Travelling On The Silicon Road

Have finally got around to moving to an updated backend/infra database. Will be posting all my subsequent blog posts from here. Have titled this as Travelling on the Silicon Road - Part 2. I plan to write more on management and strategy issues with specific insights to the semiconductor world in this blog.

Read an interesting article, “Capture more value” by Stefan Michel in the latest HBR issue (October 2014). The article talks about how companies while putting in efforts in value creation often lose focus on value capture, thus leaving money on the table. It describes 5 different innovation categories in value capture – Changing the price setting mechanism, changing the payer, changing the price carrier, and lastly changing the segment.

Most of us in the semiconductor industry would confess to be “techno snobbish “. Working at leading edge technologies and in the scaling race, we often miss out the salient point – customers want technology benefits and not technology per se. While we are steadily moving towards treating the hardware chips and systems as modes for creating value and not just solely numbers in nanometres, we have a long way to go in exploring various possible and often innovative ways on how we can optimally leverage the value we create. Value capture is sadly under prioritized.

Let me take a few examples on some varying stages of value capture in this industry…..

Capturing value by changing the price setting mechanism:
The idea is to set the price according to the product’s value or worth to the customer. Memory (DRAM and NAND Flash) pricing is a good example here.

Changing the price carrier:
Price carrier is what the seller is hanging the price tag on. Semiconductor IPs is a good example here. IP vendors have evolved their IP strategies from treating IPs as fillers for differentiating hardware sockets in a system towards ensuring that the IP works not just as an isolated unit but also in the complete system. It subsequently evolved towards IP plus services and then is moving towards offering the customer a complete IP (hardware, services, software) platform solution. The price tag has moved from the die space to differentiating value provided to the customer and then the complete valued package. Bundling and unbundling of various EDA licenses is another example where the EDA company is changing the price carrier.

Changing the payer:
It may not always be the case that it is only the consumer of the product/offering who pays for the value he receives. Like in some media where content is offered free to the public, the costs are shared by the advertisers. An example I see here is that of Qualcomm’s push to the China fabless design houses to design using its cores. Am not sure of the veracity of this but understand that in China, Qualcomm recovers its IP royalty not from the design houses there but from the system houses which use the design solution (with the Qualcomm core) from these local design houses.

One of the potential big biz for us is in the Internet of Things….. and it is especially in this space that the semiconductor industry needs to think hard and differently from its traditional value innovation and capture strategy - if it doesn’t want to be left out with just a fraction of the pie. I will do a separate post on this shortly.

Do you see other examples of value capture in your industry? What is your opinion on this? Would be keen to hear your ideas and perspective on this.

Anticipating customer requirements – often implicit – and identifying technology trends early in the product or technology development cycle in order to have a sustained revenue growth is crucial for any high technology industry. It is more so in the semiconductor industry which has its own economic cycles (typically 4 years of crests and troughs), high costs and technological complexities. Throw in the uncertain macroeconomic conditions coupled with increasingly dynamic and uncertainty in gauging market needs, shortening market window availability and the spiralling costs of trying to stay on the leading edge. And what does one have – a highly challenged R&D team with limited resources and the pressure to stay perched, if not ahead, on the curve.
And this is where R&D Efficiency gets all the more critical.
R&D Efficiency is the Return on the R&D investment, a tangible measure of what an entity gets for the number of R&D dollars invested.

Traditionally, the R&D team’s objectives are set along with inputs from the Biz and Technology Strategy group, Marketing & Sales group and sometimes the Field Application groups (usually a highly under leveraged asset) – and being aligned with the company’s top level vision and objective and with the available resources. Once handed down with the R&D mandate, the various R&D teams get onto what they have been trained to do best – R&D. And these mostly get done in silos with not much of active bridges of communication, let alone brain storming, between each other.

In my last post, Mining the seams, I mentioned about facilitating R&D folks to be market savvy – not to turn them into marketers but to facilitate in aligning R&D investments with market needs and achieve R&D efficiency. Having recognized that an issue exists is the first step. Making the necessary steps for the transformation follows. And this is especially catalyzed when all indicators point that maintaining the status-quo will be more dangerous than venturing into unknown.

