Semiconductor Supply Chain Unprepared for Mobile Device Demand

Mobile devices such as smartphones and tablets require powerful and innovative semiconductor chips far superior to those found in typical consumer electronics products. These chips are now in high demand, because smartphones and tablets are in high demand. As such, chip manufacturers need to make more sophisticated chips and deliver them to market extremely fast — a tall order for sure.

So far they have proven unprepared to deliver on these requirements. To do so, they need to completely overhaul their supply chains with the goal of increasing the speed and efficiency of their chip development processes. Accenture arrives at this conclusion based on a new report titled “Semiconductor Supply Chains: An Urgent Need for Change.”

Different World

Drastic changes in the electronics supply chainare required to respond to smartphone demand.

Drastic changes in the electronics supply chain
are required to respond to smartphone demand.

History as guide?
Historically, supply chains for desktop PCs and industrial equipment have been relatively stable and predictable. Chips needed to be developed and delivered to manufacturers in roughly a year or two. But chips for mobile devices require a much faster turnaround time, sometimes in less than six months, to keep pace with the number and types now flooding the market. It's becoming more difficult for chip makers to determine future pricing levels and overall volume demand for mobile devices. Higher inventory levels are being used as a safeguard against shortages. But with that come the added costs of managing a massive inventory.

The complexity of individual mobile devices has also increased in the past few years. Mobile device manufacturers are demanding more multi-function devices such as cellphones with higher-resolution screens, and more applications such as mapping, that require more powerful semiconductor chips.

To illustrate, a recently released Accenture survey found that consumers are less likely to buy single-function electronic products in the next year, while intentions to buy multi-function devices, such as smartphones and tablets, have increased dramatically. Accenture summarized these findings in its 2013 Global Consumer Electronics Products and Services Usage Report.

Addressing the challenge
With all this to consider, the question is this: Can chip companies keep pace with the production of next-generation mobile devices? If they make changes to their supply chain, the answer is yes, but if they don't, it's not likely. Accenture recommends chip makers take the following steps.

  • Gain more visibility into design and supply chains : Chip vendors need to be involved early in device manufacturers' developmental process, especially during the product concept phase. Early involvement enables them to anticipate product requirements and adapt processes naturally as the product changes. This up-front participation provides more flexibility and minimizes future redesigns. Likewise, open access between both parties improves collaboration and guides better product launches.
  • Modernize production : Smartphones and tablets have unique chips requirements; they are not the same as those found in desktop PCs, servers, and other industrial equipment. They need to pack more processing power and long-lasting batteries within a smaller product. Because the product differs, the process for producing them also should differ. Two processes worth considering: Introduce smaller semiconductor manufacturing processes and NAND memory production.
  • Concentrated integration : Innovation can more readily surface from a multi-functional, integrated base. On a technical level, semiconductors can accomplish this directly on the chip itself. Integrating analog, mixed-signal, and digital components within advanced nodes produces higher-performing chips with more features, lower power use, and faster time to market. When chips are built with capabilities that leverage system designs or embed software, further innovations are possible. Chips with multiple layers of active electronic components integrated vertically and horizontally on one plane, known as three-dimensional integrated circuits, are an ideal technology for mobile devices.
  • Use relationships to enhance capacities and skills : To fully produce chips for mobile devices, chip manufacturers will likely not have all the necessary resources in-house. They need to look outside the company by collaborating with businesses and organizations that do. Access to these resources extends agility, improves asset use, and delivers the latest innovations.
  • Level up on demand fulfillment : Chip manufacturers need to recalibrate production capacity and inventory planning to fit within the shorter fulfillment window of new mobile devices. The latest software for logistics and demand forecasting are ideal investments for better controlling sudden spikes in demand, creating shorter fulfillment times and expediting large inventory volumes.

To access the full report, click here.

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5 comments on “Semiconductor Supply Chain Unprepared for Mobile Device Demand

  1. _hm
    March 20, 2013

    Semiconductor vendor has very limited profit margin as compared to mobile device vendros. Semiconductor vendor may be expecting mobile vendor to invest much more in their organization to get faster and stable supply of required chips. Mobile vendor can predict more their requirement and locate chip vendor and help them to ramp of supply fro them. This may be win-win situation.


  2. prabhakar_deosthali
    March 21, 2013

    To be able to have a guaranteed and rightly priced supply of semiconductors it mat be worthwhile for mobile device manufacturers to have captive facilities for such devices

  3. Brian Fuller
    March 21, 2013

    @_hm, interesting point, although we've seen that in some sense with the ST-Ericcsson situation, which hasn't worked out so well. The lesson there is spread your risk around. Most semiconductor vendors historically have done that pretty well, even if that requires setting up multiple supply chains for customers. 

  4. HM
    March 22, 2013

    Its too tricky for the semiconductor supply chain business. While mobile device demands can fluctuate in less time spans, its too difficult or risky for the semiconductors mfr to cope up with fluctuations. So much of cost is involved when you do fabrication. And needs a lot of planning also.

  5. mfbertozzi
    March 24, 2013

    @p_d: I agree; sometimes there is also a limitation due to features' porting process, because mobile dev platforms are still young respect to traditional or legacy development platforms.

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