2020: A Turning Point In The Chip Industry

At the start of 2020, most of the industry was upbeat and sales forecasts for the year were good. Then the pandemic hit, and fear gripped most of the industry — but not for long. New markets emerged, demand increased, and the levels of innovation went far beyond what had been forecast.

While hope is on the horizon that the virus will be contained during 2021, life will not return to the old normal. Society has changed, and so has the high-tech industry.

Change is often forced, but the effects can be beneficial. “The black plague in Europe was the reason behind the Renaissance,” says Michal Siwinski, corporate vice president for marketing and business development at Cadence. “It created fundamental changes in how people went about doing things. Obviously, COVID is not that horrible or devastating. Nevertheless, it is having a profound impact. Fundamentally, it is accelerating the digital transformation that people used to talk about, put it into overdrive.”

He has lots of company. “I believe that after this period of adjusting to the ‘new normal,’ we will not be going back to the same ‘old normal’ once the pandemic is abated and hopefully eradicated,” says Joseph Sawicki, executive vice president for Mentor, a Siemens Business. “For example, the realities of the pandemic, have shown us that companies can work efficiently — perhaps even more efficiently, collaboratively, and even economically worldwide in remote worker/presence environments. And companies can reach more people more economically if they have a robust digital presence backed by a robust digital supply chain.”

People first
While attending DVCon at the beginning of March 2020, the realities of COVID started to become clear. Hour by hour, companies pulled their participants from the conference, no longer feeling it was safe to expose them to the virus. Keynotes canceled, and panels and paper sessions compressed to those who remained. Some thought it was overkill, while others remained in shock at what was happening.

How did engineers react? “We are a very technology-centric company, so we have a lot of engineers who are, statistically speaking, probably more introverted,” says Cadence’s Siwinski. “When people started to work from home, some people were like, ‘Oh my gosh, we don’t get to see other people,’ and other people were like, ‘Oh my gosh, we don’t need to see other people.'”

But the software industry is fairly unique. “A lot of engineers, even if working from the office, would probably just put on their headphones and start working,” continues Siwinski. “When you work on code, you really are focusing on that and trying to avoid distractions. So some people said that working from home improved productivity. Other people said it is more disruptive because you don’t have a clear cadence of, work, home, work, home.”

It is not better for all. “We also have to acknowledge that those of us with no children, or older children, have the luxury of potentially being more productive than our colleagues all over the world who have younger children in their homes,” says Mentor’s Sawicki.

Outside our industry, things may be very different. “Some may say we are all in this together, but that is really not true,” says Michiel Ligthart, president and COO for Verific. “When COVID hit, my co-workers and I picked up our laptops and went home. We already had VPNs in place and were avid Zoom users, so we knew we would be fine for a while. And even when a while became a while longer, we continued without missing a beat, nor a paycheck. Not everyone around us was that fortunate. And with new waves of shutdowns looming, we urge technology companies and their employees to step up their charitable donations. They are needed more than ever. Your local foodbank will thank you.”

Working from home
Moving the workplace meant retrofitting many people’s homes. “COVID-19 has demonstrated a number of tech lessons, realizations, and trends that will be taken forward into 2021,” says Paul Williamson, vice president and general manager of Arm’s Client Line of Business. “One of those is how people need and want smartphone-like experiences on other consumer devices. While many have been working from home this past year, the pandemic has shown that long-term remote working can be efficient for employees. The gradual return to normality could see greater flexibility in where people work, whether it’s the office, home, coffee shop, or even an outdoor space. This is likely to see increased demand for laptops capable of all-day battery life and LTE connectivity, like our smartphones, as users look for devices that don’t need recharging after a few hours of video calls or require a WiFi connection.”

Shifting the workplace also created a change in focus. “Having to move from a physical working environment to more of a virtual environment, almost everybody had to double up on their connectivity equipment,” says Siwinski. “TVs, webcams, phones, 5G consumption — everybody is consuming more bandwidth. Compute on the edge, compute in the cloud, there is not enough compute, not enough memory, not enough connectivity. The shift from a working in offices to working from home basically created a drastic spike in all kinds of electronic demand.”

