To maximize value, review biz

To maximize value, review biz

BY HIROKAZU HASHIMOTO President and Chief Executive Officer, NEC Electronics Inc., Santa Clara, Calif.

While cost management is essential during these difficult times, companies must also take advantage of the slow period to reevaluate the way they do business. When the economic crisis ends, semiconductor vendors will need to have done their homework to ensure that they are offering the products most in demand.

While small margins may provide a respectable revenue stream when the economy recovers, products with higher margins that will meet with increased demand in the new economy can end up providing the bulk of a company's revenue. Therefore, companies should focus their R&D efforts and road maps on "high-value" products, such as high-performance chips with unique value-added features designed for the automotive, communications, consumer or mainframe server markets.

Beyond product road maps, semiconductor vendors must have their design and manufacturing resources properly aligned if they are to meet the demand for high-value products. Correspondingly, companies will need to make significant investment in the continued improvement of their EDA capabilities.

Vendors must make sure they have fabs in place that support those processes. Those same lines also should have process checks in place to make sure all components of the manufacturing line are operating as efficiently as possible. Semiconductor vendors must also ensure that they have ample access to advanced packaging technologies, since high-value semiconductors require packaging with high pin counts.

In short, knowing what high-value products will be in demand when the economy improves is of little value without the design, manufacturing and packaging processes to build them.

With a product road map that anticipates what products will be in demand when the economy rebounds and a manufacturing process capable of meeting that demand, vendors must then ask themselves whether they have the distribution channels in place to deliver those products to customers. With the continuing development of e-commerce solutions, vendors desiring to leverage the instantaneous communication of the Internet for more efficient inventory management and accounting need to develop their e-commerce infrastructures now.

Also, while U.S. distribution channels have become increasingly refined and efficient, outside sales channels could benefit from vendor investment. To meet the demand for high-tech equipment, including both high-value and commodity-level semiconductor components, vendors will need to invest in developing their distribution channels in those regions.