Automotive, IoT and China to lead the way, with gains expected in design and related areas such as big data management.
Seventeen companies sent in their predictions for this year with some of them sending predictions from several people. This is in addition to the CEO predictions that were recently published. That is a fine crop of views for the coming year, especially since they know that they will be held accountable for their views and this year, just like the last, they will have to answer for them. We believe that this makes them think a little harder before making bold statements that they may feel foolish about later. If you want to check out how they did last year you can find the retrospectives here and here.
This year, the predictions are divided into the following segments: Markets, Semiconductors and manufacturing, Design and Tools and Flows. This segment holds those related to Markets and the others will follow over the next few weeks.
We can look at markets in three different ways. First there is the end application and perhaps no surprise that many people are looking at Automotive and the Internet of Things (IoT) as the big areas for this year. Gone are any predictions about wearables even though we can expect modest advancements in the technology. The second way to look at the markets is to look at geographic areas, and a few people continue to talk about the impact that China will have on the industry. The third area which is a new topic of conversation for this year is the activity going on with the market of the semiconductor companies themselves. The pace of mergers amongst the semiconductor companies in 2015 caught everyone by surprise.
Graham Bell, vice president of marketing for Real Intent gets things started by looking at some of the figures for the market in general. He uses the Global Semiconductor Industry Survey from KPMG LLP, published in December 2015, which identifies a number of trends for the industry and Bell offers his take on the most important ones.
The survey says that 93% of semiconductor leaders expect the rapid M&A pace to continue in 2016, compared to only 83% in 2015. Bell reports that “he recently had a conversation with one semiconductor CEO who said that there is $1 trillion in capital available for supporting M&A, and that means we should see much more activity.” Most of that semiconductor industry consolidation is expected to happen within the Americas.
The expectation of short-term revenue growth is down, with only 71% of business leaders forecasting an increase compared to 81% in last year’s survey. Bell adds that “Gartner, in its analysis of the industry as a whole, predicts a slightly positive outlook for 2016. This year’s revenue is estimated to decline 0.8%, but semiconductor revenue is expected to increase 1.9% to $344 billion in 2016. However, Gartner forecasts an oversupply in DRAM in 2016. DRAM revenue is expected to decline 12% in 2016 due to weak pricing.”
Microprocessors are slated to be the sector with the highest growth opportunities, followed by sensors and memory. The end markets with the highest forecasts for growth opportunities are networking and communications, computing, and automotive.
With all of the merger activity, many are looking at R&D spending levels. It is expected to increase according to 62% of respondents, down from 83% the previous year. Bell believes that “this is a source of concern for EDA companies because their revenue growth typically lags R&D revenue growth by six to nine months. With the expected consolidation, there will be fewer companies purchasing EDA tools. This will benefit the Big Three companies, and will put additional pressure on Tier 2 and startup companies to differentiate their offerings and maintain product pricing.”
The KPMG report says that China will be the most important region for revenue growth. Bell believes that “this is not surprising given China’s program for the development of the IC Industry, which plans to accelerate China’s efforts in several areas, such as 14nm finFET, advanced packaging, MEMS and memory. As part of the plan, China created a $19.3 billion fund that will be used to invest in its domestic IC firms.”
Jin Zhang, vice president of marketing and customer relations of Oski Technology adds some observations about this. “The last decade has seen wide spread adoption of advanced technologies in China in many areas, in particular e-commerce (Alibaba and Taobao) and mobile phones (Apple, Samsung, Xiaomi and Huawei). However, China has traditionally been lagging in the adoption of advanced IC design, verification and manufacturing technologies. With the growing concerns of information security and China’s desire to foster its domestic semiconductor industry, especially domestic CPU designs, the Chinese government has been investing heavily in the semiconductor sector in recent years.”
Zhang also see this directly affecting their business. “As a result, we started seeing advanced technology adoption in China in semiconductors. It’s visible to us in the Formal Verification space. In addition to the traditional U.S. market, China has become the second largest growing market seeking advanced formal technology and formal methodology services to help its design and verification teams adopt state-of-the-art design and verification flows. We saw this trend start in 2014 and grow rapidly in 2015. We won’t be surprised to see many more Chinese companies adopting formal technology and building internal formal teams in 2016.”
Amit Nanda, vice president for global marketing at Silvaco, suggests some caution with China. “Looking at the China semiconductor market as a whole is insufficient. It does not capture the local segment specific adaptations playing out. There are very specific display types for which China is the dominant provider. Power semiconductors are also becoming a very strong segment for them. They have strengths in mature nodes where advancements are being borrowed, such as using Mid-End-of-Line (MEOL) at older geometries, which buys better area utilization for key building blocks like SRAMs. We see the China market continue to segment and choose areas of specialization, even while inorganic deals are being pursued to gain access to leading edge technologies.”
