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Value Chain Overview and Examples
The following chart illustrates a rough overview of the value chain within the segment “Microelectronics”.
It should also figure out all major value generation stages and interdependencies of involved participants.


In order to highlight the recent market evolution and give awareness about the well-organised and mature segment of the “Microelectronics”, we listed below a few examples.

In the past years, industry developments in the “Microelectronics” show moves towards specialisation and standardisation. As an example many Microelectronics design houses (e.g. Crossmos GmbH) became independent from chip producers (e.g. EM Microelectronic-Marin SA). One of the reasons for the increasing existence of fabless design houses is the complexity and variety of design products which allows designers to stay as single and sustainable business (concentration of core competences) as well as to give the opportunity to choose among different production technologies. Nevertheless, design houses are tightly bounded to the higher specialisation, standardisation of the different processes, concentration on core competencies and an increase of the outsourcing business.


Concentration on major strengths
Due to high efficiency and effectiveness of the Microelectronics' value chain, industry participants, who intend to successfully compete against other players, are increasingly forced to understand in depth their own value proposition and to concentrate on their major strengths. In the case in which consumers value more the cost of end product than the pure improvement of technical functionalities, suppliers start to focus their development efforts on improvements in production procedures, on the definition and standardisation of business processes and on potential opportunities to outsource their non-core activities. As successful example among big players, Nokia and Ericsson have changed their production behaviour in the past five years. Both have dramatically outsourced large parts of their microelectronic and printed circuit boards’ production. This strategy was only possible because of global initiatives regarding the definition and settlement of common production procedures and standards.

 In established industries, not only market players like suppliers, producers or distributors gain on professionalism and efficiency but also additional participants such as consultants, lawyers and network partners can improve their value contribution due to increasing experiences and know-how. Hereafter we would like to present you an example of successful networking between a SME and a large corporation. The Swatch Group has decided to invest in the development of the second generation of Swatch pagers. They have set up a project with internal team participants and during the execution they realised that the planned milestones could not be reached with their internal competencies. In order to stay on track, they asked the author of this paper for the most appropriate partner in the development of the required semi-custom microprocessor. Through the long-lasting experiences and broad developed contact network of APTE Association, the intensive communication as well as the mutual understanding of the current challenges of the Swatch Group between all involved participants, the right person could be quickly identified and pursued to work on the project. The second-generation pager of the Swatch Group was delivered in “Time-to-Market”.

Statements About Industry Characteristics
In order to summarise a mature value chain like the segment of “Microelectronics” we can mention the following statements:
success of their products in the end product manufacturing stage due to the agreed dependence of royalties (the design development normally just covers the costs). This example shows clearly how a mature industry arranges itself under the pressure of competitive market condition.
  • Competition in an established industry is high and drives the way how players think and act. This forces all market participants to increase efficiency (“doing the things right”) and effectiveness (“doing the right things”). The consequences are higher specialisation, standardisation of the different processes, concentration on core competencies and an increase of the outsourcing business.
  • “Consumer gets more for less money”. This influences the development of the consumer market. On the one hand an increasing number of customers give the suppliers the opportunity to cover their infrastructure costs (economics of scale) and to decide about new investments. On the other hand the retention of existing customers establishes excellent feedback processes, which are crucial for innovation based on users’ requirements.
  • Despite the great history of the Microelectronics industry and the success story of several major players there is still room for improvements. For example, opinion leaders insist on developing new job profiles which master the challenge to bridge the gap between understanding customers´ needs and the development of state-of-the-art technology and products.