Core Competencies and Specialization Key to Survival in VLSI Design Services Market

Business Wire, Oct 19, 2004

PALO ALTO, Calif. -- The increased need to focus on core competencies has led to amplified specialization in the very large scale integration (VLSI) design services market, fueling the trend of partnerships between semiconductor vendors and third-party design houses. This increased emphasis on specialization has led to the shortening of planning horizons, causing continuous pressure on design service vendors.

New analysis from Frost & Sullivan (www.semiconductors.frost.com), World Strategic Analysis of the VLSI Design Services Market, reveals that revenue in this market totaled $1.30 billion in 2004 and is projected to reach $2.97 billion in 2008.

"Participants are stressed by the consistently evolving technology and changing business climates in this highly fragmented market," says Frost & Sullivan Research Analyst Swaminathan Srinivasan. "They must focus on providing a better financial ratio and build long-term relationships with end users to survive the cyclic nature of the market."

Additionally, semiconductor vendors are demanding greater participation of the design services companies -- compelling them to include greater innovation and creativity, even in mundane projects.

Another challenge faced by participants is the increasing level of attrition following the revival in the global economy. Employee retention has become top priority for vendors expecting to take advantage of this economic resurgence.

"Vendors' business prospects could also be influenced by the increasing levels of multivendor/location interactions -- a development resulting from the shortened planning horizons, fluctuating technologies, and mounting pressure for timely introduction of products," says Srinivasan. "This trend is gathering momentum despite the fact that almost every region is being dominated by local vendors."

The market's cyclic nature forces participants to rely on outsourcing to meet the dynamic needs of end users. One major drawback of this trend toward offshore outsourcing is the absence of knowledge about local culture and customs.

As outsourcing is expected to play a pivotal role in market success, VLSI design service providers must concentrate on efficient project management and on ironing out shortcomings by upgrading their methodologies and tool flows. Apart from outsourcing, smaller design services arrangements are also key market trends, rather than multimillion-dollar deals and performance contracts where total payment is based on business performance instead of solely on technology.

The Strategic Analysis of the VLSI Design Services Market is a part of the Semiconductors Subscription and analyzes the demand for VLSI design services globally. The study offers a comprehensive overview of the industry trends, revenue forecasts, market drivers, and challenges to help participants understand the market and strategically plan for potential growth. Executive summaries and interviews are available to the press.

If you are interested in an analysis overview which provides manufacturers, end-users and other industry participants an overview, summary, challenges and latest coverage of the Strategic Analysis of the VLSI Design Services Market, send an email to Julia Paulson - North American Corporate Communications at jpaulson@frost.com with the following information: Full name, Company Name, Title, Contact Tel Number, Contact Fax Number, Email. Upon receipt of the above information, an overview will be emailed to you.

Frost & Sullivan, an international growth consultancy, has been supporting clients' expansion for more than four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies includes custom strategic consulting, market intelligence, and management training. Our mission is to forge partnerships with our clients' management teams to deliver market insights and to create value and drive growth through innovative approaches. Frost & Sullivan's network of consultants, industry experts, corporate trainers, and support staff spans the globe with offices in every major country.

Strategic Analysis of the VLSI Design Services Market

F088

Keywords in this release: VLSI, semiconductor vendors, multivendor/location, third-party design houses, offshore outsourcing, design service providers, performance contracts