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The Future of Semiconductor Business & Innovation

Abstract: The Life Cycle theory on industry evolution suggests that the rate of knowledge obsolescence tends to diminish over time. In effect it deters new entrants from entering the industry; the ensuing shakeout forces industry consolidation and concentration. The fallout; operational efficiency, product proliferation and price discipline take center stage.

In the semiconductor industry the very presence of technological knowledge obsolescence has prevented industry shakeout and consolidation up until now. However, with escalating costs and the fundamental limits on device physics reaching a climax are the curtains descending on the semiconductor industry. If so, what are the ramifications for the industry and its ecosystem?


Downloads:

  1. Future of Semiconductor Business & Innovation
  2. Fabless Semiconductor Chip Startup Business Plan
  3. Semiconductor SOC Design Cost Model

Updates:

April 24th, 2012 WSJ - Intel Makes $140 Million Deal With Cray, Intel will be buying interconnect technology and related intellectual property used in high-performing computers.

April 30th, 2012 EE Times - IDT buying PLX Tech for $330 million and Fox Electronics for about $30 million in cash. Enabling IDT to extend its horizontal product line reach and serve complementary customer base .

May 2nd, 2012 WSJ - Microchip buying Standard Microsystems for $828.8M in a move to expand its product offerings. SMSC acquisition will enable Microchip to get a foothold in the Automotive and Wireless audio markets.

May 15th, 2012 Morningstar - Not So Golden Years: How an Aging Society Can Impact the Markets. The graying of the developed world is hitting an inflection point and is forecast to accelerate —an unprecedented shift in demographics is likely to impact everything from economic growth to equity multiples.

June 5th, 2012 EE Times – New Business Model taking hold in China  “We are seeing Chinese system guys pump out a new product every three months with just five to 10 people. That’s very disruptive.”

June 22nd, 2012 EE TimesTurnkey solutions the key to Mediatek’s emergence as the leader in global consumer electronics. Mediatek with its ability to integrate software and hardware as a genuine turnkey solution for system OEMs, has steadily risen, to the point where the company is getting the global digital consumer electronics market pretty much wrapped up.

July 2nd, 2012 WSJ - Sony to pay $380 million to buy U.S.-based Gaikai. Gaikai's technological backbone allows software titles, even sophisticated games developed for powerful game consoles, to be played without delay on any browser. The strategy is a shift from a decades-old model of playing games on disks or cartridges in dedicated machines toward playing games on any Internet-connected device.


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The Lure of Emerging Markets– India

With growth looking more and more anemic in the developed world and the fundamentals (expenses outpacing revenue) clearly pointing to a lackluster demand going forward. Can products and services from the developed world find a market elsewhere? Can the Indian consumer market offer a road ahead.

Adopted from Economist, Daily Chart March 7th, 2011

A burgeoning and transitioning Indian economy with buyers on the move bodes well for businesses local and global. Do the numbers justify India’s rise or are we once again succumbing to temptations of finding growth where the fundamentals just don’t add up. Is now the time to step in and serve unmet, latent and unaddressed needs ?

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The Future of Advertisements

Half Of All Advertising Doesn’t Work, The Trouble Is We Don’t Know Which Half ” still reigns supreme in the world of advertising.


Emerging new technology, shifting consumer behavior, always on consumer touch points and evolving new media are converging to create a new paradigm in advertising.

Advertising – Traditional, SEM, Social Media or Mobile ?

Universally almost all purchase decisions can be categorized into either a High-Involvement Purchase (ex: Home Appliance) or a Low Involvement Purchase (ex: Grocery). The former entails significant risks, is driven by situational needs and involves complex decision making. The latter seeks to minimize time, as Low-Involvement products engulf eighty percent of all purchases, is predisposed to impulse buying and familiarity/awareness plays a  key role.

It is no surprise than that most of the advertising (traditional) we see and hear around us encompasses Low-Involvement products.

Then the internet came along and SEM captured the attention of marketers. As a platform Internet offered conversations with and between buyers to be captured and acted on.

The one notable difference – Internet Search is preceded in most cases by a situational need (i.e. most buyers are either looking for something specific or researching a product category). In certain cases an enduring need also finds expression on the internet in the form of Blogs, Chat-Boards, User Forums or Special Interest Groups to name a few.

One could argue that SEM is ideally suited for High-Involvement products, but this does not seem to be the case. There is a reason behind this….. Legacy for one and….Risk Aversion for another.  

With Social Networks people share rich information about their lifestyle, habits, interests and needs on an ongoing basis. A new dimension – Individual Behavioral Data is now available to marketers. What we get with Social Network Advertising is a hybrid between traditional and internet advertising.  

