Heterogeneous integration is accelerating the industry’s shift toward modular architectures with profound implications for how value is created and captured. The automotive sector offers a useful analogue for how such transitions typically unfold, not as linear technology upgrades but as ecosystem restructurings. As modularity increases, control shifts, roles harden, and optionality collapses quickly. Leaders who focus narrowly on technical execution risk being assigned a position by the market rather than shaping it themselves.
The following moves define how to stay ahead as the competitive chessboard is reset.
1. Choose your role before the ecosystem chooses it for you.
2. Make interoperability a product capability.
3. Move packaging upstream in architecture decisions.
4. Secure the constraint: capacity and liability.
What automotive’s tiered supply chain can teach semiconductor leaders about the chiplet era
For decades, the semiconductor industry could tell a straightforward story about progress: shrink transistors, integrate more onto one die, and ride a predictable curve of cost and performance improvement. That story still matters but is no longer sufficient. At the leading edge, progress increasingly comes from assembling systems of specialized dies and making them behave like one coherent product.
The automotive industry serves as a useful precedent. The best comparison between cars and chips is not about end-markets or product cycles. It is about how complex products get deconstructed, integrated, qualified, and manufactured. When architectures shift from tightly coupled to modular designs with stable interfaces, the industry structure reorganizes. Specialists emerge from the newly created layers, integration becomes a discipline, and value moves to those who can make the entire system work reliably at scale.
Automotive lived through that transformation. Semiconductors are now entering their own modularity moment enabled by heterogeneous integration. The leaders who treat this as a structural shift, not a back-end footnote, will create new profit pools.
Milestones that rhyme: scale, standardization, specialization
Both semi and auto began with heavy vertical integration. Early automakers internalized much of the product because a mature supplier base did not exist. Early semiconductors paired innovation tightly with manufacturing know-how as transistors and integrated circuits moved from research into repeatable production.
Scale changed the rules.
In automotive, Ford’s moving assembly line at Highland Park in October of 1913 is the canonical inflection point: a complex product became a reproducible manufacturing system and learning-by-doing began to dominate.
Semiconductors developed their own scaling flywheel. Moore’s 1965 observation became a coordinating heuristic for roadmaps and investment. Dennard scaling provided the rationale for why shrinking devices could improve power and performance, until those assumptions broke down and “free” gains slowed, pushing innovation upward into architecture and integration.
As complexity grew, both industries also industrialized specialization. Automotive evolved toward a tiered supplier ecosystem. Semiconductors split design from manufacturing at scale through the pure-play foundry model, pioneered by TSMC after its founding in 1987. The deeper lesson is consistent: once interfaces and responsibilities stabilize, industries naturally “tier.”
Today, automotive shows what that looks like in maturity. OEM manufacturing has increasingly become an assembly operation, with modules and parts handled across suppliers, and tier-1 suppliers coordinating further sub-tiers. OEMs still own platform decisions and brand outcomes, but much of the engineering and integration work sits in a sophisticated supplier network.
Semiconductors are approaching a similar rebalancing because the unit of integration is changing.
The pivot: advanced packaging is turning the package into the system boundary
The strategic shift semiconductor leaders must internalize: Advanced packaging is moving “system construction” from the die to the package.
The IEEE Heterogeneous Integration Roadmap is explicit that the industry is shifting from SoC1-centric to SiP2-centric outcomes, emphasizing heterogeneous integration’s advantages in flexibility, yield/cost tradeoffs, and time-to-market vs. relying solely on monolithic SoC scaling.
The die is the product boundary in a monolithic world. In a chiplet world, the “product” increasingly becomes a system-in-package assembled from multiple dies, compute, I/O, analog, memory interfaces, and accelerators, often on different process nodes and potentially from different suppliers. The package becomes the integration boundary where performance, thermals, yield interactions, and test strategy are resolved.
This is where the automotive analogy is most useful if you keep it precise. The claim is not “packaging houses become Tier-1s.” The claim is that modular architectures create Tier-1-like roles: entities that own module-level integration responsibility, validation, and lifecycle execution. In semiconductors, that role could be a foundry, an advanced OSAT moving up the stack, a system company building internal capability, or a new class of integrator.
