Joint Conference Innovative Processes and Products for Mass Customization Wafer

Joint Conference "Innovative Processes and Products for Mass Customization" Wafer Foundry’s Business Strategies on Mass Production or Mass Customization Mei-Chen Lo National United University, Taiwan June 21, 2007 Content • • Introduction About Wafer Foundry – Foundry and IC Market share -- Taiwan vs. Worldwide – Wafer Foundry Business of IC Industry – Evolution of the Semiconductor Industry • Production Oriented and Customer Oriented – – – – The Characteristics of Pure Play Foundry Business Relevant Factors to Influence Semiconductor Industry Positioning Foundry Market Structure and Trend Four Types of Mass Customization Normalized Weights Synthetic Performance Value Expert Rankings Proactive Strategies Analysis Results and Comparisons Ranking Comparisons from Different Models 2 • Business Performance Evaluation – – – – – – • Discussions and Summary Introduction • • • • The electronic manufacturing sector is of great importance for semiconductor industry in Asian countries. For about two decades it has flowered substantially and has had prominent market performance. This study raises the problem of the proactive business strategies for semiconductor companies when they face the threats from new joining competitors, low cost issue, talent shortage, policy frustration, etc. The purpose of the study is to develop and examine the analytical methods in the field of mass customization technology product and its decision making. The evaluation of sustainable business development issues have been performed by means of multiple criteria decision making methods. The combination of qualitative and quantitative methods was employed. These different methods used for strategy ranking and supplemented by experts’ intuitional opinions, gave the opportunity to disclose the important features of the strategies and their relationships. From the methodological point of view, the comparison of various methods and approaches brighten their characteristics and ability to solve the practical management problems. The study proved that the proposed methods could be useful auxiliary tools for practical decision making. 3 • About Wafer Foundry Foundry and IC Market share Taiwan vs. Worldwide Worldwide Revenue IC Market Foundry Taiwan v.s. WW Market share 2001 2002 2003 2004 118,492 8,016 120,523 9,725 139,964 12,651 178,772 17,534 IC Market Foundry Foundry in TW IC Market Share IC Foundry TSMC UMC Total Taiwan Revenue 2001 8% 2002 9% 2003 10% 2004 10% 73% 73% 71% 68% 2001 2002 2003 2004 Unit: M USD 8,950 10,947 13,659 18,667 5,851 7,099 8,983 11,923 3,597 4,630 5,855 7,648 40.2% 42.3% 42.9% 41.0% 1,843 1,940 2,740 3,900 20.6% 17.7% 20.1% 20.9% 60.8% 60.0% 63.0% 61.9% Foundry in WW Foundry Market Share Foundry in TW Foundry Market Share TSMC UMC Total TSMC UMC Total 2001 2002 2003 2004 44.9% 47.6% 46.3% 43.6% 23.0% 20.0% 21.7% 22.2% 67.9% 67.6% 68.0% 65.9% 2001 2002 2003 2004 61.5% 65.2% 65.2% 64.1% 31.5% 27.3% 30.5% 32.7% 93.0% 92.5% 95.7% 96.8% 5 Data source: reference by IC Insights; IEK-ITRI, Taiwan. April 2004 Wafer Foundry Business of IC Industry • The semiconductor dedicated foundry business was first operated and introduce this evolution of the pure-play foundry in real production in 1987. • Integrated Circuit (IC) is the heart of the electronic industry and is the driving force of many technological progresses. • The supply chain of IC devices includes IC design, mask making, IC manufacturing, assembly and testing. The supply chain spread all over the world such that IC is a trans-national industry with the characteristics of capital intensive and technology intensive. 6 Evolution of the Semiconductor Industry IDM-1 IDM/ASIC IDM-2 Foundry Intellectual Integration IDM/ASIC Fabless Co. System Co. Total Solution Service Co. IDM/ASIC Fabless Co. Service Integrator System/IC Design System/IC Design System/IC Design System/IC Design System Design IC Design IP System Design IC Design Service Window (platform) Distribution Channels Product Service Customer Service Technology Service Fab Fab Foundry Fab System Design Foundry Assembly & Test Assembly & Test Contract Assembly & Test Assembly & Test Assembly & Test Innovative Manufacturing Service After 2005 Before 1986 1990s 2000~2005 Vertical Integration Disintegration Professional Cooperation Evolution on Business Strategies Initial Stage Localization -Production Oriented 2nd Stage Internationalization -Market Oriented -Regional Customer Oriented 3rd Stage Globalization 4th Stage Personalization -Customer Oriented -Application Oriented 7 -Customer Service Oriented Production Oriented and Customer Oriented Production Oriented and Customer Oriented Company provides a full range of integrated IC foundry services that fulfill the increasing variety of customer needs on a worldwide basis: (1)access to advanced technologies and processes; (2)supply chain information management services; (3)product planning support; (4)production and delivery consistency; (5)production volume control; (6)quality control, (7)responsiveness; and (8)stability in customer/manufacturer relations. 9 The Characteristics of Pure Play Foundry Business 1. Integrity with customers, vendors and employees with telling the truth and maintaining an objective, consistent, and impartial attitude; 2. Maintaining a consistent focus on core business, IC foundry must focus on their business, which is dedicated IC foundry, and not distract themselves with other pursuits; 3. Globalization business, not limit themselves to domestic market or any specific geographical region. It is important to recognize that the semiconductor business has no national boundaries, and that to be competitive anywhere foundry business must be competitive in the whole world; 4. Unceasing innovation is the wellspring of the growth. It is vital to all sectors of foundry business, from strategic planning to marketing, management, technology and production. 