Managing chip shortages in a sustainable manner
In late June, Malaysia’s Penang island hosted the Southeast Asia (SEA) region’s premier gathering of the semiconductor and microelectronics industry. After an arduous 2-year pandemic that saw lockdowns severely disrupting supply chains, the conference was aptly themed “Forward as One – Building a resilient and sustainable electronics supply chain in Southeast Asia”.
Many came from far and wide to tap into the collective experience, best practices, and knowledge that circulated during the event, to find out how best to manage disruptions and resource shortages in a sustainable manner.
McKinsey’s Bo Huang, was one such information source that many turned to and his presentation titled ‘Strategies to lead in the semiconductor world’ on the second day of SEMICON, saw a capacity crowd of information seekers.
Bo Huang is an associate partner at McKinsey Singapore and heads up the semiconductor and Electronics Industry Practice in Southeast Asia. He listed out 8 priorities that the industry should focus on, but we highlight the following few below:
Growth is ambitious for semiconductor
SEMI has painted a picture whereby the industry is going to grow sustainably, taking into account cyclicality. “There is a path for the industry to get to USD1 trillion by the end of the decade.”
As the industry plans its next steps, he posed hypothetical questions for the industry to ask such as, “What are the drivers in the sub-sectors? Are there any opportunities for semiconductor players given the difference in sub-sectors?
“As the node gets advanced, chip design costs on average have escalated to close to USD1 billion,” Bo Huang said before adding that in terms of engineering hours to design chips, the required ‘person days’ has skyrocketed.
Bo Huang zoomed into the smartphone and automotive market; smartphone drives 6-percent growth while for automotives it is 11-percent per annum. Smartphone volume growth is also due to price segment shift ie. A mid-tier segment is coming for emerging and developing countries.
“We see by end of next decade, contribution to growth by the mid-tier segment will be close to 50-percent. This could be largely due to the prosperity growth of countries like China and India,” he said.
War for talent
“As the node gets advanced, chip design costs on average have escalated to close to USD1 billion,” Bo Huang said before adding that in terms of engineering hours to design chips, the required ‘person days’ has skyrocketed.
“We are at a cross junction. The growth is real, and then the demand for talent and skills is escalating.
“How do we do better to retain talent?”
He pointed out that talent acquisition historically has always been very competitive. To compound the issue, there is also a new breed of skills required to keep up with the high-tech and innovation demands of the semiconductor industry to date. For example, analytical skills to understand the data, and adeptness in the use of artificial intelligence technologies.
“The incremental demands for these kinds of skills are escalating, but when you look at the job market, say in the United States, less than 10-percent of fresh talents are actually what we need.
“So, we fight for talent.”
Bo Huang urged the audience to think about their respective organisation’s drivers of attrition and unique value proposition when it comes to attracting talent and ‘winning’ the talent war.
“How do we do better to retain talent?” he asked.
Referring to Glassdoor research that measured talent satisfaction dimensions for different industries, like workplace attractiveness, culture, diversity, work-life balance, satisfaction with management, compensation, benefits and career opportunities, Bo Huang pointed out that the semiconductor industry was “not doing super well in attracting fresh talent”.
This is in comparison to the tech industry and automotive industry.
Bo Huang invited the audience to think about popular in-demand skills; like digital analytics; as a community and to collaborate among themselves or with other institutions, to facilitate a thriving ecosystem that shares knowledge and builds expertise.
Getting smart
The perception is that the time to scale artificial intelligence is now. He said, “There is value at stake but we are not even capturing 20-percent… only 10%. What is the bottleneck? How do we ensure we can capture full impact?”
“The value potential is huge with USD90 billion at stake for the industry.”
All in all, McKinsey sees the bulk of value lies in manufacturing processes as well as research and development (R&D). “R&D has been one of the neglected areas by the industry. We are not using data or analytics to drive value capture.”
The current level of AI adoption is at odds with the importance that companies place on the technology. “Most companies see IR.4.0 and AI as a top priority, but struggle to deploy it at scale.”
Bo Huang observed that a majority of companies that McKinsey talks to are trying to learn AI, or think they have deployed it at scale. “Thirty-percent of companies are not even thinking about it.
“The value potential is huge with USD90billion at stake for the industry.”