With Mobile web we are on the cusp of something phenomenal. An ability to bring together all elements from Traditional, SEM and Social Network Advertising in a way unimaginable until now.

The Elusive Target:

According to The 2011 Digital Marketer, Benchmark and Trend ReportThe most influential element driving purchase decisions today is still  Word of Mouth (54 percent), followed by information from a Website (47 percent).” Advertising in video games and on mobile phones seems to influence far fewer consumers in purchase decisions.

That for you is the dichotomy facing advertisers: How to target advertisements effectively, in what media, to whom, where and when. 

Consider the decisions confronting a marketer when trying to influence a new car buyer. Depending on the buyer’s needs and life-stage a simplified decision matrix could yield 16 different options resulting in a specific choice of vehicle make and model.

NewCarBuyerDecision

Traditional means of serving an AD to such a prospective car buyer is a “Hit-or-Miss” game of chance. While Internet Advertising (SEM) added a new level of dimension by tying AD’s to the “search keyword” it is still blind to the prevailing need driving the search.

Critical information on Individual Buyer’s behavior and his or her preferences at various stages in the decision cycle eluded advertisers and advertising platforms. Today this data can be a near certainty.

Out with the Old in with the New:

The Old: The old world of Advertising relied on eyeballs, media concentration, economies of scale, POS data and consumer surveys to create awareness, cultivate brand attitudes and induce purchase intentions.

It did so using a careful selection and allocation of advertising spending across fifteen different media with the aim of maximizing reach and effectiveness.

EvolvingADMedia-Final

The New: Platforms today are flush with rich behavioral data on shoppers, their life-style, geo-demographics, touch points and interactions as they happen in real-time.

In addition the incremental cost of delivering an AD impression today in ‘”Real-Time” is nearing “ZERO”. The ramifications are clear, an era of 1-ON-1 advertising is on the cusp.

The new age of advertising is all about capturing rich information flows in real-time within and across media platforms. Economies of scale or leveraging the networks with the largest reach become secondary as fragmentation is the norm.

New Rules of Advertising:

  1. Multi-homing - New age consumers will move seamlessly between platforms and media– with platform service providers incurring most of the multi-homing costs.
  2. Spatial vs. Temporal Relevance – The new advertising paradigm is all about harnessing relationships-interactions and developing models that morph information. The frantic bidding to secure the most coveted time slot will lose prominence. 
  3. Real-Time / 1-ON-1 - The era of real-time, personalized on the fly AD delivery is here to stay.
  4. Ubiquitous Network – AD impression and delivery must traverse the intended target’s choice of platform across the behavioral sequence model.
  5. AD Markers – Just as DNA holds key genetic information governing humans, so too will AD Markers come to define buyers.  

Update Sep-21, 2011: WSJ Article: “TV Lures Ads but Viewers Drop out”


References:

  1. Consumer Behavior – A Strategic Approach, Henry Assael
  2. IAB Internet Advertising Revenue Report, April 2011
  3. The 2011 Digital Marketer: Benchmark and Trend Report
  4. Radio & Television Business Report
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Mobile Banking – An Acute Emerging Market Need

India’s Mobile Banking Potential:

A precursor for any open market economy to flourish is the free flow of capital and goods between buyers and sellers. 

Myth and Reality:

Out of 1.2 Billion Indians only 240 million citizens have access to banking services; Whereas 764.76 million people have mobile phones. McKinsey estimates that 180 million1 new job seekers will enter India’s workforce over the next two decades—a potential demographic dividend. 30% of India’s population lives in urban areas. The 4.5 million wealthy households that consume luxury products and services are concentrated mainly in the top 10 cities.The Labor force participation by occupation is Agriculture (52%), Industry (14%) and Services (34%). A vast majority of the population living in Tier-2 / Tier-3 cities are either small business owners, entrepreneurs or self-employed laborers.

The Indian economy depends far less on exports compared to its other brethren's in Asia. Most of the growth is fueled by domestic consumption.

Bigger Pie / Bigger Slice:

An emerging middle class estimated to be increasing by 20 million a year, with a median age of 26 when weighed against the backdrop of 400 million people in India that do not have a bank account, severely dampens the market potential. One look at how MNC’s have fared over the past decade is ample proof of what went wrong with the rosy projections.

An estimated 37.2 %2 of India’s population falls below the poverty line (BPL). Microfinance was supposed to serve the needs of the poor but went wary with its focus more on credit delivery rather than help people escape poverty.

The banking system can evolve as a key gatekeeper that can bring together missing parties, unleash spending, enhance trade and in the process create new opportunities for livelihood.  

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