Quite often even the well intentioned initiatives get watered down during the implementation or transformation phase. A new design flow, a more efficient way of mapping the customer requirements into your product/technology roadmap, moving into adjacencies, hedging R&D bets etc. are often “lost in translation”.

I revisited an old HBR article recently which throws light on how one can lead a sustainable transformation in an organization. It is titled, “Leading Change: why transformation fails” by John P. Kotter.
It lists 8 steps in transforming your organization:
• Establishing a sense of urgency
• Forming a powerful guiding coalition
• Creating a vision
• Communicating a vision
• Empowering others to act on the vision
• Planning for and creating short-term wins
• Consolidating improvements and producing still more change
• Institutionalizing new approaches

It is a very interesting and informative piece and would serve us well to keep in mind while transforming to increase our entity’s R&D efficiency.

This was the phrase that actually caught my attention in an informative article, “Decision making Marketing” in the HBR July-Aug ‘14 issue.

The main problem in decision making referred to in the article is the communication falling through across the different silos in an organization thus impeding effective decision making. Challenges include divergent assumptions, lack of alignment and shared commitment across the organization structures - amongst others. Reorganizing the structure/reporting doesn’t often address this completely. Sometimes it just creates more or different silos and the challenge remains unaddressed. Mining the seams helps address this by working closely across functions, avoiding organization bottlenecks and getting work done quicker and more efficiently than in the past. While the article mainly talks about the challenges involved in decision making for marketers when they need to communicate across domains of product development, sales, finance etc., the same is true for any other function too.

Here are my thoughts mapping this to the various spaces I worked in …Am keeping mining the seams as central (rather than decision making) and I may be taking another interpretation and possibly an extension of the main theme from the article.

An IC development program requires close interaction between various functions – Marketing, Design, Manufacture, Planning, Packaging, Testing, IP, Finance, Legal etc. Islands of expertise in each can be found aplenty. However what are rare and very much needed are people who can effectively communicate across these seams for decisions made in various phases of the chip development affect others. A design decision taken in isolation from say packaging can result in a major chip gaffe.

Another example is the R&D functions in an organization. Going by Donald Stoke’s model, one can lean towards pure research (Bohr) or gravitate more towards the applications part (Edison) or find a central niche (Pasteur). For those in the latter two especially, we see a major need to mine the seams. R&D professionals need to align their research to the market requirements and move towards what can be termed – Technology substitution to Technology Epiphany. These means getting out of their labs and well……..mine the seams. Aligning market research to your innovation requirements, mapping the customer needs (explicit or implicit, existing or potential) to your R&D or technology road map needs effective communication across functions…mine the seams.

I regularly conduct training workshops for facilitating R&D folks to be market savvy – not to turn them into marketers but to facilitate in aligning R&D investments with market needs and achieve R&D efficiency. Absence of communication to communication falling through the seams is issues frequently observed.

The first step is to recognize the issue exists – it is surprising how many of us are in a state of denial. Strategies and tools are available to address the challenge.

One of the initiatives taken is to have cross functional teams to facilitate the communication flow. However in most places, these work on “passing the baton” theme rather than “playing the new new product development game” a concept proposed by Hirotaka Takeuchi and Ikurjiro Nonaka – “Stop running the relay race and take up rugby” – the ball gets passed back and forth within the team as it moves as a unit up the field.
Temporary teams set up for a project and disbanded on project completion is another way. The teams here owe their commitment to the project rather than solely to the departments they belong to. Requires tweaking the KPI and other performance markers but such dynamic structures have shown good results.

It pays to mine the seams!

A couple of years back, I had given a talk as well as moderated a panel on chip design and cloud. I had written about the same later in one of my blog posts, Chip designing and the Cloud.

I ended the article with “In summary, cloud computing in chip design will be a big paradigm shift and is poised to bring about tremendous benefits to the design eco-system. However for the design community to actively adopt it, the relevant stakeholders need to look into it in a holistic way and much beyond the scalable and economic computing power and data storage combo. And this may very well redefine the existing chip design methodology.”