The gating factor, as in automotive, is interfaces plus trust.
Interoperability is the make-or-break condition
Automotive tiering works because modules can be integrated reliably. That reliability is built on standardized interfaces and disciplined qualification regimes.
Semiconductors need the equivalent if chiplets are to scale beyond tightly controlled, proprietary stacks. Standards like UCIe point in this direction. The UCIe specification includes compliance testing plans intended to ensure interoperability, and it even anticipates automotive-oriented features like health monitoring and predictive failure analysis.
Interoperability that is enforced, not merely asserted, will determine whether the chiplet era yields an open, tiered ecosystem or a set of “walled garden” platforms.
Either way, value moves toward integration. The only question is who captures it.
Where new value pools will form
As the package becomes the system boundary, new value layers emerge and solidify, much like automotive’s shift from in-house part-making to supplier-led module integration.
- Compliance, certification, and “trust infrastructure”
In a chiplet ecosystem, conformance becomes a product: test suites, certification programs, reference implementations, and integration kits make multi-vendor adoption economical. UCIe’s compliance emphasis is an early signal that this layer will matter.
- Tier-1-like module integrators at the package boundary
Whoever can deliver a validated subsystem-in-package that is performance characterized, manufacturable at volume, and qualified for reliability, will capture Tier-1-like economics. This is where the hard work lives: signal/power integrity, thermals, yield interactions, and test strategy.
- Chiplet productization and lifecycle management
Chiplets only become an ecosystem when they behave like products: stable SKUs, revision discipline, compatibility promises, long support windows, and integration-ready models. This is unglamorous work, but is exactly what turns engineering artifacts into reusable profit engines, akin to automotive suppliers’ program and variant management.
- Test, traceability, and liability boundaries
Modularity increases failure modes, and the number of parties involved. That pushes value into (i) test regimes and traceability infrastructure that make accountability and continuous improvement possible across vendors, and (ii) commercial frameworks that define “known good,” data-sharing expectations, and warranty boundaries.
- Advanced packaging capacity and ecosystem orchestration
When integration becomes the constraint, capacity becomes power. Recent reporting has described advanced packaging as a bottleneck even amid rapid expansion to meet AI demand. As modular components proliferate, ecosystem layers, catalogs, onboarding workflows, and marketplaces begin to matter. The Open Compute Project’s Open Chiplet Economy and marketplace positioning are early indicators of how this transaction layer could professionalize.
What semiconductor leaders should do now
This transition demands changes in strategy, organization, and commercial frameworks, not just packaging R&D.
- Choose your role before the ecosystem chooses it for you.
Decide, by segment, whether you are the platform owner, the module integrator, the specialist chiplet supplier, or the infrastructure provider (compliance/tools/test/traceability). Role clarity drives investment, partnerships, and M&A. - Make interoperability a product capability.
Standards without enforcement don’t scale ecosystems. Build compliance and certification programs, invest in reference designs and integration collateral, and run partner validation programs that make integration repeatable. - Move packaging upstream in architecture decisions.
When the package is the system boundary, package-aware architecture cannot be a late-stage optimization. Establish governance that forces early co-optimization of silicon, package, power delivery, thermals, and test and treat package readiness as a launch gate. - Secure the constraint: capacity and liability.
If your roadmap depends on advanced packaging, treat capacity access and lead times as strategic inputs. In parallel, modernize contracts for multi-vendor integration: define “known good,” define data-sharing, define who owns which risks at which stage.
Conclusion: the next advantage may belong to integrators, not just die designers
Automotive’s tiered ecosystem didn’t emerge because OEMs stopped caring about engineering. It emerged because modularity made specialization more efficient, and because disciplined interfaces and qualification made integration reliable.
Semiconductors are crossing a comparable threshold. The strategic question for leaders is not whether advanced packaging matters. It is where, in a modular semiconductor ecosystem, your company will sit and what you will own: interfaces, integration, compliance, capacity, or the ecosystem that connects them.
The next era will still produce extraordinary chips. But the most durable advantage may belong to those who master something broader: building reliable systems from specialized parts, at scale, with trust, and turning that capability into a platform others depend on.
Contributing author: Devan Daniel
1System on Chip
2System in Package