The automotive category received the most submissions this year, and reports from CES would seem to bear out the significance of this segment to the industry. “The traditional industry is under a lot of pressure from emerging automotive companies,” says Chi-Ping Hsu, senior vice president and chief strategy officer for EDA products and technologies at Cadence. “The gas engine versus the electric engine represents an obvious fundamental change. A pure electric car is simplified, is a lot more software-driven, with more electronics.”
It has been observed that if you look at the automotive conferences, they talk about their industry versus Tesla. Engineers are talking about it taking five years to get something done, while in Silicon Valley they get it done in three months. That is a fundamental challenge and they are trying to figure out how to react to it.
Technology is coming to all aspects of the automobile. “Automotive is continuing its fast pace transition to more electronic systems, providing better efficiency, more safety and connectivity for its users,” says Marc Serughetti, director of business development for System Level Solutions group at Synopsys. “ADAS is a prime example where such fast-paced development is taking place. But this development is not coming without development challenges. In particular, functional safety is challenging the traditional development approach.”
Those concerns about safety are also seen by Dave Kelf, vice president of marketing for OneSpin Solutions. “ISO 26262 and other regulations will become important for many companies not usually associated with automotive as they all get in on this market. In turn, these regulations will drive a new awareness of high-reliability design and verification, creating a renaissance in fault injection techniques as part of the verification flow. This, in turn, will drive a verification strategy for these devices that places formal verification ahead of simulation for the first time.”
The impact on EDA is also mentioned by Brian Derrick, vice president of marketing for Mentor Graphics. “Automotive will remain a major growth sector for design automation, which now offers solutions for the design and verification of connectivity and networking, in-car experience, LED systems, power and thermal management. If you missed it, watch the keynote from last year’s DAC of Delphi CTO Jeffrey Owens, who notes that today’s cars contain more processing power than any other device most consumers own or purchase.”
The impact on EDA is also flagged by Serughetti. “The industry is realizing the need to evolve their electronic development process, and several leading automotive companies from semiconductor to Tier 1 and OEM are leveraging the power of prototyping internally and through the supply chain. The trend will be to increasingly depend on virtual prototyping from semiconductor to Tier 1 and OEM to collaboratively design and develop automotive systems from SoCs to ECUs to vehicles.
But it may be a bumpy road to full automation. As Steve Carlson, technology and market strategist at Cadence, observes: “It’s been noted by emerging automakers that the current infrastructure and the ways in which roads are not consistently marked with lines and other signage makes autonomous driving extremely difficult. There are infrastructure things that need to be improved, not just in the car but also in the environment, before self-driving cars can work reliably and safely.”
The Internet of Things
It appears as if most of the industry is expecting the IoT bubble to burst given the level of hype attached to this term recently. At the same time, it is clear that a lot of investment is going into this area, ranging from the sensor market to Big Data and The Cloud.
Derrick provides a summary of the potential in this area. “Expect IoT to become a suffix attached to companies’ current product offerings. New opportunities will emerge in four areas of the IoT architecture: sensing and actuators (the nodes), networking and data communications (gateways), embedded software for the nodes and gateways, powering the nodes and gateways, and cloud-based applications harvesting the vast amounts of new data. Standards may emerge in parts of the IoT ecosystem, driven by security, communication protocols, power management and economics of network leveraging others. This will certainly produce new winners, as major technology shifts in the past have done.”
Things become more real when you apply numbers to them, and Derrick takes a stab at this. “The big numbers associated with most IoT-related forecasts are impossible to ignore. There are forecasts for a trillion connected sensors within the decade. The market for post-lithium ion batteries could reach $14 billion by 2026, according to IDTechEx Research. New power harvesting technologies will grow into a $1.5B market by 2017, also according to IDTechEx. We are particularly excited about the market for gateway devices, which will be $900M by 2019, according to VDC Research.”
Ron Lowman, strategic marketing manager for IoT at Synopsys, adds a couple of technologies that could fuel many expanding markets, including automotive and IoT. “Vision systems will become increasingly adopted to add value for robotics, safety and security applications. In addition, voice recognition will improve significantly and be viable in small smart home products.”
While nobody made predictions directly about smart home products, ABI Research believes that the smart home is where most of the IoT growth will come. “The majority of the future growth [is] coming from the smart home industry, which will represent 450 million of the total multicore MCU shipments, accounting for 36% of market share by 2020. This growth will be driven by more integrated connectivity and sensor processing hubs and an ongoing shift toward implementing innovative software solutions.”