So the recent news on Silicon Cloud International bringing together ecosystem partners for chip design at DAC was quite heartening to note.

SCI establishes secure cloud computing centers for scientific and engineering applications across the world. As an initial application, SCI’s cloud is providing turn-key design-to-manufacturing semiconductor design workflows for universities and research institutions. SCI’s private cloud and thin client architecture establishes a novel security model for semiconductor ecosystem providers and users.

A call out to the best scientists and engineers in the field of microelectronics from industry, academia and government ….

The 60th annual IEEE International Electron Devices Meeting (IEDM) has issued a Call for Papers seeking the world’s best original work in all areas of microelectronics research and development.

Papers in the following areas are encouraged:
. Circuit and Device Interaction
. Characterization, Reliability and Yield
. Display and Imaging Systems
. Memory Technology
. Modeling and Simulation
. Nano Device Technology
. Power and Compound Semiconductor Devices
. Process and Manufacturing Technology
. Sensors, MEMS and BioMEMS

The 2014 IEDM will take place at the Hilton San Francisco Union Square Hotel from December 15-17, 2014.
So if you qualify yourself in the above league, well, rush off your submissions as the deadline for the papers is June 23. Good luck!

Details at IEDM 2014 home page at www.ieee-iedm.org

I attended the Semicon 2014 last week here in Singapore at the Marina Bay Sands – after a self-imposed hiatus of a few years. I attribute the hiatus to Semi charging people to attend its industry tracks. I do realize that they too have to make a bit of money to sustain but then it is always tough to pay for an event once you get used to participating in them for free for some years! Anyhow, as I was chairing a session on the Fabless/IDM Technology Challenges track in this year’s event, I had free access to all its tracks and especially the market trends as well as the networking cocktail event held on the first day. The market trend has always been a big crowd puller for Semi and this year was no exception.

Anyhow, let me talk here about the Fabless/IDM track. This was co-organized by SSIA (Singapore Semiconductor Industry Association) of which I happen to be an executive committee member, along with Semi.

The theme of this track was “Mobility and IoT - and its impact on the semiconductor industry “. The growth has been quite rapid in this space especially now in the IoT one. The potential market is huge, is fragmented and with low barriers to entry and no major competitors/players (as yet) – a conducive backdrop on Porter’s five competitive forces shaping industry competition. Unlike the smartphone market which has evolved into a cut throat biz dominated by vertically integrated players, the IoT looks set to provide a refreshing levelling impetus.

We are looking into some exciting and innovating market opportunities in this space, especially on the IoT front. Apart from the potentially high growth applications markets that this opens up for the semiconductor industry, the underlying fabric of our industry is also seeing transformation at various levels including the increasing inter dependency and synergy across the various entities in this eco system. These emerging application markets and morphing industry ecosystem bring along several interesting visions and opportunities as well as new challenges. So it was with a lot of excitement and quest for knowing more on this aspect that I was looking forward to chairing this session and especially more to moderating the panel discussion following the presentations. And of course, the great speakers and the panellist line-up fuelled this up.

The speakers included Vincent Tong, SVP, New Product Introductions and Worldwide Quality & Asia Pacific Executive Leader, Xilinx, Greg Turetzky, Strategic Business Development Manager, Wireless Communication Systems Group, Intel, Jennifer Teo, VP of Manufacturing and GM, Silicon Labs International and Giuseppe Miano, VP Asia Operations and MD, Broadcom, Singapore. Vincent’s talk dwelled on IoT requiring advanced SoC with differentiation as a key i.e. differentiation with intelligence and flexibility and hence programmability. Greg spoke about ubiquitous location for all mobile platforms, the opportunities and the challenges. The market opportunities have expanded from GPS to GNSS and now to location with the latter being the next big opportunity – always located and with context. Jennifer talked about how IoT is being a game changer and dwelt on the technologies required for the “things”. Giuseppe spoke about the 3rd wave of wireless connectivity – from connecting to consumption to sensing (and controlling). Have added another acronym to my vocab – BYOW (Bring your own wearable) – and must say I find that cool! He also spoke about the favourable market dynamics driving the growth as well as the aspects that need to start being considered especially on the manufacturing, logistics and suppliers side.

