Sept. 11, 2000

Printer ready

Chipmakers Reach Out To Internet

Semiconductor makers and suppliers are using the Web to decentralize operations

By Matthew G. Nelson

More on electronics:

Industry Charts: Electronics (PDF file) sidebar: Intel's Goal: To Grow With E-Commerce EETimes Tyco trims distributors gained in mergers (8/28/00) EETimes Sharp, Casio PDAs dial into Europe's GPRS service (8/28/00) EETimes Zoran, Nogatech plan MPEG-4 merger (8/28/00)

Send Us Your Feedback

s key providers of Internet technology, semiconductor makers and other electronics-industry suppliers are discovering new markets for their products. At the same time, however, they're reinventing themselves to match the pace and flexibility of customers clamoring for faster and smaller components.

In response, the electronics industry is turning to the very phenomenon that's responsible for its surging growth: the Internet. Chipmakers are using the Internet to increase collaboration with business partners, streamline sales, and above all, shorten development cycles.

After a rebound in 1999 from a three-year semiconductor market slump, the electronics industry this year has experienced a dramatic acceleration. Monthly worldwide sales of semiconductors soared 48% year over year, reaching $16.6 billion in June, according to the Semiconductor Industry Association, with Internet and wireless as the hottest technology areas and growth occurring worldwide.

"We're seeing a trend where the industry is very clearly growing at a startling pace and reaching out beyond the traditional sectors of high-tech growth such as Silicon Valley and Texas," says Mark Albertson, a senior VP at the American Electronics Association, a 3,000-member industry group.

To grow during these good times, electronics companies are decentralizing in order to make use of engineering groups located worldwide. This is one factor that's increasing the need to share information via the Internet. Another is the typical interaction time between suppliers and customers, which is shrinking to the vanishing point as sales move online. "Because we're talking now about a speed that encompasses mere minutes," Albertson says, "it puts the onus on companies that want to sell in these channels to respond accordingly."

IT groups at electronics companies connect internal workgroups with external partners worldwide and make use of business-to-business marketplaces, in order to ride the accelerating wave of new business. In an in-dustry where mergers and acquisitions occur at a frantic pace as new technologies and markets emerge, IT groups have become adept at rapidly integrating the IT infrastructure of acquired companies.

One overwhelming imperative looms over all these trends. "Time to market is critical in the electronics business," says Ashwin Rangan, senior VP and CIO at Conexant Systems Inc., a maker of semiconductors for communication appliances in Newport Beach, Calif. "Product life cycles are shrinking, and the demand to ramp up the volume is increasing very quickly." But doing it faster is only part of the story. With less time to fix mistakes, customers are also insisting on higher quality. "Doing it better means meeting the customer requirements," Rangan says.

To speed the flow of information among the chipmaker, its customers, and other business partners, Conexant is using Xtricity, a Java-based private information hub by Ki-Soft Inc., to share information such as design schematics when collaborating on devel-opment. "We've installed it in our premises and customers' premises," Rangan says.

The faster pace of the market also is being felt by the electronics industry's suppliers. "Clearly, the whole growth in our space puts a lot more pressure on our supply chain to ensure they have the products we need when we need them," says Craig Haught, senior director of IT for Applied Materials Inc. in Santa Clara, Calif., which supplies highly complex chipmaking equipment.

"We're trying to leverage the Internet infrastructure and E-commerce applications to im-prove the supply-chain process," Haught says. "We've got an extensive effort under way to provide E-commerce solutions, in terms of business-to-business services, supply-chain services, engineering change orders, and customer support."

Faster communication between groups within each company has become equally essential, as chipmakers gather minds from all over the world to design products. "Design engineers need to collaborate more and more from all over the world on single chip designs. Some of these designs are becoming extremely complex. It's through the wide area network that we can get this work done," says Larry Loh, CIO for Analog Devices Inc. in Norwood, Mass., which makes semiconductors used in signal-processing applications. "We have more and more tools to allow people to access information without having to learn reporting tools or go through training classes."

Analog Devices is looking for a software infrastructure that will improve information sharing by making it easier to integrate different systems. The company is testing Windows 2000 to see whether it fits the bill. "Windows 2000 is still fairly new, so I wouldn't make a sweeping statement that it's the only operating system that we're going to use," Loh says. "But we're starting to test and deploy Windows 2000 on desktops."

In the race to create new products and meet customer demands, many electronics companies are acquiring other companies. Making the best use of those rapidly acquired companies, requires the integration of various new systems.

"IT is always on the forefront of mergers and acquisitions," says Fred Chaloux, VP of global application services for Sanmina Corp., an electronics manufacturing services company. "You've got to connect the networks together, and then the E-mail systems, and then down the road the enterprise resource planning systems."

