5 Reasons You Can’t Do It Yourself

By Jack Harding

With the recent Global Semiconductor Alliance (GSA) Board of Directors vote to create a new category of semiconductor company, the value chain producer’s contribution to the overall industry has been formalized and made permanent.

This should come as no surprise. The VCP market segment is closing in on $1 billion in annual sales. The category has evolved from a conceptual alternative to the classic ASIC model to the mainstream for the development of both ASICs for OEMs and ASSPs for the small and midsized fabless semiconductor companies (FSCs). Even some of the top fabless semiconductor companies are using this model.

Why is a new category warranted? The reasons are many but a common theme is that it’s simply getting too hard for the average company to make one or two mega complex parts per year.

Consider the following five reasons:

1. Complexity is forcing the daily availability of critical, specialized skills once provided by operations generalists. Packaging and signal integrity join power management and timing closure as major challenges. Most OEMs and FSCs can’t attract and afford these specialists, but a VCP can keep them engaged in a wide range of products.

2. Time and effort spent in vetting the supply chain and working on different contracts for each project isn’t a core competency of most companies. What they should be focusing on is product innovation and market growth.

3. Integration of chip sets into one SoC has greatly limited the learning curve available to any given team. They may have made four chips a year at 180nm, but now they’re probably only making one at 40nm. That makes it almost impossible to master the skill sets needed to move to 28nm.

4. Wasteful buying practices leave too many dollars on the table that can be optimized by the collective buying power of the VCP. A VCP can beat most companies pricing and still make a good margin. There is waste everywhere that needs to be purged.

5. Accessing the “R&D” in any given EDA tool, IP, wafer or package is best done by a high-volume buyer or a VCP. A company making one or two chips a year cannot stretch the limits compared to a major FSC nor leverage the special “bells and whistles” in any given tool or raw material for both performance and economics. VCPs solve these and many other problems.

A decade ago it wasn’t expected the VCP would be a new semiconductor category. Today there is no other way to resolve complexity, cost and integration problems globally and seamlessly with the existing supply chain.

Jack Harding is chairman, president and CEO of eSilicon.