The panel discussion following these talks centred on “Harnessing the power of Mobility and IoT – perspectives from the semiconductor industry”. The panellists included the earlier speakers and
Subramani Kengeri, VP, Advanced Technology Architecture, GlobalFoundries and Francis Puno, Chairman SEA Work Group of Continua Health Alliance.

With stake holders from across the value-chain – IDM, fabless, foundry, application – the panel stirred up a lively and insightful debate. While the insights were quite forthcoming on my questions regarding the technical and even the ecosystem enablers, there was almost a conspiratorial silence from the panel on my query about the biz models they anticipated to develop or emerge with IoT applications. As they said, everyone is holding their cards close to their chest!

It was an insightful and a highly engaging session where all the speakers and panelists spoke passionately about this industry. And that is always heartening!

Join me in this track that Singapore Semiconductor Industry Association (SSIA) is organizing along with Semi in the Semicon Singapore 2014 on 23rd April 2014 (1330 – 1700 hours) at TECH West, Marina Bay Sands.

The theme of this track is “Mobility and IoT - and its impact on the semiconductor industry “

Mobility, especially in the consumer devices was one of the major revenue drivers in 2013. Joining it now, we are seeing a resurgent growth of Internet of Things (IoT) and wearable devices. We are looking into some exciting and innovating market opportunities in this space. Apart from the potentially high growth applications markets that this opens up for the semiconductor industry, the underlying fabric of our industry is also seeing transformation at various levels including the increasing inter dependency and synergy across the various entities in this eco system.

These emerging application markets and morphing industry ecosystem bring along several interesting visions and opportunities as well as new challenges. Hear from some of the industry leaders including ones from Broadcom, Intel, Silicon Laboratories and Xilinx on the emerging industry dynamics that are paving way for new biz and growth opportunities in the Mobility and IoT space as well as the associated challenges - and with additional emphasis on what and how these perspectives relate to the Singapore semiconductor landscape.

Speakers and their talks include
• Ubiquitous Location: Challenges and opportunities of enabling all-day, everywhere location for all mobile platforms - Mr Greg Turetzky, Strategic Business Development Manager, Wireless Communication Systems Group, Intel




• How the Internet of Things will change our world - Ms Jennifer Teong, Vice President of Manufacturing and General Manager, Silicon Labs International




• Enabling the next wave of Internet of Things - Mr Giuseppe Miano, Vice President of Asia Operations and - Managing Director, Broadcom, Singapore




• Mr Vincent Tong, Senior Vice President, New Product Introductions and Worldwide Quality & Asia Pacific Executive Leader, Xilinx

The talks will be followed by a panel discussion, “Harnessing the power of Mobility and IoT – perspectives from the semiconductor industry” which will strive to shed some light on these two game changers – Mobility and IoT – from the eyes and ears of the semiconductor industry.

Panellists include


• Above speakers and

• Mr Subramani Kengeri, Vice President, Advanced Technology Architecture, GlobalFoundries

• Mr Francis Puno, Head of Business Development –mHealth, Spice Global
Panel
• Moderator: Ms Meenu Sarin, Director, VLSI Consultancy, Assistant Honorary Secretary - Singapore Semiconductor Industry Association (SSIA)

You may access the Program and registration details at www.ssia.org.sg


I look forward to seeing you at this track!

Georges Penalver, chief strategy officer for ST, told the analysts community recently that ST is being constructed as two product-oriented business segments organization. The first block encompasses ST’s sensor, power and automotive products and is essentially ST’s successful analog business and its digital automotive business. The second block is ST’s embedded processing business and is the non-automotive digital business including microcontrollers and processors for digital consumer applications.

