For each of our markets we have considered the business imperatives, business trends and the impact that emerging technologies and solutions may have in addressing these.
Imperatives
A Structurally Growing Industry
The ever-increasing speed of technical innovation (geared by, amongst others, Moore’s Law) is driving the economy to use more electronic applications and the High-Tech & Electronics industry overall is growing well beyond global GDP growth. The industry as a whole is in a sustained growth phase. Many segments have already finalized the transition from analogue to digital technologies, changing the industrial landscape radically. Product lifecycles are decreasing continuously, driven by both consumer demand and technology push, imposing significant R&D effort upon all players.
Dominated by Rapidly Evolving New Technologies
New technologies are driving the growth of the High-Tech & Electronics industry, with some companies adopting active technology portfolio management: from scouting emerging technologies and investing in growing technologies to pruning aging technologies that are being substituted by newer ones. These technologies are developed into unique and differentiating products. Being first to market is key, as well as securing future profit streams by protecting them from any low-cost copycats.
Facing a Dramatic Economic Downturn
Most electronics industries are very sensitive to economic cycles. If the economy grows, electronics industries will grow exponentially. In return, when the economy slows down, the electronics industries can come to a virtual standstill. The current combination of a credit crisis and an economic crisis has therefore hit the High-Tech & Electronics sector hard. Consumers will buy significantly fewer end products such as LCD TVs and automobiles (with their abundant use of telematics). And electronic manufacturers cannot get the credit facilities they need for their multibillion investments in new semiconductors, display, solar cell, or battery factories.
With Ongoing Globali zation
The High-Tech & Electronics sector is at the forefront of the ongoing globalization trend. Many industries have realized global coverage for some time now. Companies headquartered in former Asian Tigers—and more recently in emerging countries like China—now dominate much of the mass electronics market. More recently, new global players headquartered in emerging countries like China and India—such as Lenovo (computers), Haier (white goods), and Huawei (telecommunication hardware)—are rapidly expanding their business on a global stage, and increasingly via the acquisition of (parts of) Western firms.
Business trends
Survive the Crisis
As electronics industries are hit relatively hard by economic downturns, most players have to develop strategies to survive and, if possible, thrive in the aftermath of the current credit crisis. This requires an orchestrated approach on all levels: from strategic (such as portfolio pruning and restructuring) to operational (such as business process improvement and business process redesign).
Innovation in Many Areas
For many decades, the industry was dominated by Moore’s Law, and this is expected to continue for at least the foreseeable future. The main result is ongoing miniaturization, falling costs, and ever-increasing functionality and performance of electronic products. In addition, standalone applications are becoming part of an ever-increasing complexity on a systems level.
Large media conglomerates drive the sector to adopt industry or even open standards. In addition, standalone applications become part of networks and must communicate with other applications, driving connectivity and standardization of communication interfaces.
Applications that have more functionality usually require an abundant use of (embedded) software in order to keep an ease of use. Given the high development costs, only the largest suppliers can make profit and survive, which, in turn, is forcing the embedded software industry towards standardization.
Intellectual Property Rights & Brand Equity
Intellectual Properties Rights (IPR) are an important instrument to enable firms to protect their electronics devices—ranging from various hardware
and software components to designs to entire brands—from so-called copycats. In addition to their own interests, the High-Tech & Electronics sector has to protect the content (audio, video, pictures) that is needed by most electronic applications as a prerequisite for large media firms to support the development of new devices.
In addition to IPR, brands are emerging as a second strategic control point to create and / or secure value from high-tech products.
New Business Models Emerge
The business imperatives mentioned previously are now forcing the High-Tech & Electronics sector to develop new business models. Traditional hardware firms are transforming into to software firms, and traditional software firms are likewise transforming into service firms and system integrators. IBM is a classic example of this transition from the last decades.
