-
- News
- Books
Featured Books
- smt007 Magazine
Latest Issues
Current IssueBox Build
One trend is to add box build and final assembly to your product offering. In this issue, we explore the opportunities and risks of adding system assembly to your service portfolio.
IPC APEX EXPO 2024 Pre-show
This month’s issue devotes its pages to a comprehensive preview of the IPC APEX EXPO 2024 event. Whether your role is technical or business, if you're new-to-the-industry or seasoned veteran, you'll find value throughout this program.
Boost Your Sales
Every part of your business can be evaluated as a process, including your sales funnel. Optimizing your selling process requires a coordinated effort between marketing and sales. In this issue, industry experts in marketing and sales offer their best advice on how to boost your sales efforts.
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - smt007 Magazine
R&D Takes Back Seat Amidst Chip Shortage—But It Shouldn’t
December 8, 2022 | Malcolm Thompson, NextFlexEstimated reading time: 5 minutes
As the global chip shortage continues, companies may be tempted to put research and development on the backburner to conserve capital and prioritize production. A primary area of focus has been on increasing production capabilities to meet demand. In this drive to increase capacity, R&D has fallen to the wayside as some companies consider scaling back to refocus on the expansion of manufacturing capacity at current technology nodes. This is a hard choice to make for any company, and even R&D giants like Apple, known for its dedicated investments in innovation, have had to cut R&D budgets below original projections1.
At NextFlex, we’ve heard from partners developing additive manufacturing and advanced packaging capabilities who have had to divert their focus to simply getting product out the door. While this reprioritization is understandable in the context of the shortage, pausing R&D needs to be done with caution.
Research: Difficult to Start and Stop
A spark of creativity can be difficult to reignite. A pause in research and development, especially for an extended period of time, may result in talent leaving or being dismissed. Again, these are tough decisions for all that even giants like Google have had to make with its research centers2. When talent leaves though, details of processes or ideas could be forgotten, and institutional knowledge will generally erode. Plus, needing to restart or re-acclimate to a process can exacerbate lead times. This can be especially problematic for chips, since they have an average lead time of 26.6 weeks, which has stretched to 52 weeks at times due to supply chain issues.
It is possible to scale back R&D efforts without entirely stopping, such as by prioritizing incremental research over exploratory or pausing a limited number of projects or departments. However, extreme cuts or a full stop may not be possible to come back from in a meaningful or timely way without massive overhauls. Talent may need to be rehired, processes may need to be relearned or recreated, and new materials may need to be sourced, all of which require significant investments of time and money.
Whether it be a full pause or operating at a reduced capacity, companies make such decisions with careful consideration. It may be necessary in the moment, but it should always be done in recognition that the immediate benefit may mean sacrificing something in the future.
Missing a Product Cycle Can Be Deadly
In high tech, the effects of missing a product cycle can be devastating to a company’s outlook, or result in a long, expensive catch-up process. There can also be a domino effect of racing to catch up while trying not to fall further behind on other projects or developments. By pausing R&D, a company may limit both their ability to keep up with current developments and their ability to be on pace for future ones, as some forward-looking projects may require years of foundational work.
However, working with reduced resources does not have to have dire consequences. As I’ve previously discussed with regard to the chip shortage, having a dynamic research and development program can help mitigate issues and prevent them from recurring. It can also generate creative solutions and fresh ideas in the face of less-than-ideal circumstances, such as how those created by the current pandemic-have affected production downturns.
Prioritizing R&D Makes a Business Resilient
Often, conserving capital is the reason behind cuts to research and development, since the returns come in the future, and eliminating the cost looks like an immediate boost in profit. While this short-term boost can be useful or alluring, there can be long-term detriments. It can be more expensive in the long run, as scaling back up, including rehiring or updating equipment, costs more than maintenance. Further, investors may be reticent to back a company that does not have a robust R&D program due to a perceived lower ceiling for growth. Finally, companies that conscientiously invest in innovation are also more likely to successfully navigate a recession or other challenging times.