Focusing on the Embedded processing segment and ST’s manufacturing strategy, let’s look into some statements from the earnings call last month:

·       The 1^st segment i.e. Sensor, Power & Automotive represented 56% of net revenues and the 2^nd segment (Embedded Processing Solutions) 44%

·       Wireless saw a significant decrease due to ST-Ericsson and this will continue. LTE Modem development activity and biz has moved to Ericsson

·       ST will not compete in the application processor market in smartphones

·       Microcontrollers are a key driver in the Embedded Segment; the others are STB (set top boxes), TVs, digital ASICs, Imaging etc.

·       ST will focus on 2 segments in Microcontrollers. The first one is wearable electronics (healthcare, automotive, gaming) where it caters to diverse and small size customers (requirement is for low power microcontrollers, sensors and connectivity). The second one is secure microcontrollers (which is more for smartphone applications (NFC), banking - both contact and contactless) catering to a smaller number of customers but for a likely high volume

·       Digital biz will be in 300mm wafer fab in Crolles

·       Manufacturing distribution in Crolles: 1/3^rd each into MCU, CMOS image sensors and dig consumer products

·       ST is betting big on FD-SOI tech. It has second source agreement with GlobalFoundries for selected customers for this techno. Here it is working aggressively on 2 fronts – 1^st is communication infrastructure where low power dissipation is important along with strong performance. The other is portable equipment (outside smartphones, tablets)

Add to that the fact that the major semiconductor growth (last year and projected this year too) are the mobile consumer devices especially smartphones and tablets as well as the wireless communication sector.

Keeping the above in mind, it will be a big challenge for the company to support leading edge technologies in Crolles and that too with an allocation of a third of its capacity for digital consumer products – case of an expensive leading edge digital technology without targeting aggressive margins. So, how ST can keep its IDM model, especially on the leading digital edge with this kind of a product segment organization strategy, economically viable – that’d be interesting to watch.

What are your thoughts?

Another one on Qualcomm (QCOM)

Lead in mobile integrated chipset and wireless – Snapdragon series, wireless technology patents/licensing
Announced CMOS Power Amplifiers alternative to GaAs PAs for mid-high tiered 3G/4G smartphones

China market focus
- Well positioned to ride on China Mobile’s LTE wave (China Mobile announced spending $6.7b in 4G tech this year)
QCOM chips were in 14 of the 31 terminals selected for trial by China Mobile in Dec ’12 - nearest rival with 4 was Sequans.
- Biz model with local mobile chipset design companies and the system/handset manufacturers for licensing royalties

Major Revenue segments – licensing and sales
While in the last couple of years, QTL’s revenues were higher than that of QCT, QCOM is looking at double digits growth for both biz segments and QCT’s growth to be substantially higher than that of QTL.

Strong focus & investment in R&D
R&D in Q1 fiscal 2013 was 1.1B (18% of revenues)

Vertical integration for mobile eco-system
- Accelerating the commercialization of its Pixtronix MEMS displays using Sharp’s IGZO tech – Note however that the deadline for giving Sharp the 2nd half of $120m investment from QCOM has been extended now to June (due to some specs conditions not being met by Sharp)
- Ride on Internet of Things: Amongst others - Alljoyn and FlashLinq
- Moving beyond devices into wireless backhaul – DesignArt acquisition last year

Strong Financials
- Q1 ’13 earnings: $6b quarterly revenues (a 29% y-o-y increase), $1.91b profit (36% increase over previous year)
- Full-year revenue guidance to a range of $23.4 billion to $24.4 billion from its previous target of $23 billion to $24 billion.

Going through some of the equity research notes, apart from the contents, one of the things that struck me the other day was the brief succinct way the main content is put out. And so, I thought, why not do a series with my take on some of the stakeholder companies and application markets in the semiconductor eco-system. Appreciate your feedback, comments, thanks!

