Innovation in the Electronics Industry
By John MacWilliams, Bishop & Associates

As software steals the stage from hardware, we may lose focus, and think the future for electronics lies in fine-tuning the way we use the machines we have. But we are far from done seeing hardware innovation. One way to contemplate these questions is through the lens of history. If one looks back over the past century, many breakthrough innovations changed the way people live and work. They occurred because manpower was required to do everything — there was no automation.

Great Inventions of the 19th and 20th Centuries 

• Electricity

• The light bulb

• Flight

• Telecommunications

• Electric motors

• The internal combustion engine

• Energy storage technology (batteries)

• Vacuum tubes

• Television

• Semiconductors and the integrated circuit            

• Incandescent

• Electronic components and materials

• Compact fluorescent

• The computer

• Medical imaging technology

• Personal electronics

• LED light bulb

Most breakthrough inventions occurred during the 19th and 20th centuries, and they enabled the changes that transformed society from agrarian to industrial. The applications were all new. Electronics has now come to the fore as the new productivity engine. New products are breakthroughs or extensions from recent inventions, with connectors providing the “glue” to hold systems together. Innovations in electronics have reduced costs, increased productivity, entertained us, allowed us to communicate, and provided new products in all market areas. It has become the growth engine of our economy.

Semiconductor technology, the IC, computers, and fiber optics (in telecommunications) are exceptional phase-change products in electronics. Many recent inventions, like hybrid vehicles, are extensions of earlier developments tweaked and tailored to new applications; e.g. combining electric motors, internal combustion engines, electronics and computer battery technology to produce a long-range gas/electric vehicle that alleviates a problem (fossil fuels), reduces emissions, and has the potential to reduce costs.

Evolution, Not Revolution Moore’s Law describes the steady, predictable progression of semiconductor technology toward ever-higher density and performance. The rule has held for more than three decades. Thus, the case can be made that innovation in the electronics industry — since the invention of the integrated circuit is mostly evolutionary — is dependent on the next generation of silicon. We’ve witnessed some abrupt events, disruptive to some industries, like the digital camera overtaking film in just two or three years, or the MP3 replacing music stores. The Internet was a hugely disruptive sea change, and it took 10 years and a dot-com bust, before settling down with a forever-changed telecom industry. What the electronics industry has produced — and needs, to keep its growth trajectory and fuel our economy — is a constant infusion of new blockbuster products that reduce cost, increase functionality, and provide new killer applications. Most of these developments evolve from existing technology. But some result from new technologies, and we believe more will in the future. Here are some existing winners and next-generation technologies that will foster a new generation of connector products.

Software and Apps vs. Hardware It is important to note that software and applications have taken center stage. But has hardware, particularly with outsourcing, taken a back seat? As we look to the future, what role will hardware play in a software- and app-centric marketplace? Software and new applications, along with changing distribution channels from physical to electronic, are emerging as a major driver for this industry. They generally will not take away from hardware (server virtualization could be an exception), but usually enhance hardware. Digital downloads and electronic books are just the tip of the iceberg of future applications that will be enabled via hardware on both ends and in the middle.

Is Innovation Slowing? There is the argument that innovation in the electronics industry has slowed. Wall Street thinks so; at least to the extent we may now be in a lull of major new products. The first decade of the 21st century saw a wave of new consumer products, and smartphones, media players, tablets, and other devices were introduced via digital convergence. Next, the Internet went broadband. This created many new business products, including blade servers, office networks, and storage, both local and remote. Many think there are no products in the pipeline that will spur huge increases in demand like those that occurred in the last few years. But most would also argue that this pause is temporary. In the long-term, major innovation will continue, particularly where there are unfulfilled challenges, such as in energy, transportation, medical, and the environment. One point of concern is the maturing computer industry. The PC category has contracted to less than 10 players and single-digit growth. It is hard to see what innovations can occur there to spur growth, outside of emerging world demand. Silicon (Si) innovation will continue to be the driver, and it is not inconceivable that Si breakthroughs, say in System-on-Chip, will again hype the computer market.

Are There Inhibitors to Innovation in Hardware? If you read the business press, you will see complaints about government regulations and taxes. It is said that Sarbanes-Oxley, Dodd-Frank, and environmental regulations have hampered business and are costing the industry billions. Some say this is crippling new business startups, particularly in hardware. Venture capital is swarming around software and apps startups, not hardware, where investment costs and risks are much higher. So, yes, there are hurdles. Earlier issues, including even higher tax rates in the past, have been overcome by U.S. ingenuity and productivity. Nonetheless, there is some question about how this will play out in the future, as the rest of the world continues to develop world-class capabilities.

Recent Past: Industry Consolidation, Globalization, and Innovation via Digital Convergence The 2000-2010 decade was good for innovation, despite that, we had two of the worst recessions ever in electronics. There was also considerable industry consolidation: Scores of computer companies became less than 10; more than 20 disk drive companies became less than five; a major settling out hit the telecom industry; a sea change in TV from analog/CRT to digital/LCD changed the whole TV supply chain in just five years; and massive outsourcing of manufacturing went to China. There were similar changes in other markets, and the start of consolidation in the handset industry. Even with all this turmoil, many major new products were brought to market and we expect this to continue.

Recent Top 10 Products

Here is a proposed list, including some connector-specific developments.

Candidates for the Next Decade:

What did we miss? What is your company working on today that will be on everyone’s mind tomorrow? The larger question is, is your company innovating, or merely following the crowd? That’s the kind of thinking and planning that determines not only what the top 10 products will be in the future, but who the top 10 companies will be.

John MacWilliams Senior Consultant and Analyst, Bishop & Associates Inc. John MacWilliams' experience includes a long career in the electronics industry. He’s been involved in U.S. competitiveness programs, market research studies, sales and product management, strategic marketing, technology/venture development, and has authored many articles, including many pieces with Bishop & Associates. Prior to joining Bishop, MacWilliams worked with AMP Incorporated pre-TE Connectivity (connectors), Diceon Electronics (printed circuits), TRW, and IRC (passive components) in various marketing management positions up to VP. He is author/TWG chairman of the connector roadmap for the iNEMI.org International Electronics Technology Roadmap, and is a graduate of Lehigh University in Bethlehem, PA.