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The Great Semiconductor Overhaul Raises the Stakes on Technology

by Chris Shrope , Model N December 1, 2022

Microelectronic components are everywhere, and essential to every major industrial sector. The need for microelectronics is particularly acute across the aerospace, defense, cyber intelligence, and telecommunications sectors, all of which impact our key national security interests.

Pandemic-related disruptions in the supply chain for semiconductors have shed new light on the prevalence of microelectronics for both the public and legislators, as well as the need to reconcile gaps in our supply chains. For example, the auto industry has experienced issues that include longer lead times, vehicle production cuts, and lower overall revenues due to the limited availability of semiconductors.

Providing Benefits for the U.S. and Its Semiconductor Players

Recently, the Biden Administration signed into law the CHIPS and Science Act, designed to boost American semiconductor research and development, manufacturing, and workforce development. The law provides $52.7 billion in funding. Key industry players, including Micron and Qualcomm, have announced nearly $169.2 billion in additional manufacturing investments.

The larger payoff around the big investments spurred by the Act will ultimately materialize in the form of greater domestic manufacturing capacity, skilled labor, and easing supply chain constraints. We will see a shift from U.S.-based design and so-called fabless manufacturing overseas, to a more balanced model that integrates U.S.-based design and production with overseas supplies.

This strategic shift in America’s industrial policy will eventually mean a faster, more responsive supply chain capable of delivering a larger chip supply for the aerospace and defense sectors, and more parts for today’s tech-heavy automobiles, among other everyday necessities.

The CHIPS and Science Act Raises the Bar on Technology Infrastructure

As part of this historic industry overhaul, manufacturers will need to update and upgrade their technology infrastructure to harness more of the value they create. A future with a more reliable and plentiful supply of semiconductors accelerates the push for technology-driven solutions — particularly in the areas of channel data, sales forecasting, and revenue management — to help companies maximize long-term profitable revenue and ensure a healthier industry.

With increased investment across the industry, companies must enhance their technology strategy in order to stay ahead. As a result, a holistic set of systems spanning products and the front- and back-office functions of a high-tech manufacturing company will become even more essential to capture value. Management of the product lifecycle from both design and product standpoints will become increasingly useful, and systems that help harness and make the most of a company’s revenue will become more important to business performance.

Recommendations for High-Tech Manufacturers

To help maximize revenues in this new environment, high-tech manufacturers should focus on systems that cover their complete revenue ecosystem and take into account the evolving supply chain — which is poised to grow even further in complexity, given the potential for new U.S.-based players thanks to the CHIPS and Science Act.

This means there is now a greater need for more effective deal, channel, and rebate management, as well as actionable business intelligence around inventory and pricing. For example, channel data management (CDM) solutions can provide visibility into items sold via real-time point-of-sale (POS) data, which helps guide decisions around pricing based on where the part might be made or how long the lead time is. This is especially important when a company must deal with multiple semiconductor node sizes and customer-specific SKUs.

In addition, solutions for deal management should attach specific design registrations for a given part when actively selling, and be able to integrate global pricing management, automated discounts, and automated quoting and contracts to ensure maximum accuracy and consistency. Channel incentives such as rebate management tools should operationalize the creation and oversight of sales programs, as well as management of market development funds (MDF) and support for comprehensive reporting that eliminates manual processes and partner “management by spreadsheet,” a common problem across numerous sales initiatives.

As part of this process, companies must leverage enterprise data to ensure they have the latest actionable business intelligence. This ranges from understanding stock and inventory levels to helping answer questions about how much to produce and what inventory to have, knowing where to adjust on price protections and ship and debits, and maintaining accurate deal, price, and channel sales levers. Being able to interpret that information using AI and analytics tools will ensure adequate supplies for customers and profitability for manufacturers.

Are Semiconductor Manufacturers Poised for Success?

While the U.S. semiconductor industry grows, a deeper understanding of pricing across numerous sales channels will help companies stay more competitive through management of the complete pricing process. This, in addition to the incentives in play in the complex channel ecosystem, have a significant impact on cash flow and long-term business performance. By having better data and visibility into pricing scenarios and channel performance, companies will be better positioned to meet industry challenges and follow through on the promise presented in the CHIPS and Science Act.

Chris Shrope is associate director, product marketing, high-tech, for revenue management software provider, Model N

This article was originally published on
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