In the boom times prior to the current economic downturn, semiconductor vendors worldwide were rapidly producing chips to support the demand from high-tech communications and consumer-device OEMs for a variety of cutting-edge technologies. However, OEMs that stocked up on semiconductors during this upswing found themselves overstocked when the technology bubble burst and the market for new products dwindled. The resulting inventory write-offs have left many OEMs hesitant to develop products supporting technologies that remain unproven in the marketplace. Rather, OEMs are looking to deliver technologies with as little expense and development time as possible.

To address this change in OEM product strategy, semiconductor vendors need to help customers develop and ship products that incorporate existing technologies. This requires a more service-based strategy focused on not just supplying chips, but on providing complete hardware and software solutions necessary for turnkey implementation of existing technologies.

To provide OEMs with the hardware side of a complete system solution, semiconductor vendors will need an intellectual-property (IP) library with strong support for the technologies that customers want. However, supporting these technologies at the IP level is not enough; the time and expense OEMs must invest to develop systems to deliver them are simply too high.

The responsibility for developing a system-on-a-chip or even a complete hardware reference design to support current technologies falls upon the semiconductor vendor, and the vendors that provide this service to OEMs are the ones who will succeed as the market improves.

This service model for semiconductor vendors must also include a software component. Indeed, system-level support demands software, as semiconductor manufacturers must offer their customers a truly robust software package to support their system-level hardware offerings. This software package should include out-of-the-box support for each target system's most popular operating systems. Additionally, it should also extend to the application layer. Semiconductor vendors should either provide customers with application development tools or consider developing software for the most popular applications in-house.

Providing OEMs with end-to-end software solutions will reduce development time and help bring products to market more quickly. This additional service will be a key differentiator among semiconductor vendors. Why look to two separate vendors for hardware and software if a single supplier can deliver a complete package?