So here goes the first one…

Intel (INTC)

• Intel’s technology lead
- Pros: Increased capex to maintain the lead (at least 2.5 years ahead from competition), Intel’s stake in ASML for 450mm and EUV R&D
- Cons: The increased capex that could also result into high end fabs running under capacity. Intel needs to monetize its leading edge technology and also needs numbers and breadth of various types of chips to be fabricated in its fabs in order to fine tune its processes.
- As per IC Insights, Intel’s forecasted capex for period 2010-2013 is $40b, second to Samsung’s ($46.9b) – together to account for 42% of the total industry

• Intel’s foundry principle seems to be - Open Intel fabs for non-Intel chips but not for competing chips (“chips for mobile biz”). Altera deal is seen as step forward. However, point to be noted is that while (reportedly) this deal does not allow Intel to let other FPGA vendors (Xilinx?) on its 14nm fabs, Altera can still continue to work with TSMC and others. Second source foundry options may not reel in 100% of Altera’s total fab requirements to Intel

• Semiconductor growth drivers and Intel’s market share in it
- Slowing down/Cannibalizing of PC biz (Intel’s main revenue generator)
- Mobile chips being the major driver now for semiconductor growth and Intel’s not too effective efforts till date in this space.

• However lately, we are seeing Intel making good in-roads in this space. Mobile biz requires connectivity plus good power management solutions besides the performance factor. Two announcements from Intel this year point positively in this direction – Dialog deal (for power management in its Bay Trail (22nm)) and XMM7160 (multimode, multiband 4G LTE global modem solution) for an integrated SoC solution end 2013/early 2014.

So, is connectivity to internet necessary for all smart connected devices/applications? A lot depends on the application; for example in a multiplayer gaming app with players physically in the same room, a peer-to-peer network without connecting to the net can do. Qualcomm’s AllJoyn software and FlashLinq are a good fit in this space.

AllJoyn debuted last year and Qualcomm announced the extension of this to new core interoperable services at the Mobile World Congress this week. An application, in its present avatar, it may soon get integrated into the firmware for consumer electronic devices by their manufacturers, should the wave catch on.

And once that happens, I believe Qualcomm would like to see FlashLinq (their peer-to-peer PROPRIETARY technology) too get entwined into this. For while AllJoyn will run across various hardware platforms, AllJoyn apps will be able to run directly over FlashLinq without using Wi-Fi/Bluetooth etc. So if AllJoyn takes off in a big way, we can also look at chips with FlashLinq integrated within them flooding the market – another licensing revenue generator for Qualcomm.

There has been a lot of talk on Internet of Things (IoT) or Machine2Machine (M2M) communications – which basically is an intelligent grid of devices connected to each other through the internet. Chips are embedded in the devices enabling them to relay information, take decisions, communicate commands and adjust settings/implement a requisite action(s) accordingly.

As per a report from ABI Research, over five billion wireless connectivity chips will ship in 2013.

What does this mean for the chip biz?

Some basic things that various devices involved in this IoT will include are: wireless connectivity (mostly low power unless one or more of these devices is connected to the mains), sensors, MEMs and control units.

The control units here needn’t be too fancy – efficient and sufficient enough to do the task they are assigned for. They span from low end to high end depending on the computing power required for the control functions - served by MCUs, embedded processors. The sensors (for temperature, pressure, moisture, light etc.) are coupled with accelerometers, gyroscopes and the like.

Connecting to the internet – wirelessly and power efficiently – that will be the key for connectivity stake holders in this space. Nuel has come up with an interesting way to achieve this. It recently announced a white space (unused frequencies during TV channels’ transmission) radio chip for low power communications and come out with a chip to demonstrate the same (it implements the “Weightless’ specifications)

One thing I find interesting about IoT/M2M is that it does not have any defined market space/application. There are potentially several applications, several markets where these can find their way. So, while one can chose to specialize in servicing one market/application, a choice of providing a generic chip/platform (control/sensor/connectivity) for any or combination/integration (SoC) of the components of the basic fabric for any (or at least most of the applications) is also wide open.

However, for the application to catch on, it has to be implemented in an inexpensive way and should be easy to use - and that is where we’ll see some exciting innovation & integration happening

Communication and Consumer Electronics appear as the most promising application market segments for 2013. And within that, portability and wireless connectivity are set to be the main growth drivers for the semiconductor industry.

