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August 12, 2011

Infosys can enable Hi-Tech OEMs to realize higher value as semiconductor prices are likely to fall

As per reports, the semiconductor industry is looking at a robust 16% growth, this year. But what is worrying for the industry is the potential supply glut. The capital investment in foundries in 2010-11 has been very high. Foundries like TSMC, Samsung, and Global foundries have almost doubled their previous run rate in the past two years, which capacity will be available to the market from the second half of 2012.


This is certainly going to impact the foundry wafer prices downwards. While the resultant prices fall in semi-conductors should improve demand, given the elasticity of semi-conductor demand the demand rise will not be sufficient to absorb the entire price fall. Also, given the robust consumer demand for electronics, the end product price that the consumer pays is unlike to fall at all.

So essentially, OEMs will be looking at a market in the mid-2012, where the semiconductor and component prices will be cheaper but the final product prices will not be downwardly revised. This will be more beneficial for the contract manufacturers who will be able to source the components cheaper and can improve their margins.

Infosys can support the Hi-Tech OEMs to benefit in this situation and realize more value in such a scenario. Our "Should-be costing" offering, constantly evaluates the ideal to-be cost for components and parts, enabling alert mechanism for customers where the price they are paying is above a certain threshold. We can also enable the processes and platforms for a "Buy-Sell" solution for our clients, managing to realize the price differential that is likely to emerge. In a buy-sell solution, Infosys sourcing and fulfillment teams can support our OEM clients, with sophisticated & precision sourcing directly from the component manufacturers and selling to the contract manufacturers, without having to worry about Inventory obsolescence and carrying costs, fully realizing the differential value.

If you would like to know more on how Infosys can support you, please write to me at Tarini_das@infosys.com