The semiconductor industry has undergone many boom and bust cycles. Yet regardless of whether times are good or bad, chip-makers have managed to deliver higher levels of product sophistication and processing power in shorter product cycles.

Decades of brutal market competition have forced perennial leaders like Intel, Qualcomm, and Texas Instruments to learn not just how to survive, but how to thrive under the harshest of business conditions.

How have they done it? There is no single answer.

However, there are a number of management tools and philosophies that the industry shares. These are techniques that can transfer across industries and smart management teams should carefully consider how they might apply in today’s tumultuous business environment.

The Semiconductor Industry Survival Model

1. Zero-Based Budgeting. This proven method of budgeting forces management to prioritize and justify projects based on projected costs and return-on-investment. The discipline here is that every budget is set at zero and built from the ground up based on a forecast return.
2. Product (or service) focus and execution. Periodic reviews between development, marketing, sales and operations keep projects on track and on budget. Disciplined companies always pull sales into the discussion to make sure they’re getting a true market view and have the customer perspective.
3. Product (and service) diversification. Markets naturally cycle at different times and rates. Diversification provides a buffer from the marketplace dynamics of supply and demand.
4. Forecast end-user markets. Monitoring and forecasting end-user markets (like computing and communications) provides an early indicator of upcoming market conditions and transitions.
5. Keep resources lean and mean. You’ll never find a department or a project team with enough headcount in the semiconductor business. Outsourcing, contractors, and consultants (all of whom can be easily ramped up or down) are often used to manage the peaks and valleys of business cycles.
6. Use market volatility to grab market share. Turmoil can present opportunities to gain market share or displace the leader. Practitioners constantly assess risk versus reward tradeoffs, even in down markets.
7. Embrace “lean” methodologies like supply chain management and just-in-time manufacturing. Industry leaders use these methodologies as a competitive advantage to minimize their inventory, improve process efficiencies, and maximize profits.
8. Adapt with lightening speed. Advance planning, decisive action, and flawless execution ensure rapid responses to market changes and efficient operations.

In spite of economic turmoil, increased global competition, and political upheaval, the semiconductor industry has managed to maintain a long-term growth trajectory and relatively consistent profitability. It’s a great example of what smart strategy, disciplined management, and engaged employees can accomplish.

The above list is by no means complete. I’m sure there are many other proven methods or strategies to mitigate the effects of our current economic climate. There are certain to be some of them that are relevant to your business or industry.

Over the past 20 years M Squared Consulting has helped thousands of clients to evaluate and implement strategies like these, across many industries. The thing that continues to impress me most about the M Squared Consulting business model is that we can truly help any company solve almost any problem. The wealth of talent found in our Consultant Network enables us to quickly deploy proven experts who will cost-effectively deliver results for our clients. In challenging times like this the ability to bring in outside resources who can make an immediate contribution to the bottom line may just be the best management tool of all.

This entry was posted by Kimball Norup on Wednesday, April 22nd, 2009 at 9:22 am in Business Strategy, Technology. Feel free to leave me a message about this post below.