Electronics Executives Prepare for the Millenium

-- Semiconductor International, 9/1/1999

A new survey by Cahners Electronics Group identifies critical trends in Internet usage, time-to-market response, quality improvement, company mergers and acquisitions, and a decreasing willingness to take risks due to Wall Street pressures. Presented at SI's Annual State-of-the-Industry Breakfast at SEMICON West by Susan Mulcahy, group research director, the research was based on 897 responses from 4000 questionnaires sent to electronics executives.

Among other findings, the survey showed company downsizing has resulted in workers being involved in more and wider-ranging tasks, which formerly were shared among larger groups of employees. The engineers' knowledge base is growing accordingly, as they require access to more sources of information, though 'everyone is looking for something specific, especially on the Internet,' Mulcahy said. Nearly all respondents use the Internet (97%). During new product development cycles, executives (including CEOs, presidents, VPs, product line directors, CFOs and COOs) use the Internet to:

• Develop concepts (66%)
• Establish specifications (62%)
• Locate a brand (62%)
• Seek design tips (55%)
• Evaluate products (51%)
• Select a supplier (48%)
• Purchase a product (32%)

The survey showed 75% of Internet users gravitate to the same sites over and over. Users research an average of 4.4 vendors when selecting a commodity part, but research 8 vendors when selecting a new technology or partner.

Customers further demand breadth and depth of product lines; they want innovation and customization; and they need vendors who understand time-to-market constraints, the client's business and competitive pressures. The survey showed 80% of customers are looking to cut their approved vendor list. Among the respondents' companies, since their inception 57% had acquired another company, 36% had been acquired, 25% had merged with another company and 20% had done none of the above. In the next five years, 66% of respondents expect their company to acquire another company, 19% expect a consolidation, 10% think their company will be acquired, 10% expect to merge with another firm, and 30% expect none of the above.

Technologically, companies are pushed to establish and maintain product differentiation while accelerating development of faster/cheaper/ better products. Nearly 50% of executives see a merging or convergence in technologies. Because commodity products are losing value in a highly cost-competitive environment, companies are gravitating toward markets offering higher profit margins. As some markets become saturated, companies shift resources to emerging markets.

When asked to rate the following 'factors in the acquisition of products/services/components when selecting a vendor,' the top responses (Table 1) indicate product reliability and quality are still paramount, along with improvements in product performance and service, technical support, and company experience. Delivery schedule flexibility and reducing time-to-market also are critical in a global, competitive environment.

Most new product development activities (88%) involve teams (Table 2). Product development cycles (from inception to launch) have shrunk from 12 months in 1995 to 8 months in 1997 and 7 months in 1999, according to Cahners Electronics Group. The design phase of development has been similarly shortened from 6 months in 1995 to 5 months in 1997 and 4 months in 1999. Some 65% of designs actually make it into production, and 42% of products making it through pilot production enter full-scale production. Getting products to market today clearly involves collaboration among people in various functions at various locations, spurring the need for advanced company intranets