconductor and OEM space, so that we can provide up to date advice and guidance to our clients across these verticals.
We use our insights, coupled with our product development and semiconductor experience, to guide the platform strategies of our clients. In turn, our ASIC expertise, coupled with our excellence in product development, is a valuable and unique combination of skills to help those OEMs willing to try the DIY route.