Industry Transforming In Ways Previously Unimaginable

Early in the year, everyone expected that the availability of COVID vaccines would signal the start of a return to normal, but that has certainly not been the case. Now the industry is taking a longer-term view about how to transform business, what is necessary for people to maintain their mental health, and how to create robust hybrid work environments for the future that do not discard the positives of a work-from-home period.

Perhaps the biggest ongoing surprise is the resilience of the industry and the continued rate of innovation. “The ongoing pandemic surfaced many global challenges this year, but it also revealed some incredible innovation from the technology sector, from major players to startups, hardware engineers to software developers, in looking at how we can apply advanced compute to some of the world’s most significant challenges,” says Rene Haas, president of Arm’s IP Products Group. “This ranges from the world’s fastest supercomputer, Fugaku, crunching through data in the search for ways to combat COVID-19, to contactless biometrics playing a role in accelerating vaccine distribution for those lacking formal identification, and the implementation of a ‘lab in a box’ designed for rapid screening of COVID-19 samples.”

With so many headwinds, was some slowdown expected? “How are our customers doing?” asks Kurt Shuler, vice president of marketing at Arteris IP. “How many new design starts are being done by our customers? How many new customers are we getting? Your heart says innovation should be slower or stalling, but when I look at the numbers, when I look at the financials — not just for us, but for all of our customers, all of our partners — semiconductors continue to be in a huge upswing even though we’re going through this. Maybe it is partially because of this. Maybe that’s fueling demand.”

“2021 has been an amazing year of growth for the semiconductor industry, resulting in an ever-increasing number of system-on-chip designs,” says Rod Metcalfe, product management director in the Digital & Signoff Group at Cadence. “This has brought into sharp focus the efficiency of chip design methodology as small groups of highly-skilled engineering teams need to create more and more silicon products.”

Perhaps we should expect innovation to be focused on making money. “To me, a genuinely positive surprise of 2021 was the increased focus on sustainability, not only in data centers but across the hyperconnected device to edge to the cloud ecosystem,” says Frank Schirrmeister, senior group director for solutions and ecosystem at Cadence. “From 2010 to 2018, data center workloads increased more than six-fold, internet traffic increased tenfold, storage capacity rose by 25X, and global data center energy consumption ‘only’ grew a surprising 6%. With hyperconnectivity driving requirements faster and faster, low power and energy consumption took center stage. Next step? Decarbonization.”

Multiple drivers
One of the reasons for the robustness of semiconductors is that it has transformed from an industry led by one product segment, mobile phones, to multiple product segments and technologies. “If you look at the new architectures and new technologies that are coming out, there are three main markets,” says Arteris’ Shuler. “It is hard to call AI a market segment. It is more of a function that is going to be in everything. It is still in its very early stages, but it is resulting in these complex SoC architectures with multiple processing elements, crazy cache coherence, and sometimes non-coherent systems. 5G is a lot more complex compared with a 4G LTE type baseband. And automotive is a proving ground for those two technologies plus some more. Having these three different drivers is pushing EDA, it is pushing the complexity of the SoC architectures, and the complexity of the chips in general.”

That requires a long chain of innovation. “Always-on wearable and socially acceptable consumer products like glasses and virtual reality goggles raise novel privacy, low-power, energy, and security considerations in the consumer domain,” says Cadence’s Schirrmeister. “Functional safety requirements enable autonomy in automotive and aerospace/defense. The sheer scale of hyperscale computing and infrastructure requires chiplet-based 3D-IC assembly for fast derivatives, and never-before-seen reliability as a single flipped bit can have severe consequences. Composable, domain-specific compute, storage, memory, and interconnectivity require advanced system analysis extending to thermal and computational fluid dynamics. Depending on the target industry’s requirements and the compute edge’s position between the end point and the hyperscale data center, developers assess complex considerations balancing latency, throughput, interconnect, and availability of data.”