It doesn’t come without a few hiccups, though. “Network security and software piracy problems were huge, especially for companies in the throes of chip design and development,” says Ted Miracco, CEO for Cylynt. “The pandemic created an ideal situation for illegal software use as the work-from-home edict provided opportunities for sharing or copying licenses and/or downloading cheaper, pirated software. Software companies report that piracy increased 20% to 30% this year. In addition, with so many employees working from home and accessing company networks remotely, the risk for network breaches and malware infections has increased significantly, a function of the pirated software they’re using.”

Homes needed to be upgraded, too. “My webcam at home was poor, so I have been trying to buy a good one since July,” says Siwinski. “But they’re all sold out till January. There are no good webcams available. They’re all gone. And with most phones, they’re gone. That is driving consumption of the current inventory, and accelerates a lot of innovation. People get a clear indication to go ahead and do the next generation, and do it now, and assume there’s demand for compute, for bandwidth. It’s not going to come down. People are not going to stop watching 1080P or 4K TV and switch to hiking with no electronics. The clock never turns back. They have started driving the next generation products and going about it much faster.”

It also started a new kind of upgrade cycle. “We have seen consumers become far more comfortable with videoconferencing,” says Arm’s Williamson. “However, it did make many realize that their laptop camera doesn’t quite match up to their smartphone’s. Much like all-day battery life, the camera capabilities of smartphones are likely to be taken to other large-screen devices, such as laptops and TVs. From a recent survey we ran with Arm’s ecosystem partners, it was interesting to note that the majority of respondents identified AI cameras as the most interesting application to explore in 2021.”

Digital revolution
Outside of our industry, many of those same factors are at play. “One of the surprising effects of the COVID pandemic is that within a few months it has accelerated the adoption of digital tools for remote work, online shopping, and online schooling by a number of years,” says Casper van Oosten, managing director and head of business field for Intermolecular, a subsidiary of Merck KGaA, Darmstadt, Germany. “This has left the semiconductor industry scrambling to supply the hardware to support these online activities.”

Change has accelerated in the medical industry. “The unanticipated circumstances of 2020 accelerated the medical community’s reliance on semiconductors,” says Lucio Lanza, managing director for Lanza techVentures. “Telehealth, for example, leveraged the power and performance of chips with AI and ML capabilities for remote diagnosis, monitoring, and other clinical services. In many situations, it became an essential tool for delivering care safely. It’s a leap forward in health care services, improving quality, and making it accessible to more people while changing the health/medical care from an episodic interaction to a constant connection.”

We are seeing acceleration in moving humans out of the loop. “In some of the industrial environments, such as agrotech or transportation, digitization is accelerating,” says Siwinski. “Automation in manufacturing, industrial, and transportation might go faster because human disruptions are pretty bad for business.”

As the world begins to open up again, contact tracing will be a necessary tool. “As businesses, activities, and venues looked to re-open, there was an immediate market demand for tracing devices and exposure notification systems,” says Srinivas Pattamatta, vice president for Atmosic Technologies. “Companies sought highly efficient tracing systems that were both low-cost and featured extended battery life. Smartphone manufacturers started to integrate contact tracing software and applications into their devices. However, the ongoing challenge of smartphone access, cost, and connectivity remained. Conversely, wearables provided a solution for users to stay informed about potential exposure to the virus while addressing the cost and access challenges.”

That provides a boost to certain technologies. “LoRa is playing an instrumental role in enabling public safety solutions,” says Marc Pegulu, vice president for wireless LoRa and IoT at Semtech. “It spans office spaces and schools to assist with contact tracing, ensuring healthcare regulation compliance in the workplace, and addressing the needs of medical professionals, building managers and individuals alike. Contact tracing is proving to be a key factor in the fight against COVID-19, and wearables are being designed for occupant safety, which is the number one concern for reopening school districts and college campuses.”

