28th March 2013

My analyst series - Intel (INTC)

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.

posted in Semiconductor, Business, Technology, Intel, Ecosystem, chip, connectivity, Mobile, Power | 0 Comments

3rd July 2012

Fab Power

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

posted in Semiconductor, Process, Business, Foundry, Fabless, Technology, Samsung, Qualcomm, Intel, Ecosystem, chip design | 0 Comments

2nd March 2012

AMD acquires SeaMicro

AMD starts selling Intel based servers – it does make an intriguing catch phrase, correct?

AMD’s latest acquisition of SeaMicro has caused some ripples. SeaMicro is a US based exclusive start-up claiming high power and space reductions (both key factors in the server market). And it currently sells exclusively Intel based servers. Its technology includes a custom CPU (Atom or Xeon) + DRAM + Freedom Fabric ASIC.

AMD has seen its market share in the server market fall from 15% in 2007 to 6.5% in 2011. Add to it the fact that almost 22% of the company’s market share depends upon server sales. So, this acquisition will strengthen AMD’s stake in this sector.

Outlook here may well include – AMD phasing out Intel’s design/chips and replacing with its own (the thread performance of its CPUs score over Intel’s) or perhaps ARM (following its partners (IBM, Dell, HP) and…. at the mention of partners, with AMD selling chips to its existing partners and also selling servers which count these partners as competition, this acquisition can pose a channel conflict

posted in ASICs, Semiconductor, Business, Mergers & Acquistions, Intel, AMD, Server | 0 Comments

25th January 2012

Capex disparity…. and the fortifications of the leaders

Add the 2012 planned capex spending of the world’s top two IDMs and you get an almost half of the total ’12 planned semiconductor capital expenditures. Add to it the world’s top pure play foundry’s planned capex and you end up with nearly thrice the amount the group spent in 2009.
This month saw a slew of capex announcements – Intel’s $12.1 to 12.9 billion, Samsung’s 1$2.2 billion and TSMC’s $6 billion; the first two an increase and the last a decrease (18%) from their 2011 capex numbers.

TSMC had already reported their plan to slash their 2012 capex in September last year. The major chunk of their capex this year will be spent on ramping up their 28nm process and their Gigafabs. Incidentally, 28nm accounted for 2% of TSMC’s 2011 revenues while 40nm and 65nm accounted for 27% and 30% each. And remember, they had an oversupply on 65nm capacity while seeing a demand exceeding supply on 28nm. TSMC’s 2012 outlook – a challenging year.

Intel and Samsung have a lot at stake in the mobile internet devices (MID) market. Intel is betting high on its ultrabooks while Samsung owes much of its lucrative foundry biz to Apple. In addition, it is aggressively ramping up for its in-house application processor to ride on the surging MIDs wave.

These two have an advantage of their in-house designs to test and ramp up on leading edge processes while the pure play foundries like TSMC rely much on their customers’ designs for this.

One thing that is getting increasingly visible – the chasm between the leaders and the ROP (Rest of Pack) is steadily increasing. While this beckons consolidation, it also serves as an innovation catalyst for the smaller but niche companies and strategies emerging in and filling this gap.

posted in Semiconductor, Business, Foundry, MIDs, Intel | 0 Comments

14th January 2012

A 2011 snapshot of the Semiconductor Business

This is the time of the year when the digital cooler is abuzz with the gazing into the crystal ball.
Here I take a look at what all that happened in the semiconductor space in the year just gone past….
for is it not the past that also paves the way the New Year pans out?

A snippet into the year that’s just gone and an usher for the next one…. with an Asia-Pacific region focus
A 2011 snapshot of the Semiconductor Business

posted in Semiconductor, Business, Samsung, Qualcomm, MediaTek, Spreadtrum, MStar, Intel | 0 Comments

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