CEO Outlook: 2016

Semiconductor Engineering talked with 10 CEOs from all sides of the Semiconductor Industry for a high-level view of what to expect this year—good and bad. What follows are excerpts of those conversations, which were compiled over the past month.

Scott McGregor, president and CEO of Broadcom
“We’re going to see more M&A. In the past, you only did deals that made sense strategically or from a synergy perspective. Now, investors reward the acquirer and the acquiree.”

McGregor noted the big risk isn’t M&A, although companies do need to continue developing enough chips to have experience in the latest technologies or they’ll fall behind. “If there is a risk, it’s macroeconomic,” he said, adding there are still enough new opportunities surfacing with self-driving cars, the IoT, industrial applications for semiconductors, and even wearable electronics and home automation to offset any hiccups in demand.

Aart de Geus, chairman and co-CEO of Synopsys
“The industry is restructuring itself toward an intriguing future. The next wave is beginning, and really we have only had two waves. One was computation. The killer app was the PC, which was later networked. Starting in 2001 we saw the move from the stupid phone to the smart phone. If you liked one, then the next one would be better. And from there we saw the tablet and a big increase in application software.”

De Geus said the next wave will be the IoT, where sensors gather an enormous amount of data and that data is sifted for patterns using artificial intelligence techniques. “With the move to 10nm and 7nm, which are both now in the works, the new capabilities are enormous. We’re just in the prelude to the next wave where many devices are smart. The physical world is being turned into data. The big worry here is how you are going to survive the turbulence. The key to survival is to maintain adaptability in the midst of this turbulence.”

Wally Rhines, chairman and CEO of Mentor Graphics
“Emulation will continue to grow a lot in 2016. It is becoming the best choice for a verification platform. We also will see the effects of consolidation this year. Most of these companies have synergies, so there may be a reduction in places other than R&D. We’re also going to see enormous growth in Big Data. With networking changes, there will be massive server centers for data processing to analyze all of the data being collected. There also will be a wave of users of IoT, automotive, and a lot of sensor-related things.”

Rhines said mergers and acquisitions change structures, but they also create new opportunities for new companies to fill in the void left by consolidation.

Lip-Bu Tan, president and CEO of Cadence
“The big upside is in system design enablement. We’re seeing that in automotive, the IoT, and we’re starting to see it in health care and medical, which will be big.”

But he added there are some risks that need to be dealt with in 2016, as well. “Consolidation will continue. We’re seeing that in China now.” He said Chinese companies are extremely savvy about which companies to buy and how to get the most out of investments.

“The other problem is on the startup side,” Tan said. “We need more innovation in the industry.”

Simon Segars, CEO of ARM
“The IoT rollout will be gradual. You won’t wake up one morning and say, ‘It’s here.’ But in most places, there is some element of the IoT. It will certainly make progress next year. We’ll also see progress in virtual reality and augmented reality, which will drive more hardware and software. And mobile will keep growing with more gadgets.”

He noted that growth may be tempered as markets get ready for these changes. “The outlook for semiconductor market growth is not fantastic next year. There will be continuing pressure on pricing, which will lead to more M&A. That could also help drive more innovation while leveraging synergies.”

Jack Harding, president and CEO of eSilicon
“The big risk is poor industry growth, driven by premature expectations on the IoE’s impact. The IoE will happen, but it won’t be the savior of the industry in 2016. There also is sufficient macro risk to be concerned. Geopolitical security may get worse before it gets better. And the industry’s appetite for M&A will bring stability and pricing improvements, but hopefully some of that money finds its way into R&D, too.”

He noted that the IoE will be unpredictable for some time to come, but as it begins rolling out the opportunities could be enormous.

Charlie Janac, chairman and CEO of Arteris
“Automotive SoCs will represent the fastest-growing major segment of the automotive industry in 2016. They will start replacing microcontrollers in order to consolidate the manageability of automotive electronics functions. The driver will be car manufacturers striving to get better control over the architectures of their cars. This will create major winners and losers in the electronics supply chain. The winners will understand both hardware and software as a system. The early examples will hit the market this year. It’s also likely that Apple will buy a car company, or an automotive contract manufacturer, to have a better chance of catching Tesla.”

Janac believes Detroit and Stuttgart will spend billions of dollars to save themselves from Silicon Valley entrants such as Tesla, Apple, Google, Uber and Lyft, with some of that spending occurring in 2016. “All cars will be connected to the Internet over the next five years. Security and resilience will be requirements for assuring driver protection against hacking. And the self-driving/assisted car will transform the way we live, spend and travel—the most transformative electronic system since the smart phone.”

Grant Pierce, president and CEO of Sonics
“SoC designs have hit the power wall. This marks the beginning of a multi-year, SoC development trend where system architects and sub-system engineers must consider power as a primary design constraint. Reducing power consumption is now every electrical engineer’s concern—both to enable product success as well as to support reducing greenhouse gas emissions as a global issue. SoC designers can no longer afford to ignore power management without suffering serious consequences, especially in untethered applications where users expect all-day, all-month or even all-year battery life, even with increasing functionality and seemingly constant connectivity.

Pierce said the majority of SoC design teams don’t have a power-engineering staff, so they will be looking to third-party IP providers for solutions that are orders of magnitude more efficient than software-based power management. “Hardware-based power management solutions will be extremely attractive to a broad set of designers building products for automotive, machine vision, smart TV, data centers, and IoT markets. SoC designers incorporating this approach can better manage the distributed nature of their heterogeneous chips and decentralize the power management to support finer granularity of power control. They can harvest shorter periods of idle time more effectively, which means increasing portions of their chips can stay turned off longer. The bottom line is that these solutions will achieve substantial energy savings to benefit both product and societal requirements.”

Anupam Bakshi, CEO of Agnisys
“More EDA tools will support portability across various target environments, with verification and validation being the key targets. ATE will get more focus from the EDA vendors. And Shift Left will continue with the realization that the spec-automation will be the ultimate shift left. Formal and UVM-SystemC also will see wider adoption as verification teams seek a more thorough verification without the performance issues.”

Bakshi believes M&A activity will slow in 2016. “With the hike in interest rates, the cost of debt has risen, so 2016 will not see as many mergers as we saw in 2015. The consolidation will stabilize and the work-force will get re-organized leading to germination of smaller companies. These new companies will require low-cost productivity tools.”

Steve Kelley, president and CEO of Amkor Technology
“It all depends on how successful Apple is with the next iPhone and Samsung is with the Galaxy. If one or both of them are successful, then the semiconductor industry will be successful. About 55% of the market is tied to the mobile ecosystem. The risk is that in 2016 phones are not well received. But we are cautiously optimistic that won’t be an issue.”

Kelley noted there also is a growing push into advanced packaging. “We’re seeing a lot of innovation from thin stacking (of die) and fan-outs. They are involving the OSATs early in the packaging process to optimize it.”