Artificial Intelligence is reshaping the semiconductor industry

 

December 2017

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Opportunities

The sales of semiconductors are fuelled by the demand in:

  • Upcoming 5G smartphones and infrastructure

  • Cloud servers

  • IoT wearables and sensors

  • Autonomous cars and electric vehicles

  • Chips used for machine learning and artificial intelligence

In particular, the Chinese market is growing fast.

 

Challenges

However, the market trends are changing the landscape and semiconductor players face the following challenges:

Combining these technologies, notably for AVs, is very complex

It is difficult to compete across all IoT use cases and marketplaces

The channel mix varies across international markets

Weakening retail prices and rising supply costs have impacted margins and led to production outsourcing

Substantial Capex and R&D expenses are required to manage cost, quality, and production cycle times

Competition is getting fiercer and international

  • Semiconductor chips are being optimised for AI (*)

  • New entrants and startups are appearing

  • Consolidation continues

(*) Recent AI-related competitive moves include:

  • Nvidia: GPU for large-scale customers and for cryptocurrency-linked demand

  • Google: Tensor Processing Unit

  • Intel: NNP (Neural Network Processors)

  • Graphcore: Raise of USD 60 million in July 2017 and October 2016

  • ARM: New chip architecture

  • Google: Tensor Processing Unit

  • Intel: NNP (Neural Network Processors) and acquisitions (Mobileye in March 2017, Movidius in September 2016, Nervana Systems in August 2016)

  • Qualcom: Acquisition of Scyfer in August 2017

  • Broadcom: Acquisition offer for Qualcomm in November 2017

 

Solutions

In order to grab those promising opportunities and to keep competitors at bay, semiconductor companies should:

Business

  • Reinvent their business models in order to venture further into their value chain

  • Define a shrewd value proposition, and monetisation and sales strategy

  • Select the most attractive markets and adapt their technologies accordingly

Operations

  • Research an architecture better suited for artificial general intelligence (AGI)

  • Source software, AI, IoT, and infrastructure-management talent and capabilities

  • Seek acquisitions and alliances

  • Deploy advanced and real-time analytics, productivity tools, IoT technology, and agile approaches in order to improve their supply chain and their production

 

Lanai Consulting can help players across the semiconductor industry chain identify their market opportunities, develop their strategy and business model, and assess their investments and acquisitions.

 
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