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Product innovation has for a long time been directly correlated to scaling as the enabler for increasingly complex products, better performance and large productivity gains. The technical and economical limits of further miniaturization make an end to simple scaling as the primary driver for innovation. Furthermore, customers increasingly demand subsystems or system solutions that include more than one type of circuitry such as digital, RF or analog/mixed signal. This causes a fundamental paradigm shift in the semiconductor industry from technology orientation to application orientation - or even better to customer-orientation - which means that applications are becoming more and more dominant in driving innovations. Under this new paradigm, instead of technology roadmaps dominating the development of innovative products, the application requirements and customer needs determine which technology is best suited. An additional focus is arising on advanced packaging to enable smaller subsystems and system solutions. This paper analyzes why limits in performance, lithography and economics - and a shift in customer requirements - demand new types of innovation and discusses what will be the upcoming areas of interest for future research and development. The paradigm shift in the semiconductor industry is illustrated by recent examples from the communications and automotive segments that show how an application-oriented approach can achieve minimized system cost and optimized system functionality.