The other promising markets for 2013 are automotive and medical.

Portability has brought in an increasing importance of power management. Demand for power efficient and high performance solutions in portable devices will continue driving the need for power management ICs - and these represent a significant part of revenues from analog IC vendors.

The rapid growth of wireless applications and the incorporation of computing into communications (e.g. smartphones) and vice versa (e.g. media tablets) is likely to continue in 2013. While smartphones have been the main growth driver in the wireless application, the market also includes all semiconductor content needed for communication infrastructure, equipment etc. The proliferation of 4G, an increasing use of fibre coupled with an increasing data traffic need will catalyse this application market segment. In addition, semiconductors have proliferated beyond the traditional wireless and computing applications, e.g. mobile commerce.

The rise of M2M communications/Internet of things will also provide long term opportunities for wireless communication chip makers. These will span a broad range of applications across automotive, industrial etc. Intelligent, connected, and energy-efficient systems (with sensors and motors being wirelessly connected) will continue leading to higher semiconductor content.

The increasing sophistication of the mobile devices has led to not only increasing semiconductor content but also its varied usage. The traditional content of baseband and RF has morphed into multicore application processors, connectivity supporting various spectrum bands, sophisticated graphics and video, touchscreen displays etc. And the tidings will cascade across the complete semiconductor supply chain supporting these applications. This includes market for components like sensors, displays, power management, MEMs etc.

2013 will also see MEMS becoming a part of mainstream semiconductor content. From gyroscopes, accelerometers, and microphones, they are finding an increased penetration into devices spanning multiple industries and applications – consumer electronics, mobile devices, medical, automotive, aerospace etc. Its growth will be seen through an increased on board processing and integrated and self-contained sensing units.

On sensors, Internet of things is also likely to drive a huge market for low power, cost sensitive sensors. Innovations here are also reshaping the medical imaging industry. While this market is currently evolving, the emerging technologies and products in this space are likely to go main stream with a high potential.

Medical electronics is another promising market for semiconductor. The increasing aging population, increased life-span and various life style related illnesses are spurring the demand here. Medical devices now warrant small and smarter technologies – coupled with wireless connectivity.

Automotive has also seen an increasing amount of electronics. Automotive infotainment, safety, fuel efficiency and enhanced features is making this application market very promising for semiconductor content

Recently, I was requested for some information on the Wi-Fi market landscape for 802.11ac and the 60GHz/802.11ad standards. I compiled a snippet and would like to share the same here too

Neither of the two standards has yet been ratified – expected next year. However, that has not deterred players from entering this market. Speculations on which standard prevails/dominates, transition path etc. abound. Both of them are geared for the mobile market – spanning across notebooks/ultra books and then smart phones. My take is that 802.11ac will be the mainstream while 802.11ad will co-exist for niche applications.

Comments, opinions welcome!

Looks like the scaling down road for fabless – foundry model is getting bumpier. First the high cost of setting up new fabs made the earlier IDMs get into the fab lite model – i.e. depend upon the pure play foundries for the basic process capacity and do the specialized process add-ons in-house to get the competitive advantage. The fabless companies too coupled with pure-play foundries and gained prominence. The industry seemed to have found a way out (at least temperoraliy) of the high cost challenges of scaling down coupled with the issues of designing multimillion gates chips with increasing features and decreasing time to market window.

But now the speed breakers on this road are getting frequent and higher. Take the last couple of examples. FD-SOI is one of the new transistor architectures thrown up by ST/ST-Ericsson for scaling down 28nm and below. The process is reported to give a 35% power performance gain and that too by a simpler process transition from the typical CMOS. But ST lacks the capacity and hence is exploring options with GlobalFoundries. The latter is reportedly insisting that it will use ST’s process to make parts for all other parties too, in exchange for this extra capacity – leading to ST/ST-E potentially losing on a big competitive edge of sole access to a proprietary process through its FD-SOI process.