AI is also going into EDA tools. “In my opinion, 2021 is the year machine learning-optimized chip design went from an interesting academic idea, to a real, deployable approach to improve chip design productivity,” says Cadence’s Metcalfe. “Everybody who is involved with creating or using EDA tools now accepts machine learning technology will be a significant component of chip design automation.”

Heterogeneous adoption
During the first session at DAC this year, Charles Shi, vice president and research analyst at Needham & Co., said something that drew criticism from audience members: “Stagnant, and possibly rising cost per transistor accelerates design complexity growth.” Others believe the driver is the complexity that causes transistors to be more expensive. Regardless, the slowdown in Moore’s Law means we no can longer afford to waste transistors to just do what was done in the past. Instead, we need to examine if every transistor is positively contributing.

“One of the biggest surprises this year has been the uptick in specialized processing,” says Arm’s Haas. “Specialized processing has been around for a while, but in the last 12 months we have seen a marked acceleration in activity and adoption. For example, a number of hyperscalers are integrating their own CPUs into operations, as well as adopting DPUs, which barely existed as a category a few years ago. Another surprise was the growth of the NPU. Over $1.7 billion was invested in NPUs in the first quarter of 2021. The variety of NPUs available is fascinating. At one end of the spectrum there are wafer-sized chips, and at the other you have companies like Alif producing edge device AI chips. We’re still in the early phase of adoption. The next three to five years will be a Cambrian period of adoption and experimentation before we see large-scale adoption on a few primary architectures.”

Much of this trend was foreseen. “We are closing the third year since John Hennessy and David Patterson predicted ‘A New Golden Age of Computer Architecture’ in their Turing Lecture from 2018,” says Schirrmeister. “In this context, at the beginning of 2021, I had suggested that ‘end-user concerns across the major industry verticals — computing, consumer, mobile, communications, aerospace/defense, automotive, industrial, and health care — determine development requirements for designs at the IP, chip, and system-levels.’ 2021 surprised me with the strength and breadth of the momentum of this trend. The various industries changed development requirements faster than I thought, all driven by ubiquitous hyperconnectivity from devices through edges and networks to the cloud.”

This trend is barely getting started. “One of the ways to decide if an industry is maturing, or if there is still innovation, is to look at the chip architectures,” says Shuler. “When mobile phones first started to get interesting, all of the application processors were different. TI was the company that came up with the term application processor. They explained it as a DSP with an ARM microcontroller. Initially, all of the block diagram for application processors, and for digital baseband modems for GSM and CDMA, were different. After 5 to 10 years, they all became the same. There was one best way to solve that problem. We’re nowhere near that in automotive or AI. That means there is a lot more innovation yet to happen.”

With systems companies becoming semiconductor companies and semiconductor companies becoming systems companies, the dynamics of the industry are changing. “When we look at our customer base, Arm is the largest segment, but very quickly RISC-V has taken second place,” says Simon Davidmann, founder and CEO for Imperas Software. “It is primarily in the software development side of things, but increasingly we’ve seen interest in verification. People have to be able to verify their processors. There is always a degree of hype that surrounds new technologies, but real companies are making real use of it. And people are becoming more practical about it.”

Industry cooperation continues to grow. “The other positive surprise was the pace of growth of ecosystems,” says Schirrmeister. “In its tenth year, the Open Compute Project ecosystem combined 5,000 engineers and 29 projects, and its membership grew by 37% in 2021 to more than 280 members, up from about 230 back in December 2020. It truly takes a village to fulfill its vision to ‘design, use, and enable mainstream delivery of the most efficient designs for scalable computing.'”

The increase in innovation also is having ripple effects on the industry. “In the past, EDA and semiconductors stopped being the sexy place to work, ” says Shuler. “The people who were doing stuff at Google or Amazon, working on Java Script and stuff like that, which was all exciting. Now that’s changed. Things ebb and flow, and the real innovation that’s occurring today isn’t happening on top of a standard instruction set architectures. We’re seeing more custom SoCs with increasing numbers of processing elements. The innovation is going all the way down to the silicon level.”

