How Can the High-Tech Industry Evolve in a Digital World
As the world becomes more technology driven than ever, opportunities abound for companies that play in the high-tech space. But to leverage those opportunities, these companies must rapidly adapt to the changing dynamics of the industry. The rising cost of manufacturing, evolving customer profiles and the need to quickly acquire new capabilities are driving changes in the fundamental functioning of high-tech companies.
The Challenges of a Digital and Dynamic Market
Keeping the cost of manufacturing low has always been a major concern. Hi-tech manufacturing companies are making increasingly multifarious and micro products and at the same time increasing their production capacity (in line with Moore’s Law). Just to give a sense of the impact, as per a report from a leading analyst firm if the manufacturing cost of a 28nm chip is roughly $30 million, the cost of manufacturing a 7 nm chip may go up to $270 million. That’s a nine-fold increase in manufacturing costs. This discourages manufacturers to produce the 7nm chip unless they have high-volume and can get a reasonable return on investment.
The changing customer profile has also led to some far-reaching changes in how high-tech companies function. In an earlier era, the applications for semiconductors were mostly limited to PCs and phones. This meant that these companies had to sell to a very small customer base – mostly PC and mobile phone manufacturers. Today, semiconductors are used in a vast multitude of industries ranging from automotive to manufacturing to energy and home automation. They are used in sensors, robotics, cloud computing, connectivity and many more applications. They are used in systems that work on new technologies like Artificial Intelligence (AI) and Internet of Things (IoT).
Given this complexity, vendors often don’t fully understand the complete scope and usage of their products. However, the use cases are still emerging and they look promising.
Need for New Business Models
As a consequence, the market for these high-tech companies has exploded, both in terms of the sheer number of companies they can sell to as well as the reach and geographical spread. This change in scale has impacted several business functions within the organizations right from how they design marketing and sales strategies, how they reach customers across the globe, how they compete and differentiate themselves, and how they support this vast customer base. All these result in a need for new business models.
Given all these changes, how can the high-tech industries prepare themselves to succeed? I’d like to offer a few insights, based on our own work in this sector:
A Comprehensive M&A Playbook
As new innovations emerge, and the breadth of the technology landscape expands, companies need to rapidly acquire new capabilities; often through mergers and acquisitions. Over the last 30 years, the number of major players in the semiconductor industry has gone from over 30 companies to roughly 13 or so today; largely due to mergers and acquisitions. We have worked with customers in the high-tech space to put together comprehensive M&A playbooks that help ensure day zero readiness. This is important to ensure guaranteed realization of market commitments based on synergies.
Embracing Digital Technologies
Like I mentioned earlier, the customer profile as well as reach has diversified considerably, necessitating a change in the way the organization is run. A digital transformation effort is important because it can empower the organization with digital capabilities to help reach a wider market more efficiently and effectively through digital channels. Digitizing tech support (possibly using AI/chatbots), research, and other operations is the only way to cater to the new scale. The old model of dedicated customer representatives for each customer is simply not feasible.
As technology becomes ubiquitous across verticals, an understanding of various applications is key. We’ve worked with semiconductor vendors to help them develop a better understanding of the use cases, leveraging our own deep domain expertise.
As our world becomes more digital than ever, it throws up plenty of new challenges as well as enormous new opportunities for high-tech companies. Adapting effectively to the changing dynamics will be key. So is the high-tech industry ready to change for better success in a digital world?