The second recent example is of Qualcomm. The world’s largest fabless company uses TSMC‘s 28nm process to manufacture its Snapdragon S4. And the world’s largest pure play foundry has had yield/capacity issues on this node.

TSMC’s 28nm foundry capacity woes have put a dampener in the presently exclusive run of Qualcomm – the sole (at least presently) provider of integrated multimode 3G/4G LTE baseband chips. And it ripples further down the chain causing distress to LTE smartphone vendors. Shortage is not expected to cease before Q4’12. Qualcomm is now planning a 23 per cent increase in operating expenses this year and looking for alternative (apart from TSMC) suppliers. It’s CEO Paul Jacobs’s recent visit to Samsung, reportedly for discussions that included semiconductor supply as well as his comment of not ruling out owning the means of chip production has led to a lot of water cooler speculation.

Incidentally TSMC’s sales hit an all-time high (9.1% annual revenue growth) in April’12 – with much of the strong growth attributed by 28nm demand!

So where does this leave the fabless-foundry model? And how does this affect the IDMs?

One thing for sure is that the model will need to be tweaked in order to stand up to the sub 28nm/20nm challenges. Some pointers:

• Cost advantage of scaling down is diminishing for the foundries. The cost-per-transistor has been about 29% per node leading to cheaper scaled down chips. 28nm and sub has seen that levelling off for the foundries. Intel still has a big (at least a couple of years) lead in the process race. If the fabless companies do not see a steady decline in the cost-per-transistor in their foundries’ scaling, it certainly puts a spoke in their continuing down on the scaling path with this model.

• The prohibitive high cost of setting up a new fab and the related R&D and yield challenges just does not make sense for a fabless company, even Qualcomm, to start one. Owning a pre-planned and negotiated capacity or even production means with an existing foundry – yes but a fab from scratch, no, that doesn’t appear to be a viable option.

• With the increasing yield issues at smaller geometries pitched along with capacity shortage and uncertain market demand, a stronger vertical integration of supply chain may become the order of the day to sustain the fabless model – one which accounted for $64.9 billion in 2011. While expecting to resolve 28nm capacity shortage by Q4, TSMC has raised this year’s capex 42% to USD 8.5 billion to ride the market opportunities.

• Rewinding to one of my earlier blog posts (Jan 2008), I had cited a remark by Infineon’s CEO, Ziebart in an interview to EE Times’ rick Merritt, “The major thing giving semiconductor makers a competitive advantage has evaporated. Today everyone has access to the same process technology at roughly the same time. This access used to be what differentiated the best from the worst semiconductor companies, but now it has evaporated, What’s replacing process technology as a differentiator is systems know how, and it must be specific to a market area”. My comment to that, as also mentioned in the same post, was: Yes, the differentiator has moved from process technology; but it is due to access to the process techno. This access has become cost prohibitive for any single semiconductor company (perhaps leaving aside a couple with really deep pockets) and hence the scramble to find an alternate place in the value chain to survive.
That access to the process techno is now morphing, if not under threat.

• GlobalFoundties’ SVP Mojy Chian mentioned that “New challenges at 20nm and beyond will require deep, IDM-like collaboration to accelerate the time-to-market”. Now, does this mean that foundries will transition towards virtual IDMs?
Rewind to another earlier blog post (Dec 2007): “Over the last couple of years, we have seen IDMs going towards fablite and fabless models, and the emerging dominance of the original pure play foundries. I say “original” as lately these foundries are paving their way into newer territories like climbing up the design support value chain by increasing their IP portfolio, collaborating with EDA vendors for providing yield related data/information to the designers and reference design flows, and others – just short of coming up with their own ASSPs. So will we see the re-emergence of real IDMs albeit in the form of a morphed foundry??
IDMs, foundries, fabless… they are all morphing from their original identities and are reshaping the industry with their redefined (work in progress) grey and diffused boundaries

However, one thing stands tall amidst all this and that is “The “Fab power’ is increasingly getting honed into the semiconductor eco-system lately.” Fab matters