Services Grow in Importance
There is a twofold logic that is driving the B2B industry in particular towards developing its customer service. Firstly, there is the customer need. As electronic systems grow in complexity, they require more support and maintenance. Remote monitoring is an emerging area within this context. As they also become more expensive and the technology continues to develop, frequent upgrades are required to keep up-to-date. Secondly, there is a supply driver. Services in general are more profitable and less cyclical than initial sales. Therefore, services render a large profit potential that is only partially tapped into. In addition, the service departments of High-Tech & Electronics firms have to grow as they mature to unleash the full profit potential.
Optimizing the Global Footprint
Firms are continuously examining their global footprint in terms of the revenue and profit potential of the regions or countries where they are active. In addition, the operational footprint is optimized from the point of view of both ownership (resulting in outsourcing) and location (offshoring). Initially, it started with outsourcing and offshoring of simple contract manufacturing. Nowadays, entire operations (including logistics, production, and, in some cases, R&D) are being transferred to emerging countries like China, India, Russia, and Brazil, usually from a low-cost perspective (abundance of relatively cheap talent) and for market share (growing number of willing consumers that can afford the electronic products). Extended Supply Chains and Global Supply Chains
Supply chains are becoming extended in functionality and geography. The functionality increases from mere supply-and-demand transactions to co-creation. The geography now spans entire continents as businesses seek efficiencies through new partners and suppliers to service customers across the globe. Supply chains increasingly overlap and form networks that create new relationships and patterns. As the supply chain becomes more and more extended, the visibility and transparency of goods-flow decrease and the risk of disruption increases. Mitigating the impact of supply chain disruption is now a key focus for companies with an extended supply chain. One could speak of the rise of a supply chain network management.
Operational Excellence
Commoditization and competition are eroding profitability of new products at an ever-increasing pace. Companies are under profit pressure and are looking for ways to scrutinize their cost base in order to sustain their profitability across the business cycle. Operational excellence in all business (innovation, purchasing, manufacturing, distribution, sales, services) and associated support areas (finance, HR, IT) is pivotal to remaining competitive. Operational excellence, lean concepts, shared services, offshoring, and outsourcing are being implemented and optimized in virtually every firm as well as across entire value chains.
Simplification and Harmoni zation
The remaining activities are simplified, standardized, and automated over the different business lines and the various countries. The result is centralization of authorities on a global / regional scale as well as ongoing adoption of Shared Service Centers (SSCs), sometimes in combination with Business Process Outsourcing (BPO), and standardization of processes (Business Process Management or BPM) into single information kernels (Enterprise Resource Planning or ERP).
The electronics components industry has long since entered the nanotech era. Electronics applications grow more complex, with an increased amount of intelligence both in hardware (ICs) and (embedded) software. In spite of the increased functionality, applications must become more userfriendly and intuitive. Firms that excel in product design and user-interface, such as Apple, dominate their respective markets. Increased functionality requires more bandwidth (in terms of connectivity), more storage capacity, and more power (in terms of batteries). The enhanced user-friendliness also requires larger displays and touch screens.
Unbundling and Rebundling
Typical OEMs (Original Equipment Manufacturers) have outsourced manufacturing to focus on value-added activities in R&D and marketing and sales. Examples are Cisco (communications), Dell (computer hardware), and Philips (consumer electronics), who outsource manufacturing to Electronics Manufacturers Services firms like Flextronics and Jabil, who in turn develop added value activities and become ODMs (Original Design Manufacturers).
Owing to credit shortages, companies have postponed new divestments and acquisitions. In the longer term, ongoing focus on market leadership (acquisitions) in core business (divestments) will remain important. Mergers and acquisitions and de-mergers have left a wealth of legacy systems leading to an increased need for effective integration / rationalization of processes and associated IT systems.
Sustainability
As European legislation gains in severity, sustainability—including its impact on recycling (of both packaging as well as the entire product) and energy consumption—has become an important topic in the High-Tech & Electronics industry. Companies are increasingly putting efforts into lessening pollution through cleaner technologies and recycling, as well as reduction of energy and raw material utilization.
Impact technologies
Miniaturization and lower energy consumption are the main drivers for new business trends such as ‘stay connected’ and the ‘connected home’. The following mentioned technologies offer the foundation for High-Tech & Electronic companies to develop enhanced new products and services.
