Accenture Strategy

Manufacturing strategy: Eroding competitiveness

May 8, 2020

RESEARCH REPORT

In brief

Accenture Strategy analysis reports as much as 50% of revenue is eaten up by the cost of goods sold.
Most companies believe they perform best when they focus on one manufacturing source strategy and optimize it to become highly efficient.
The solution: Embrace a hybrid, flexible approach to manufacturing sourcing.

Selecting the right sourcing strategy

Many semiconductor companies are not deploying the optimal strategy for their business because they use the wrong criteria to determine which sourcing strategy to adopt.

They rely on the type of product a chip is destined for or the company’s business model to shape their decision.
This can lead to a mismatch between the strategy and the needs of the business and compromise a company’s ability to control production costs.
With a hybrid, flexible approach, a semiconductor company can effectively use both the Known Good Die and Wafer Buy strategies, switching from one to the other when business conditions require.

Tradeoffs between known good die and wafer buy strategies

Determine which strategy to use when

Introduction

As the product moves into the growth stage, demand begins to ramp up and yield becomes more volatile.

Growth

Minimizing risk to production and mitigating any potential supply issues is critical—which is one of the biggest strengths of Known Good Die.

Maturity and beyond

That decision is primarily a function of where a product sits in its life-cycle, as illustrated by the semiconductor yield curve.

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Yield Curve versus Product Life Cycle Stages

Take action to boost the bottom line

Control costs

Given the dynamic nature of this industry, and increasing investor pressure for better returns, addressing the increasingly unwieldy cost structure helps to shore up the bottom line.

Bring process, tools & systems together

Adapting the sourcing processes, yield management capabilities, costing methods and ERP systems to flexibly support both Wafer Buy and Known Good Die strategies can help rein in COGS.