Fabless Semiconductor Firms’ Financial Performance Determinant Factors: Product Platform Efficiency and Technological Capability

Abstract

The semiconductor industry is experiencing a rapid change since new markets and new technologies have emerged to give insights to product innovation. The semiconductor industry is now specializing into the integrated device manufacturer (IDM), fabless, and foundry sectors. We investigated the determinant factors that affect the financial performance of firms in the fabless sector, which is the most technology-intensive and product-oriented sector among the three sectors. The correlation among technological capability, product platform, and financial performance is analyzed by structural equation modeling. The data includes 17,256 patents from 2005 to 2014 and financial data from 2012 to 2016 from 57 firms that run businesses in the fabless sector. Specifically, technological capability includes technological assets, technology breadth, and technology depth. New product development occurs by applying product platform efficiency. Financial performance includes growth and profitability. The results show that advancing product platform efficiency brings positive effects to financial performance. Also, increasing technological depth and technological assets not only improve product platform efficiency, but also bring positive effects to financial performance. In addition, technological depth affected growth positively, and technological breadth affected profitability positively. The results show the direction that new product development strategy needs to take.

Does Competitive Intensity Moderate the Relationships between Sustainable Capabilities and Sustainable Organizational Performance in New Ventures?

“…This integration, which derives from firms' experiences, tacit knowledge, and unique complex combinations of resources, affects the creation of valuable outputs [15,25]. The literatures in marketing, management, and entrepreneurship have suggested several major capabilities, such as marketing capabilities, technology capabilities, information technology capabilities, research and development (R&D) capabilities, management-related capabilities, operational capabilities, design capabilities, and innovation capabilities [3,7,20,21,[24][25][26][27][28][29][30][31]. These capabilities can be deployed to reduce costs and to create sustainable competitive advantages [32].…”

The Impact of Technological Capability on Financial Performance in the Semiconductor Industry

“…Therefore, the market requires firms to grow their technological capabilities in a short period of time. As a result, the new strategy for technological capability is to acquire and continue with comparative advantages [30]. Also, since R&D does not always succeed, it is very important to reach targets efficiently.…”

Multidimensional Perspective of Firms’ IT Capability Between Digital Business Strategy and Firms’ Efficiency: A Case of Chinese SMEs

“…This hypothesis has also been tested in the study by Park et al (2018) in which the positive effect of IT capability was determined in the efficiency of firms. In this manner, this study has involved the testing of this hypothesis in the context of Chinese firms where the effect of IT capabilities has been examined on the efficiency of firms.…”

“…Hence, based on the proposition, the following hypothesis has been constructed: Hypothesis 3: IT capability affects the Chinese firms' efficiency significantly and positively. This hypothesis has also been tested in the study by Park et al (2018) in which the positive effect of IT capability was determined in the efficiency of firms. In this manner, this study has involved the testing of this hypothesis in the context of Chinese firms where the effect of IT capabilities has been examined on the efficiency of firms.…”