In June, Sanmina acquired Hadco Corp., a manufacturer of electronic interconnect products that was also Chaloux's previous employer. Sanmina wanted the company in order to obtain Hadco's advanced circuit fabrication technology and workforce.

Chaloux says that communication among IT staff and executives is essential when integrating companies. "The most important thing to do is to communicate to the staff and the business in terms of what the plans are," he says. When it comes to deciding which systems to tackle first, "focus on the high-value-add items, but also be fast on your feet with the perceived high-value--but low-effort--implementations," Chaloux says. "Populating each other's E-mail directories with each other's names is something that doesn't take a lot of effort, but adds a lot to the business."

It's not only acquisitions that electronics-industry IT groups need to deal with--some companies spin off units to focus on fast-growing markets. A modular, standards-based approach to systems design can speed that process, says Bob Vance, VP and CIO of Tektronix Inc. The Beaverton, Ore., company sold off its printer and video businesses during the past year. "We designed a system so that we could break it apart very easily. We basically moved some hardware over to them and copied the databases, and then they were up and running."

The markets for semiconductor products change so rapidly that traditional approaches of manufacturing products to meet estimated demand have little relevance and are, in fact, dangerous. "We're trying not to manufacture to forecast, because typically your forecast isn't accurate and you build up inventory that sits on the shelf and eventually gets written off," says Analog Devices' Loh.

"In addition, your ability to respond to customer demand gets used up because you're working on products for the forecast."

Instead, manufacturers need better links between front-end ordering systems and the back-end manufacturing applications to obtain constant feedback about supply and demand or to alter designs based on customer needs. "Our emphasis in terms of E-business is fundamentally rethinking and streamlining the business processes and not just focusing on the mechanics of taking an order," Loh says. "To do that, we have to work on systems integration, from the front office to the back office."

That means building links between Analog's enterprise packages, which include SAP for order processing, finance, sales, and other functions, and production planning from PeopleSoft Inc. "We've been making some progress in the area of production-planning optimization, matching supply and demand on a nightly basis," Loh says. "We'll be able to optimize our delivery to our customers and at the same time be 95% confident of our delivery dates because the plan is material-and capacity-feasible. All that involves real-time integration between ERP and the planning engine."

Some electronics-industry suppliers see wireless communication as another way to speed the flow of information between vendors and customers, by providing vendor sales reps with up-to-the-minute information.

Customers that buy Applied Materials' semiconductor manufacturing equipment spend millions for each system. "Given the high level of service quality that our customers expect, time and availability are paramount," Haught says. "To be able to do that, we need to rely on the Internet infrastructure and the emerging wireless technologies. Our people need access to information in real time, whether they're in their office or in a customer location."

Electronics suppliers are moving into online sales, a trend that threatens the industry's traditional reseller channels. Raytheon Co., an electronics supplier and defense contractor in Lexington, Mass., is trying to avoid that problem by involving resellers in the process. Instead of supplying aircraft-industry corporate and federal buyers directly from a Raytheon Web site, for example, Raytheon provides links to its resellers.

The company encourages resellers to participate by explaining what could happen if they don't. "You know and I know that the Web is going to eliminate you," says Jim Infinger, Raytheon VP and CIO. The Web sites mean that instead of being eliminated, resellers can help Raytheon grow its brand without increasing its sales force, Infinger says.

As in other industries, electronics suppliers also turn to online business-to-business marketplaces to sell their products and to save money on procurement. "We have huge procurement needs--chemicals, wafers," says Bob Neuberger, manager of corporate IS standards and thin-client technology for National Semiconductor Corp., a semiconductor chip manufacturer in Santa Clara, Calif.

National employs Ariba Inc.'s ORMS procurement system and plans to use its online procurement experience to do business through an online marketplace. "Initially we were using Ariba mostly for procurement, but we want to be positioned for getting into that open marketplace for supplies down the road," Neuberger says. "Ariba was justified by seven-figure savings in streamlining our purchasing and getting better deals."

Raytheon is involved in the creation of several online marketplaces, including an as-yet-unnamed aerospace and defense exchange founded by BAE Systems, Boeing, E-commerce systems provider Commerce One, Lockheed Martin, and Raytheon.

Raytheon's Infinger says that besides cutting costs, these exchanges can also provide a way for electronics suppliers to collaborate and speed development.

"More and more people are selecting multiple vendors," which requires those vendors to work together, he says. "I can use the Web as the middle ground where

I do the collaboration. If Boeing and Raytheon were working on a project together, we could use exchanges to work on a program with our competitors."

Illustration by Jeffrey Fisher
Photo of Haught by Alan Blaustein
Photo of Loh by Brian Smith

Back to This Week's Issue
Send Us Your Feedback
Top of the Page

---