'Co-opertition' still not that easy

Study finds no consistent approach

Co-opertition, the formation of R&D and other strategic alliances between former competitors, is on the rise in electronics although there remains little consensus as to how to make it work, according to a new report.

Research by the Wharton School of Business at the University of Pennsylvania has found that chip designers are being forced into more and tighter collaborations across their supply chains because of ever-growing technological complexity.

However, while strong partnerships are now being struck with manufacturing-based suppliers of foundry, assembly and test services, those that may involve fellow design houses are typically less effective.

"Complementors are often other semiconductor companies that develop complementary ICs used in the customer's applications. However, managing relationships with complementors seems organisationally more complex than managing relationships with suppliers or customers," said Rahul Kapoor, a professor in Wharton's Management Department.

"While there are well-defined departments for managing relationships with suppliers and customers, the relationship with complementors seems to be managed in very different ways, both within and across companies. Hence, in addition to suppliers and customers, semiconductor companies pursuing collaborative innovation models need to explicitly consider different types of complementors and develop organisational structures to effectively manage these new types of relationships.

"The results caution executives that it may take only one ineffective collaborative link to undermine the total value created by the firm within the ecosystem."

The research found an almost equal split between those who manage 'complementor' relationships through either their main marketing or engineering activities (39 per cent vs 37 per cent respectively). Only 17 per cent of Wharton's sample had departments or executives specifically dedicated to overseeing these agreements.

At the same time, Kapoor said that there is now a clear link between the breadth and willingness with which companies are willing to collaborate and the level of innovations they can reach. 

The report also released some valuable data on the current state of fabless semiconductor design.

Re-use is on the increase. A revision design for an existing product will usually incorporate 63 per cent existing IP and similar in-house blocks will account for 44 per cent of the IP in a typical new product. External IP is also increasingly significant: on average, 18 per cent of a design's IP blocks will come from a fabless company's foundry and a further 16 per cent from other third-party suppliers.

Kapoor estimates that time-to-market (TTM) for fabless companies is about 14 months for each revision of an existing design and about 19 months for a new product. He further observes that adding a shift to a new manufacturing process will add another three months to these TTMs.

The report was commissioned by the GSA which has made it free to download from its website (www.gsaglobal.org).

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