Consumer Digital Rights Management (DRM) technologies control how consumers can use copyrighted material that is distributed in digital form, such as music and video files, or text in e-books.
Solid-State Drive (SSD) technology is the flash-based or RAM-based semiconductor successor for conventional hard-disk drives (HDDs). SSD technology can enable improved access times, potentially lower TCO through greater reliability, and provide better power efficiency. SSD technology will probably be most beneficial for low-cost and mobile products, combining low storage needs in compact form.
Hardware Reconfigurable Devices are extremely flexible and can be configured to perform different functions at different times.
Wireless Networking LTE (Long-Term Evolution) delivers high bandwidth, high-quality mobile services at reduced cost. LTE could compete against WiMAX standards as true mobile technology.
WiMAX is a mobile network standard to support mobile and broadband wireless capabilities and might be very interesting especially for emerging countries as a last-mile technology to provide Internet services. WiMAX will mainly be used in defined and limited areas, competing with thirdgeneration (3G) services.
The 4G standard is still in the early stages of development and has to handle a wide range of technologies. LTE, WiMAX, and all other competing technologies extend the life of 3G infrastructure and will delay the usage of the 4G standard.
Personal Area Networks (PANs) are networks implemented via wireless technologies to manage the synchronization of personal content between multiple devices, such as smartphones, PDAs, media players, set-top boxes, and personal computers, for the discovery of services available to consumers for use with their personal devices. Initial implementations are based on Bluetooth, but this will probably shift to Wi-Fi because of its acceptance among Consumer Electronics Manufacturers. PAN will have an impact on personal computers, consumer electronics, and peripheral devices, as well as Networking Equipment Manufacturers.
Location Awareness Technology (LAT), such as GPS and location technologies available via cellphones and mobile devices, will create new business scenarios for, amongst others, fleet management applications with mapping, navigation, and routing functionalities combined with inspections. Furthermore, LAT will allow an efficient communication between devices, vehicles, and infrastructure.
Portable Navigation Devices (PND) are handheld products that receive GPS signals to determine location. Consumer PNDs are used in automobiles to provide directions and other location-based services.The additional standardization of interfaces and introduction of new global standards will simplify the usage of PND in, amongst others, the automobile.
Field Service Management includes the identification of a field service required through remote monitoring, inspection, or customer detection to improve technician scheduling, dispatching, parts information delivery to the field, and support of field technician interactions.
All these new technologies and improvements can be used in many industries, especially Manufacturing, to develop new concepts and business models such as remote services to improve the customer loyalty and brand equity in the aftermarket.
e-Paper refers to several reflective display technologies that do not require a backlight and can be viewed in conditions of moderate-to-good ambient illumination. They can be made very thin, the result of which is a close to paper-thin rewritable display. e-Paper will also lead to new product and market opportunities for vendors, especially in consumer and remote applications.
Ultra-Mobile Devices are devices with full Internet browsing functionalities, all-day battery life while running video and multiple radios, and enough performance for fast Webpage loads.
Set-top boxes allows the ‘new generation’ of consumers to view local and Internet content on their television in addition to the regular television content they receive. The Set-top boxes will link their broadband connection to their television to allow them to access Internet content, such as local weather, traffic, and streaming video. This technology will significantly change traditional television and PC usage.
Surface computers are displays that support interaction via touch or gesture. The display can recognize more than one touch at a time, enabling multiple users to interact or work collaboratively. Surface computers may be delivered as wall displays or may be built into a table. Some also have the capability to recognize objects marked with a special ID tag, allowing context-sensitive information to be provided as soon as items are placed on the display.
Remote Patient Monitoring is the use of IT and mobile telecommunications to monitor the health of patients remotely, and to help ensure that appropriate action is taken. Patients are given devices that measure variables such as blood pressure, pulse, blood oxygen level, and weight, and transmit this data to clinics. Other devices are used for messaging, gathering information from patients on their symptoms and behaviors, and sending them information and advice. The aging population and changing social networks will create a solid base of people who are in need of Health Remote Monitoring Services.
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