Darshan Naik is Chief Growth and Strategy Officer of Telco, Media and Technology Markets at Capgemini Americas.
As businesses adapt to the Intelligent Industry, silicon performance is gaining importance and is often the cornerstone of a successful digital transformation. As a result, semiconductor companies face demands from customers who want more personalized and software-centric experiences. To many industry experts, it is apparent that the semiconductor sector is experiencing a massive transformation, with its customers demanding change across various industries.
Into this arena of complexity comes a new opportunity—the softwarization of semiconductors—specifically “chip to industry.” This new model supports the creation of a full stack of capabilities. From silicon to application, the softwarization of semiconductors is achieved in one of two ways: by building a more standardized, limited set of base chips that can be customized for various industries and solutions through software, or by adding software on top of an existing chipset that exposes the new possibilities of leveraging its capabilities.
With flexibility, intelligence and security as baseline expectations of new chips, delivering best-in-class silicon has never been more challenging. As a result, chip-to-industry is the beginning of the next generation of disruptive silicon and will allow semiconductors to reimagine their businesses, unlock new revenue streams and deliver seamless value to their customers.
The Importance Of Chip-To-Industry
So, what is chip-to-industry? At a high level, chip companies have traditionally relied on hardware OEMs (original equipment manufacturers) for their success. With this model, semiconductors built chips that were then incorporated into a physical device, such as a camera or laptop, which was then purchased by a consumer. The success of the chip and the semi’s business was tied to the hardware product of another company. With chip-to-industry, chip manufacturers build out their own end-to-end silicon plus software stack for unique industry use cases, allowing them to monetize their capabilities directly with their customers. With this model, semiconductors are leveraging software to build transformative products in a much simpler way, driving the monetization of their solutions and opening new lines of business.
There are several examples of organizations utilizing this approach. One central processing unit (CPU) and semiconductor manufacturer is leveraging its software stack to facilitate AI at the edge for several prominent use cases. Whether industrial, entertainment or experience media, this organization is enabling connectivity at the edge for workflow orchestration on its own software stacks.
Another large multinational corporation that designs semiconductor and wireless communication technologies has used its connectivity layer and mobile capabilities to build out a new IoT platform, which enables track and trace and condition monitoring for its customers across products. For example, consider a truck full of vaccines being transported from India to the U.S. The end user will want to ensure that the vaccines have been maintained at the right temperature, have not been exposed to direct sunlight and have been managed properly. With this system-on-chip solution, the semiconductor manufacturer not only provides the hardware but also the software API and the connectivity to make this track and trace successful. From here, the semiconductor organization can sell this software system as a service (SaaS).
Benefits
The chip-to-industry model offers many benefits to the end user, but the most important advantages center around complexity and cost.
Firstly, chip-to-industry reduces complexity by providing a simpler and more elegant solution that reduces the chance of failure. For example, consider a company that has developed a track-and-trace device with condition monitoring. Without the softwarization of semiconductors, the organization would have to work with several partners to build and scale this item. It would require a hardware company to build the device, a software provider to enable the device, a cloud provider to ensure that the device can scale and a telecommunications partner to provide the connectivity.
In this scenario, these elements must be stitched together piecemeal. With a simple chip-to-industry solution, the semiconductor company provides all the connectivity, orchestration, power management and beyond through its own platform, eliminating complexity for the end user and providing a seamless experience.
Beyond complexity, chip-to-industry is also an attractive business model from a cost perspective. This consumption-based model optimizes simplicity and cost in a meaningful way, allowing customers to leverage a subscription, as-a-service membership and payment cadence.
Challenges
Paired with the many benefits of chip-to-industry come several learning curves that leaders must be aware of. Semis are traditionally not software companies—their strong hardware background means they do not have strong experience building and selling software. These are chip companies that are experts at selling to OEMs but may struggle to build software solutions with strong user experience capabilities.
This also opens the door to roadblocks associated with go-to-market. Semi leaders must become adept at building go-to-market solutions and successfully selling them to an end customer. This concept of moving from selling chips to selling solutions will pose a challenge for these companies.
Customer service and success also present a challenge. Traditionally, when a chip is sold, the semiconductor organization’s work is complete. On a SaaS model, however, this relationship is ongoing. These semis will be selling software as a subscription, making them responsible for all aspects of customer success and customer service. Semis must ensure they implement a customer service branch designed for a B2C or end-customer B2B model.
Finally, semis leveraging a chip-to-industry model must have a strong strategy in place for managing channels and partnerships, as well as guaranteeing privacy. These are crucial elements that software businesses are used to but are likely new to chip companies.
The softwarization of semis is a core enabler of the Intelligent Industry—and is pivotal for innovation and acceleration across sectors. By leveraging technologies like cloud and artificial intelligence and building a strong business strategy, these companies can foster their software development skills and solve technology challenges in a cost-effective and elegant way.
Forbes Business Development Council is an invitation-only community for sales and biz dev executives. Do I qualify?
