Where Is the Semiconductor Industry Going?
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Where Is the Semiconductor Industry Going? - A multiple case study of six semiconductor companies Joakim Nideborn Kristina Stråhle December 2007 Master Thesis Faculty of Engineering Lund University, Sweden Supervisor: Dr. Ola Alexanderson Where Is the Semiconductor Industry Going? Abstract Title: Where Is the Semiconductor Industry Going? – A multiple case study of six semiconductor companies. Authors: Joakim Nideborn and Kristina Stråhle Supervisors: Ola Alexanderson, Department of Industrial Management and Logistics, Faculty of Engineering, Lund University Mattias Löfgren, Ericsson Mobile Platforms Martin Zander, Ericsson Mobile Platforms Purpose: The purpose of the thesis is to investigate how the semiconductor industry will develop during the period 2007-2012. Issues: The main issues presented are: • How will the competitive landscape change from 2007 to 2012? • How will companies succeed in the industry in 2012? • What position will the Integrated Device Manufacturers take in the value chain in 2012? Method: In order to achieve the purpose of the thesis the multiple case study is complemented with a study of the market and technology trends. The necessary material and information is gathered mainly through qualitative research such as interviews, mainly with people within Ericsson Mobile Platforms. Further the information is gathered from industry newspapers available on-line. Conclusions: Competitive Landscape: The study has shown that the semiconductor industry will be characterized by hyper competitiveness and cost reduction. A transformation is approaching due to the upcoming technology which requires completely new solutions and huge amounts of capital. I Where Is the Semiconductor Industry Going? Position: The findings suggest that without in-house manufacturing the Integrated Device Manufacturers will have a narrower area of business and will be compensating by moving forward in the value chain, trying to establish as Technology Enablers. How to succeed: Furthermore the case companies have shown diverged strategies on how to succeed and a Key Success Factor Analysis identified Broadcom, Infineon and Texas Instrument as the companies most likely to succeed in the industry in 2012. Key words: Semiconductors, Integrated Device Manufacturer, Value Chain, Key Success Factor, Broadcom, Freescale, Infineon, NXP, STMicroelectronics, Texas Instruments II Where Is the Semiconductor Industry Going? Acknowledgements The thesis work has been a fast and fascinating journey that began in early December 2006 with a text message from Cambodia to Sweden. With that text message we decided to do our master thesis together. When we were both on Swedish ground again it did not take long before we contacted Martin Zander at Ericsson Mobile Platforms to see if he could be interested in having two students in his group during the fall of 2007. The first meeting was held at Ericsson Mobile Platforms in mid April where the content of the thesis was presented. We found the subject and the study interesting and decided to take on the work starting in September 2007. It became clear from the start that the biggest challenge would be the time limitation set by Ericsson Mobile Platforms as the thesis work was a part of a bigger project and had to adjust accordingly. The time limit has not only been negative though since it has given us plenty of extra motivation that would not have existed otherwise. Thanks to an interesting topic for the thesis as well as helpful co-workers at Ericsson Mobile Platforms the journey did not become too hectic and still offered time for needed reflection. We would like to express our gratitude to our supervisors at Ericsson Mobile Platforms; Mattias Löfgren and Martin Zander, who has given us valuable inputs as well as the freedom to analyze on our own. Furthermore we would like to thank all the interviewees, both internal and external, for their time; especially Mathias Nawroth and Magnus Karlberg for several fruitful meetings. Without the interviewees’ commitment to the project and their inputs the study would have been less usable. Further, we owe a thanks to our supervisor at Lund University; Ola Alexanderson, for his professional and academic guidance throughout the project. Last but not least we would like to thank Elisabeth Geijron for many useful and inspiring conversations over a cup of tea and a fruit. Lund, December 2007 Joakim Nideborn Kristina Stråhle III Where Is the Semiconductor Industry Going? IV Where Is the Semiconductor Industry Going? Table of Contents ABSTRACT............................................................................................................. I ACKNOWLEDGEMENTS ................................................................................ III TABLE OF CONTENTS ...................................................................................... V TABLE OF FIGURES......................................................................................... IX ABBREVIATIONS.............................................................................................. XI 1 INTRODUCTION..........................................................................................1 1.1 BACKGROUND..........................................................................................1 1.2 PROBLEM DISCUSSION .............................................................................2 1.3 AREAS OF INQUIRY ..................................................................................3 1.4 PURPOSE ..................................................................................................4 1.5 FOCUS ......................................................................................................4 1.6 DELIMITATIONS .......................................................................................4 1.7 TARGET GROUP........................................................................................5 1.8 DISPOSITION ............................................................................................5 2 METHODOLOGY.........................................................................................7 2.1 METHODOLOGICAL APPROACH ...............................................................7 2.1.1 The Subject and the Case Study ..........................................................7 2.1.2 Explorative, Descriptive, Explanative and Normative Approach .......8 2.1.3 Inductive, Deductive and Abductive Method.......................................9 2.1.4 Qualitative and Quantitative Approach ............................................10 2.2 DATA COLLECTION ................................................................................10 2.2.1 Primary and Secondary Data............................................................11 2.2.2 Pre-study ...........................................................................................11 2.2.3 Main Study ........................................................................................11 2.2.4 Sources of Criticism ..........................................................................12 2.2.5 The Delphi Method............................................................................13 3 THEORETICAL FRAMEWORK .............................................................15 3.1 GENERAL FORECASTING – PREPARING FOR THE FUTURE .....................15 3.1.1 Building Scenarios ............................................................................16 3.2 STRATEGIC APPROACH ..........................................................................17 3.2.1 Strategic Lenses, which one to use?..................................................17 3.3 STATUS QUO THEORY WITH A TWIST....................................................18 3.3.1 Porter’s Value Chain ........................................................................19 3.3.2 The Value Network............................................................................20 3.3.3 PESTEL Analysis ..............................................................................20 3.3.4 Competitor Analysis ..........................................................................22 3.3.5 Mergers and Acquisitions..................................................................22 3.3.6 Forward Integration..........................................................................23 V Where Is the Semiconductor Industry Going? 3.3.7 Alliances............................................................................................24 3.3.8 Herfindahl-Hirschman Index ............................................................24 3.3.9 Key Success Factors and Threshold Factors ....................................25 3.4 REQUIREMENTS AND FINAL DECISION ..................................................27 4 SETTING THE CONTEXT OF THE CASE ............................................29 4.1 INDUSTRY STRUCTURE ..........................................................................29 4.1.1 Foundries ..........................................................................................29 4.1.2 IDMs..................................................................................................30 4.1.3 Technology Enablers.........................................................................32 4.1.4 ODMs & EMS ...................................................................................32 4.1.5 Brand Owners ...................................................................................33 4.2 GLOBAL MOBILE PHONE MARKET ........................................................33