TechMark Global

I recently had the opportunity to survey the medical electronics market. I was quite surprised by the some recent developments in this area so I thought it would be interesting to capture highlights in this short article. I was most impressed by some of the integration of biomedical/biochemical microanalytics with the well-established semiconductor structures.

DNA Sequencing:

A major focus area is that of DNA sequencinq. Roche and IBM have recently made the headlines, announcing a collaboration to develop a nanopore-based gene sequencing chip (see http://www-03.ibm.com/press/us/en/pressrelease/32037.wss). Other companies, such as Ion Torrent, have also bet on leveraging the 1 Trillion semiconductor infrastructure with the announcement of a MEMS-like electrochemical nucleotide detection scheme for sequencing (see http://www.iontorrent.com/).

Having a biochemical background, I've been waiting a long time for the integration of life science analytics with the high-tech silicon-based electronics industry. I think we are essentially there with the large focus on what is generally referred to as "lab-on-a-chip" (LOC), a subset of the rather generic System-On-A-Chip (SOC). Large research institutes like IMEC (see http://www2.imec.be/content/user/File/Leaflets/HPP2010_leaflet_labonchip.pdf), as well as established commercial players like IBM and ST Micro are investing on a large scale. These efforts marry well with other activities performed under the "wearable electronics" umbrella.

Miniaturization through integration...drives to lower costs

The cost of sequencing the human genome has become a major indicator of LOC evolution. From $10,000 to a $1000 in phase 1 and phase 2, LOC is pegged to bring the costs down to $100, a price point this will drive sequencers out of the research lab and into clinics. A significant turning point in the overall  spread of the technology.

Market Info:

The global biochip market is rapidly approaching 3B. Growth rates in the double-digit are forecasted. (see http://www.bccresearch.com/report/BIO049C.html). The LOC piece is expected to surpass 1B in the next few years.

Technology:

Without going into great details in this short article, we can summarize the general LOC approach as being the poster child in nanotechnology and MEMS manufacturing. This will be further explored in future articles.

TechMark Global...Marketing Technology Globally

Offshore, Nearshore or Onshore?

Electronics Manufacturing: the beginning

Over the last 30 years, electronics companies, such as IBM and Sony, morphed themselves from vertically integrated, monolithic institutions to that of lean, core-competency focused, global enterprises, with extensive outsourcing of its manufacturing. In this decade, EMS and ODM services are forecasted to grow to a combined 435B (by 2013), representing more than 30% of the overall electronics industry. Advent of wafer foundries such as TSMC and large assemblers such as Foxconn and Flextronics paved the way for ever-increasing “outsourced content”.

Although lower value outsourcing had previously occurred in the textile industry and the like, the electronics migration was clearly the most technologically-advanced to occur... Information technology is next.

IT Services follow suit

Fueled by technology and infrastructure, IT services became another area of great activity over the last 20 years, as companies not only outsourced manufacturing operations, but migrated various business functions to the outsourcing model. Macroscopically, the overall IT market is forecasted to be above $ 1,713B in 2011. The outsourcing piece is estimated to be between 100B and 150B. A lot of room for growth! India comes to mind, with armies of software engineers and service structures.

In addition to cost-driven outsourcing forces, globalization also drove changes to business models. Indeed, outsourcing locations are now typically aligned

The overall outsourcing market can be further segmented as follows:

IT outsourcing (ITO): outsourcing of infrastructure projects, product development, applications development, applications integration, etc…

Business Process Outsourcing (BPO): outsourcing of business activity such as calling centers, accounting, human resources, etc..

Knowledge Process Outsourcing (KPO): can also be seen as the higher end of BPO. Services outsourced are market research, market analytics, legal services

Across many verticals

The outsourcing of IT-related business cuts across all major vertical business segments. The following are typically tracked: Banking/Insurance/Financial, Health Services/Pharma, Manufacturing, Travel/Transportation, Energy, Telecommunications, Retail, Others.

Globalized Outsourcing:

Outsourcing business activity is typically associated with India or China. Offshore outsourcing, as it is called, still represents a large chunk of the overall market.

Nearshoring, which means outsourcing closer to home, has recently seen some significant growth. For US companies, nearshoring equates to outsourcing to Mexico or other Latin America players. Advantages incude:

· Same time-zone logistics

· NAFTA-related ease of doing business

· Culture affinity

Another option picking up steam is known as onshoring. In this scenario, lower wages of some rural US rural areas becomes attractive for ITO or BBO activity.

Outsourcing is not the solution to all problems but when it comes to IT-related activity, a good mix of internal and external activity can be highly effective.

References:

“The offshore services; Global Value Chain”, Gereffi Gary & Karina Fernandez-Stark;

Center on Globalization, Governance and Competitiveness; March 2010

http://www.cggc.duke.edu/pdfs/CGGC-CORFO_The_Offshore_Services_Global_Value_Chain_March_1_2010.pdf