The semiconductor industry provides a prime example of globalization. A recent Industry Week analysis shows that nearly 60% of revenues for US computer and other electronic manufacturers come from outside of North America. Fairchild Semiconductor leads in this statistic, with only about 15% of sales coming from North America.
So how does a company meet its customers' demands for products and application support on a global basis? There are many dimensions to this question, and the historical context has been in manufacturing, where the primary considerations are costs such as labor, capital, and productivity.
But in the context of design, the answer to globalization has its roots in becoming a local player in the market. This strategy applies to product development, because designers and other product-line personnel benefit from close contact with customers for the purpose of new-product definition and refinement, as well as other forms of key feedback. And it applies to application support, because disseminating new-product-engineering information and helping customers reduce their time-to-market bring significantly greater value to customers than that which the silicon alone would represent.
You might think that this emphasis on 'localization' is simply another way to refer to 'outsourcing' to capitalize on lower costs, but it isn't. Lower costs decrease risks, allow us to be more patient, and often enable us to pursue parallel paths. But lower cost engineering is not the primary goal. The real benefit of globalization comes from the direct interaction with our customers in the markets we serve.
The globalization of our markets has led to some remarkable changes in the product-design process. Informal ad-hoc communication between geographically distant sites is obviously limited. In its place, more formalized communication methods and handoff procedures ensure that designs move seamlessly from product definition through design to manufacturing.
Eventually though, the situation reverses itself, and what started as a remote design center becomes a self-contained product-line business unit serving the local market. Then the challenge becomes getting a product line in Asia, for instance, to successfully market its products globally. A remote design center that focuses on being a source of low-cost labor would not evolve in this way.
As mentioned earlier, our localization efforts involve both semiconductor design and application support. It makes economic sense that many OEMs turn to the semiconductor manufacturers to provide design assistance during the critical product-evaluation and design-in stages and use a design-tool suite that includes everything from reference designs to online modeling and simulation.