Increased demand
The rapid increase in demand is stretching the supply lines in interesting ways. “Supply chains have been ramped up to match the demand, as well as the development of the software,” says Intermolecular’s van Oosten. “Hardware development, and in particular materials development needed for the next generation, is notoriously difficult to accelerate. This has created a gap, and we observe that old concepts are dusted off to be used in new applications, such as neuromorphic computing — metal oxides for resistive random access memory (RRAM) and ferroelectric RAM (FRAM), chalcogenides for phase change memory (PCM), and Li-based ionic materials for electrochemical RAM (ECRAM). With sufficient tuning, these material concepts are quickly being adapted to the new needs, resulting in a fresh stream of novel devices and disruptive startups, making their way to the market.”

EDA is seeing new pressures. “Demand for technology is getting pulled in drastically,” says Siwinski. “2.5D and 3D-IC have been around for quite some time. Ten years ago, it felt like we were pushing it, and most customers would find ways around it or do some minimum level of 2.5D. But now we’re seeing demand for 3D-IC increasing significantly and it’s accelerating. Why is that happening? All aspects of compute are driving a different kind of pressure for the data centers. Data center compute is getting revolutionized, and many are taking more of a heterogeneous design architecture. That means you’re combining different chips, potentially from different foundries, into a specific system that goes into the servers.”

Hurdles along the way
To imply that all of this was obvious at the onset would have been to rewrite history. “In Q2 of this year, nobody knew how to model the financial impact,” says Siwinski. “There was a concern about some of the innovations, or some projects, or even customers not having the ability to pay their bills on time, because no customer knew how to model their financials. Everybody started being very conservative. By the beginning of Q3, people basically figured it out, and they doubled down. Since then we have been having the good problems of having too much demand. That took us by surprise. The appetite to innovate was the surprise we were not expecting in the second half of this year.”

Several business changes have been required. “Re-establishing global customer intimacy was a priority,” says van Oosten. “Our customers traditionally have been served from offices and labs in the heart of Silicon Valley. Working together on our customers’ most advanced materials challenges required our team to frequently fly out and visit customers worldwide. This year forced us to develop different approaches to working effectively with customers beyond the regular video calls that are now part of our daily routine. We created a virtual lab tour where we bring customers to work with us to address their material challenges. We established a network of worldwide ambassadors, using local representatives from other business groups. They have been key in maintaining close relationships with customers. Using virtual reality glasses and molecular simulation packages, we have shrunk ourselves down to an atomic level to study defects in atomic rosters. We are having virtual lunch meetings with our customers to share knowledge. The limitations imposed during the pandemic made us find new ways to work even more closely with our customers safely and productively, enabling our collaborative programs to still meet critical milestones.”

Many still miss the physical interaction. “Though the virtual conferencing infrastructure has been very helpful to maintain contact, having a large group presence has been very much missed,” says Sawicki. “Whether you are talking about starting a new program or pitching a new product to a customer, having to do that with Zoom calls or Microsoft Teams without the side conversations you would normally have with a physical presence have been a challenge.”

It certainly has had a huge impact on conferences. “We were forced to cancel almost all in-person industry events and settle into a virtual experience,” says Bob Smith, executive director for ESD Alliance, a SEMI Technology Community. “Ever-resourceful industry consortiums adroitly stepped in to bring companies and attendees together virtually to create as rich an educational experience as possible. While virtual learning and networking will never fully replace time-honored in-person opportunities for information exchange, we adapted and carried on.”

Some have found a silver lining in virtual conferences. They can selectively attend the most important parts of a greater number of events. “We used to do a lot of physical activities and technology tours,” says Siwinski. “During the pandemic, we took all of it virtual. Some people are not exactly thrilled by that, but at the same time we also got a gigantic spike in participation. For a lot of people, it is just easier. They can access information on demand when they want it.”

Conclusion
2020 has been a year like no other. Fear and uncertainty played a role, but as soon as the industry realized that technology was a way to lessen the impact of the pandemic, it not only recovered, it grew. Innovation became magnified and companies adapted to the new ways it had to conduct business.

But as Verific’s Ligthart pointed out, “Not everyone around us was that fortunate. And with new waves of shutdowns looming, we urge technology companies and their employees to step up their charitable donations.”

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