The Clouds Of Economic Slowdown May Have a Silver Lining

Feb 12, 2008 11:40 AM
by Alan Elbanhawy, Semiconductor Industry Veteran

With all the talk about a slowdown in the economy — which may or may not materialize — I decided to look on the bright side and explore how power electronics companies could use such a downturn to effectively improve their competitive positions. A slowdown in the economy usually heralds a harsher business environment in terms of profits.

It also brings increased competition as companies face shrinking demand for their products while attempting to maintain profitability and still keep their marketing and research and development teams intact. Clearly, a wide and varied product offering is always a great advantage going into a slower market, and it helps suppliers to weather a temporary downturn.

When business does decline, the price sensitivity in the power electronics industry places more pressure on companies to lower their prices to maintain their market share. For companies, this means lower revenues, which then leads to belt-tightening and the limiting or elimination of expenditures in all areas of the business.

But here’s where companies with vision and a well-charted course tend to increase attention to research and development. While other companies are simply making budget cuts, forward-looking companies are continuing to support and push for new and innovative products. If well executed, such products may advance the state of the art within a company and, in some cases, across the whole industry.

Though this approach may not be intuitive to everyone, it is clearly the right way to go. Ultimately, this focus on innovation and product development will lead to continued success once the market is back in the normal growing and expanding mode. In order to understand why this is so, let us examine the situation.

During periods of growth, most companies are preoccupied with expanding their own market share. They do this mainly through the introduction of products that simply meet the average customers’ expectations, while matching the performance of the competition. This approach is driven by the desire for market share and a healthy bottom line. But during slower times, research and development engineers and scientists catch a breather that allows them to dust off new, more-exciting ideas that sat on the shelf while everybody was scrambling to meet the demands of a red-hot market.

These sober second looks are a golden opportunity to reexamine these exciting ideas in light of the overall vision of the company and the customers’ and industry’s needs. By creating new and more effective solutions for these needs, companies can put themselves in a more competitive position once the marketplace emerges from a slow economy into a fast and furious one where the customers are optimistic and ready to tackle new challenges.

Once the customers are ready to try new ideas, companies can strut their stuff and advertise their new solutions for the new times. The vendors can boast that their new power products are cheaper, are more functional and offer higher performance than existing products. One benefit is that consumer equipment manufacturers can use these new components to design products that give a new face to miniaturization, offering both aesthetic appeal and outstanding, feature-rich performance.

The trick to designing a new and successful IC, module or MOSFET during the downturn is predicting what the market needs will be a few months to a year from now. This process will be greatly influenced by the strategic marketing talent in the organization and their vision of the market landscape within the time frame of interest. Another important factor will be the research and development team’s track record of innovation. Corporate vision combined with positive synergy between marketing prediction and research and development team capabilities is most likely to result in success in the marketplace.

An in-depth look at the power electronics market today reveals that there is a great need for very sophisticated power conversion systems that are smaller and can do more for less. This market need should be the guiding light for new power electronics product development in the near future.

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