The Internet of Things (IoT) is quickly going mainstream. In fact, by 2020 nearly 50 billion Internet addressable and aware devices will exist – which translates into a $14.4 trillion business opportunity, according to networking vendor Cisco Systems, Inc. A recent GE and World Bank study predicts that the opportunity could be as big as $32 trillion, or 46% the size of the global economy today.
IoT adoption is fueled by a combination of forces, including the exponential growth of connected devices, a confluence of low-cost technologies (things, gateways, big data and computing power), pervasive connectivity and massive volumes of data. The IoT’s accelerating momentum will drive the next wave of growth across all industry segments, including high-tech. In addition to mobile devices, semiconductor vendors will also be key players, as new IoT chip opportunities could power the industry across the $400 billion mark by 2020.
Increasing Sales through New Approaches to Monetization
Similar to how traditional software vendors work, semiconductor vendors can monetize IoT products by adopting new licensing and entitlement management systems that control access to their Internet-connected components, functions and features. Licensing and entitlement management also introduces more flexible approaches to pricing and packaging, enabling manufacturers to bundle product features and capabilities, ensure payment, provide upgrade paths and create new revenue streams.
To accommodate the business opportunities introduced by connected devices, semiconductor companies will need to develop a roadmap (see Figure 1) for high-level business transformation strategies that includes:
Adapting CRM/ERP/IT systems to accommodate and manage the new licenses and entitlements.
New forms of customer support.
New sales processes (i.e., the transition from boxes to solutions).
Revenue allocation, recognition, deferrals, etc.
Improving Operations through Yield Management
It is critical for semiconductor fabs to maintain high yields as the production process is highly capital-intensive (with setup costs ranging from $2 billion to $4 billion), involves a large number of processing steps (more than 150), has long production cycle times (more than six weeks) and uses expensive raw materials (with individual wafers often costing in the thousands of dollars). However, semiconductor manufacturers have struggled with low yields as extended process and testing times make it difficult to implement real-time statistical process control.
The IoT makes it possible to deploy sensors to record yields and settings at different production steps; when combined with analytics, this can help the yield management application keep pace with incoming data and compress the reaction time between detecting an actionable event and adjusting the manufacturing or test process (see Figure 2). In the long term, IoT-driven yield models, linked with statistical process control methods, ensure process improvements as process engineers can quantify their own process sector’s influence on test yields instead of waiting for months to get the final test results.
Semiconductors play a significant role in the IoT spectrum – providing the technology that enables “things” to connect. As the core component that helps collect, process and transmit the signals that form the IoT’s foundation, semiconductor vendors have immense opportunity in the near- and long-term future.
This is part one of a four-part series on the impact of IoT in the high-tech industry. Read more about the impact and applications of IoT in the contract manufacturing, product distribution and OEM space in the other installments of this series. For more on the how IoT affects the high-tech industry, please read our whitepaper The Internet of Things: Impact and Applications in the High-Tech Industry. Visit Cognizant Digital Works and the IoT section of our website for more.