Economic Bailout Meets Design

What does the economic bailout have to do with system-level design? Probably more than you’d guess.

Convergence of the front and back end of chip design, combining everything from software with verification planning at the architectural level, is now being converged with one other element—business. And that business element is reaching far deeper than ever before.

Business has always had a big role in designing systems, of course. Cost is a big factor in designing chips that can run tens of millions of dollars and threaten the solvency of even big companies, which is why there is such a huge focus on verification these days. It’s also a huge factor in manufacturing the chips, which is why even the most stalwart IDMs (Intel included) use foundries for some of their production.

What’s changed is that the complexity of designing chips—both time and money—are forcing more companies to work with partners. That means the weakest link in the chain is the weakest partner.  Until a few weeks ago, that was viewed primarily as a technology or engineering issue. It’s now a liquidity issue, and it reaches beyond your partners to their partners and into everyone’s combined customer base.

Credit crunches can significantly raise the cost of doing business. They make borrowing money more expensive. That, in turn, can make end markets look less attractive, completely change the ROI model, and they can bring some of the best-run companies to a standstill.  Analysts’ projected softness in the consumer electronics market knocked 18 percent off Apple’s stock on Monday. But the real question, which so far hasn’t been answered, is what that will do to new design starts in Apple’s core market—and how that will ripple across the industry into other areas.

That helps explain some of the side comments at the Common Platform conference this week. Business concerns are giving everyone in the design chain neck strain. They’re looking back to see whether their business partners are all aligned, and they’re looking forward to see if there will be enough demand to warrant a massive investment. And they’re dropping one-liners about what they’ll be doing in five years—or maybe three weeks, depending on what happens on Wall Street.

There must have been a half-dozen such mentions in a two-hour span. The news is rampant. The market is down 777 points one day, back up 485 points the next. These are the kinds of swings that make the entire system look unstable, and they get people thinking about whether to invest in a new chip or whether to use some caution or whether to slam on the brakes and move a half-node instead of a full node, or no node at all.

There have been numerous credit crunches in U.S. history. The only one that proved calamitous was in 1930. Some were politically motivated—witness the battle a century earlier between President Andrew Jackson and the central bank. Others were caused by bubbles gone bust following run-ups in the stock market. J.P. Morgan was famous for averting market collapses by pumping up the cash in banks.

But no matter whether the current fiscal crisis is resolved quickly, or whether it continues to rear its head, the effects this time will be different. Design cycles are no longer insulated from the overall business climate, and the business climate right now is extremely volatile.

What do you think?