For the chips industry based in the U.S. specifically, it’s also important to remember that we’ve been losing ground on the international field, falling from approximately 37% of manufacturing in 1990 to 12% in 202033. Even as we’ve historically dominated research and development (and still do, in terms of pure dollar amount), we are being matched in percentage of investment. On average, U.S.-based companies reinvest 20% of profits, while Chinese companies reinvest 23%4. The signing of the CHIPS Act does signal some positive signs for the future, with major companies investing tens of billions of dollars into manufacturing and a federal allotment for R&D5. As we look to regain ground, we want to ensure we’re not overcorrecting by surging production while cutting back research.
Conclusion
The balance between manufacturing and R&D is a delicate one that ebbs and flows depending on circumstances. Specifically, the current era of supply chain issues, the chip shortage, and efforts to combat a decline in market share have presented a unique set of obstacles OEMs are facing. However, that doesn’t mean we should take our foot off the R&D pedal. As vital as manufacturing and infrastructure are, we need to be cautious to still conscientiously invest in research and development to stay ahead of the curve on new technology. If, in an effort to regain lost ground, we miss developments in flexible hybrid electronics, additive manufacturing, advanced packaging, or other emerging technologies, we’ll find ourselves in the same bind—and possibly worse off for it.
References
- “Apple to Slow Hiring and Spending for Some Teams Next Year,” by Mark Gurman, July 18, 2022, Bloomberg.com.
- “Google Cuts R&D Projects at Area 120 in Half, Layoffs Imminent: Report,” by Marvie Basilan, Sept. 14, 2022, International Business Times.
- “Congress Is Giving Billions to the Chip Indstury, Strings Are Attached,” The New York Times.
- “Silicon: Are Chinese chipmakers spending enough on R&D?” by Stewart Randall, Sept. 10, 2021, Technode.
- “Biden Signs Chips Bill, Unleashing Funding for US Production,” by Jenny Leonard and Jordan Fabian, Aug. 9, 2022, Bloomberg.com.
Malcolm Thompson is executive director of NextFlex.
Suggested Items
Real Time with… IPC APEX EXPO 2024: Tools, Training, and Trends in Manufacturing Engineering
04/25/2024 | Real Time with...IPC APEX EXPOGuest Editor Kelly Dack and Product Specialist Erik Bateham of Polar Instruments discuss Polar's latest technology, including their role in aiding manufacturing engineers. They highlight the advanced capabilities of Polar's tools and the critical role of signal integrity analysis, as well as the importance of accurate modeling in board manufacturing. Polar's unique training approach and demonstration contact details are also explored.
TTM Celebrates the Grand Opening of Its First Manufacturing Facility in Penang
04/25/2024 | TTM Technologies, Inc.TTM Technologies, Inc., a leading global manufacturer of technology solutions including mission systems, radio frequency (RF) components and RF microwave/microelectronic assemblies, and quick-turn and technologically advanced printed circuit boards (PCBs), officially opened its first manufacturing plant in Penang, Malaysia with an investment of USD200 million (approximately RM958 million).
Listen Up! The Intricacies of PCB Drilling Detailed in New Podcast Episode
04/25/2024 | I-Connect007In episode 5 of the podcast series, On the Line With: Designing for Reality, Nolan Johnson and Matt Stevenson continue down the manufacturing process, this time focusing on the post-lamination drilling process for PCBs. Matt and Nolan delve into the intricacies of the PCB drilling process, highlighting the importance of hole quality, drill parameters, and design optimization to ensure smooth manufacturing. The conversation covers topics such as drill bit sizes, aspect ratios, vias, challenges in drilling, and ways to enhance efficiency in the drilling department.
Elevating PCB Design Engineering With IPC Programs
04/24/2024 | Cory Blaylock, IPCIn a monumental stride for the electronics manufacturing industry, IPC has successfully championed the recognition of the PCB Design Engineer as an official occupation by the U.S. Department of Labor (DOL). This pivotal achievement not only underscores the critical role of PCB design engineers within the technology landscape, but also marks the beginning of a transformative journey toward nurturing a robust, skilled workforce ready to propel our industry into the future.
Fujitsu, METRON Collaborate to Drive ESG Success
04/24/2024 | JCN NewswireFujitsu Limited and METRON SAS, a French cleantech company specializing in energy management solutions for industrial decarbonization, today announced a strategic initiative to contribute to the realization of carbon neutrality in the manufacturing industry.