How Semiconductor Companies Deploying Profitable Strategies Amid the Pandemic-Fueled Market?

Published  November 11, 2021   0

Chip designing companies are now adopting a new strategy of semiconductor manufacturing in various factories with more workforce and manufacturing capacity

For the past few decades from cities to moffusil to villages, there is one unique technology that is altering and transforming the way we work and live. From data centers powering the internet to smartphones, from hypersonic aircraft to electric scooters, there is a small piece of cutting-edge technology that makes it possible to operate, known as semiconductors. The US-based global microcontroller and circuit maker Microchip Technology since its operation in 1989 has proven itself to be the spinal cord of the electronics industry by powering its microcontroller chips to automobiles, industrial equipment, and various other electrical products.

Now, in the past one year, the global slump in production of processors has uplifted the position of the organisation and the demand of its chips is now 50 percent more than its production capacity. The point to be noted is the company allows its clients to cancel a chip order in just 90 days of the delivery; it suddenly commenced providing priority shipments to those clients who signed contracts for twelve months of orders that couldn't be rescheduled or cancelled.  So, these are the schemes that boosted the company to hire more employees and purchase pricey equipment to augment production.

This is just one instance of how companies are deploying profitable strategies amid the pandemic-fueled market. One of the major changes is the interminable transfer in market power to the sellers from buyers, specifically to the factory owners that manufacture semiconductors. The crystal-clear beneficiaries are the semiconductor tycoons like Taiwan Semiconductor Manufacturing firm, which crafts chips for other companies with the help of its foundries.

The shortage has also deeply strengthened the lesser known chip making companies like STMicroelectronics, NXP Semiconductors, OnSemi, Infineon and many more, which design and sell a huge-range of processors/chipset to scores of companies. These companies that manufacture their own chips at their own age-old factories have now the option to choose which clients get how many of their scarce processors. Most importantly, customers are now asked by these companies to share accurate information about what kind of chips they require that ultimately helps make a proper decision about how to increase production. 

In fact, the US based Marvel Technology, which earlier used to give foundries the estimates of chip production for one year has now started giving five year forecasts back in April this year. Capegemini’s global vice-president, Shiv Tasker stated that many chip designing companies are now adopting a new strategy of semiconductor manufacturing in various factories with more workforce and manufacturing capacity. Car makers are also talking directly to the manufacturers about their chip requirements rather than speaking to the sub-contractors.