10 Relevant Factors to Influence Semiconductor Industry Positioning Mass Production Cost Issue Customization Service Issue Production Oriented and Customer Oriented Market conditions Managerial Strategies End Users Requirement Market Conditions Capital Enterprise Talent Industry Technology Asia U.S.A. Europe Investment Positioning & Global Strategies Knowledge Management and Innovation Internal Competence 11 Foundry Market Structure and Trend IDM-Foundry Foundry New Entrant of Foundry Market Defense (Guard) Leading-edge Technologies (Strategy on innovation and technology and barrier) Legacy Technologies Strategy on Market Pricing 12 Source：reference by Global Foundry Trend, Topology Research Institute, 2005/06 Four Types of Mass Customization • Collaborative customization - firms talk to individual customers to determine the precise product offering that best serves the customer's needs. This information is then used to specify and manufacture a product that suits that specific customer. • Adaptive customization - firms produce a standardized product, but this product is customizable in the hands of the end-user (the customers alter the product themselves) • Transparent customization - firms provide individual customers with unique products, without explicitly telling them that the products are customized. In this case there is a need to accurately assess customer needs. • Cosmetic customization - firms produce a standardized physical product, but market it to different customers in unique ways. 13 Business Performance Evaluation Case Study Business Performance Evaluation • The main goal of the hierarchical framework is the performance evaluation of the semiconductor companies base on the issues of mass production to mass customization. • Four dimensions under this goal are established from the economic viewpoint: the enterprise aspects, the market aspects, the environment and the prospects. • The hierarchical structure, adopted to deal with the problems of semiconductor companies’ assessment. Weights reveal the importance of aspects, criteria and sub-criteria in view of the factors of considered business strategies. They have been obtained as the averages from 20 experts. 15 Normalized Weights (Average of 20 Experts) 16 Synthetic Performance Value, SPV by Professional Groups/Areas Categories SPV (Rank) Weight Overall Fab Operation Top Marketing SPV Operation Support Manager 2.21 (2) 2.31 (1) 2.08 (3) 1.89 (3) 2.02 (2) 2.04 (1) T 2.26 (2) 2.53 (1) 2.15 (3) 3.55 (1) 2.99 (2) 1.88 (1) 1.68 (2) 1.50 (3) 1.43 (4) G 1.68 (3) 1.78 (2) 1.93 (1) 2.68 (1) 2.57 (2) 1.40 (3) 1.31 (4) 1.65 (1) 1.41 (2) C11 0.32 (3) 2.05 (2) 1.96 (3) 1.95 (3) The C12 0.35 (1) 2.35 (1) 2.22 (1) Enterprise 2.14 (1) C13 0.33 (2) 1.88 (3) 2.17 (2) 1.95 (2) C21 0.51 (1) 3.14 (1) 3.24 (1) 2.94 (1) C22 0.49 (2) 2.97 (2) 2.40 (2) 2.94 (2) C1 Business Strategies 0.27 (1) 1.69 (1) 1.58 (2) 0.25 (2) 1.53 (2) 1.52 (3) 0.24 (3) 1.52 (3) 1.59 (1) 0.24 (4) 1.51 (4) 1.38 (4) 1.62 (2) 1.46 (3) 1.70 (1) 1.35 (4) The Market 3.68 (1) 2.83 (2) 2.99 (1) 2.82 (2) 1.89 (1) 1.74 (2) 1.14 (4) 1.32 (3) 1.57 (3) 1.39 (4) 1.68 (1) 1.64 (2) C2 C3 C4 Rank (1) (4) (2) (3) (1) (2) Remark: “T” stands for Domestic company, “G” stands for non-domestic company. Total SPV 6.24 6.27 4.88 6.13 5.64 6.40 5.06 17 Expert Rankings by Business Stages Experts Category Operation Support Fab Operation Top Management Marketing Start-up 3 1 1 3 Growth 4 2 2 1 Mature 3 1 3 2 Decline 2 3 4 1 18 Definition to Proactive Strategies S1: Cost Control: cost control on operation activities; S2: Marketing and Sales: marketing and selling skill in each aspect of the marketing mix, market research and new product development, market network and sales point (REP, globalization service center, logistic service, maintenance support, etc.), training and skills of the sales force; S3: Quality Activities: quality driven on operation oriented processes and product diversification (yield improvement, output, utilization and efficiency); S4: Innovation and Knowledge Management: knowledge based activities and mechanism-information quality, information technology and innovated knowledge management; S5: Customer Services and Support: to fulfill customers’ satisfaction and focus on customers’ requirement on application, product, market, regional exploration, strategic business unit, advanced technology; S6: Technology Development and Integration: technology driven on development and integration (leading edge)—R&D capability, patent, copyrights, in-house capability in the research and development process (product research, process research, basic research and development), access to outside sources of research and engineering (e.g., suppliers, customers, contractors), R&D staff skills in terms of creativity, simplicity, quality, reliability; S7: Talent incubation and human resource development: flexibility on business strategies – manufacturing, marketing and technology development; S8: Corporate resources integration and allocation: resources rearrangements and reasonable allocations (production and logistic); S9: Capital management and financial risk management: Cash flow, short- and longterm borrowing capacity (relative debt/equity ratio), new equity capacity over the foreseeable future, financial management ability, including negotiation, raising capital, 19 credit, inventories, and account receivable. Analysis and Comparisons • The results analysis provides a picture of the strategies comparison. It describes the analysis result from SAW, fuzzy integral and experts’ intuition evaluation. • Comparisons of solutions received with different methodologies give the deeper insight into the evaluation process and the opportunity to attain more objective view of the studied problem. • Various methods and approaches reveal its own unique characteristic and feasibility of explanation in business strategies as well as the ability to solve practical management problems. 20 Ranking Comparisons from Different Models Strategies S1: Cost Control S2: Marketing and Sales S3: Quality Activities S4: Innovation and Knowledge Management S5: Customer Services and Support S6: Technology Development and Integration S7: Talent Incubation and Human Resource Development S8: Corporate Resources Integration/Allocation S9: Capital Management and Financial Risk Management Fuzzy Integral 4 5 9 1 2 3 6 8 7 SAW 4 2 9 1 5 3 8 6 7 Experts' Intuition 9 3 6 1 6 1 5 4 8 21 Discussions and Summary Discussions – 1/2 • Differentiation makes customers in a given segment have a lower sensitivity to other features (non-price) of the product. • In marketing, technology development and integration task can foster product differentiation, furthermore, it lengthens rivals distance and leave them behind the competition. • In economics, base on technological cycling (S-shape), successful high-end product differentiation leads to monopolistic competition and is inconsistent with the conditions for perfect competition, which include the requirement that the products of competing firms should be perfect substitutes. • In strategy, the objective of the strategies is to develop a position that potential customers will see as unique. A successful business strategy will move product from competing based primarily on price to competing on non-price factors (such as product characteristics, distribution strategy, or promotional variables). 23 Discussions – 2/2 • In industry, mass customization is a trend in semiconductor manufacturing industry. – Most mass customization applications, however, are still in business-to-business level. Many industries have found that lengthy supply-chains, and the economics of configurability do not allow them to economically offer mass customization. – Eventually, many implementations of mass customization are operational today, such as software-based product configurators which make semiconductor manufacturing possible to add and/or change functionalities of a core process or to build fully custom enclosures or support from professional service as well as using its intellectual property (IP) library. • In finance, customization will always be bound to financial limits as well as technological development. Mass customization, however, can be interpreted as a threat to tailor-made customization. General customization now can be achieved at a lower cost. The extent of this menace for tailors depends on the product and social class of the customer. 24 Summary – 1/2 • This paper provides an outline on business attributes for the help of management on production and operation resource implementation. Base on the consideration on production efficiency and full customer services, this study found that the top five improving strategies among the evaluated criteria are S4, S6, S2, S1, and S5. This result has concluded the way of improvement and demonstrates the sequences of amelioration on excellence manufacturing operation. • A key dynamic aspect of the model is the relation between market condition and managerial strategies. When market competition is severe, top managers will move towards conservative by focusing on advance technology development strategies, customization product of reviewing the production and operation procedures compared with full capacity running situation. • This paper provides not only a simple concept on the business strategies at different views from related functions inside of company but also useful information for the consensus in existing business strategies. 25 Summary – 2/2 • • Strategic decision-making is an extremely complex and difficult process. Businesses that learn to embrace mass customization are able to create greater variety and customization in their products and services at competitive prices. This study, applying the analytic hierarchy process, structures the complexity relations among essential attributes, criteria, and aspects in a model. The model allows decision makers to analyze strategic alternatives and their supporting attributes in a systematic manner. Rather than using pairwise comparison method, which is typically used in AHP, this research compared three data collecting methods, namely fuzzy integral, SAW and expert intuition. Various data obtained with the three approaches provide more powerful explanation than the traditional single approach. The developed methods are applied to semiconductor foundry business as an empirical case. It shows the capability of facilitate decision-making process at strategic level. With minor modification of the model, the methods are applicable to other industries with similar technological and market challenges to the case industry. Selecting and evaluating of the three approaches therefore would depend on the nature of the application and the judgment of the decision maker. 26 • Thank You !! meichen_lo@nuu.edu.tw