But there is a dark side to this changing workforce, too. “We have people graduating from computer science who do not know what a register is,” adds Shuler. “Having people who are able to span and understand that confluence, or the integration of hardware and software, is a premium. Think of it this way — the complex hardware architectures that we see nowadays are totally driven by the needs of the software. The software architecture and the hardware architecture are interdependent on each other. It’s not like 10 years ago, where given a hardware platform you might ask, ‘What can I do with it in software?’ We already played that out, as far as innovation goes. Now it has become much more complex, and the skills needed by engineers that come from college have to understand both hardware and software.”

The pandemic
It is impossible to look back on 2021 without considering the impact of the pandemic. “The pandemic has allowed us to reflect on the type of future we want to build,” says Arm’s Haas. “It has taught us how to learn, adapt, and most importantly, empathize. We went from daily life in the office to living our workdays on Zoom, and it all happened seemingly overnight. While many of us had to adjust to that working environment quickly, the technology we increasingly relied on also had to evolve to keep us seamlessly connected so that we didn’t miss a beat. Digital experiences have never been more important. As the global workforce transitioned to remote work, the industry was forced to accelerate its digital transformation. There was a significant increase in our reliability on the data center, and what will be interesting is how this continues to evolve as many companies now transition to a hybrid, flexible working environment where not every individual returns to the office full-time. I am very proud of how all our employees rallied together and showed amazing teamwork and resilience during this time. The very best of our people has been on display.”

The impact of the pandemic can be broadly put into three buckets — productivity, social interaction, and hiring.

Productivity
Nobody expected working from home to be as productive in the early days as it has proven to be. “The biggest surprise to me is the operational efficiencies that I see at our customers, and the innovation I see our customers doing,” says Shuler. “It hasn’t suffered as much as you would expect. With many of them working from home, being physically separated from each other, the industry has adapted really well to the things that none of us had control over.”

A reduction in travel may be one of the factors. “With all these Zoom and Skype meetings, both within the company and with customers, we are much more efficient,” says Davidmann. “I don’t spend two or three days a month traveling and then being jet lagged. I don’t commute to work, and that saves me two hours a day. There are positive benefits to the changing world.”

But there are downsides, as well. “Obviously, after the introduction of the COVID vaccines, I expected the pandemic to come to a quick halt,” says Michiel Ligthart, president and COO for Verific Design Automation. “It was disappointing when our office in India had to close down again, and our colleagues sent back to work from home. The younger engineers prefer to work in the office for many good reasons — social interactions, teamwork, and air conditioning. Despite that setback, productivity did not slow down.”

Social interaction
In the past, we all have valued in-person interaction, where we can see the other person’s eyes and read their body language. “We’ve become more comfortable with meeting people that we don’t know in a business, getting to know them over video rather than meeting them face to face,” says Davidmann. “I don’t think that is a fully positive thing because there’s something to be said for meeting people in a less formal environment — having a chat over coffee or dinner. We are social beings, and it’s disappointing that we are not having more sociability in our lives. That might be a negative to some people’s mental health over time, although as a company we haven’t had any problems so far.”

Shuler agrees. “I used to get a lot of work done in the coffee room and through random conversations. One of the things that we’ve done is to have more informal online get togethers that are cross-functional. These are basically done toward the end of the day, where people can have a drink, or whatever. They involve people like architects, marketing, the CTO, or head of engineering at the high level, but similar ones at the lower level, like people who are just joining the company. It is a way to informally get stuff done. One of our innovations was meeting in people’s backyard, for those people who have backyards. There have been a lot of improvements to our cherished employee backyards since we started.”

This is easier to do when you know the people involved. “The year of social distancing was a difficult adjustment as we learned to work without in-person meetings and no travel,” says Amin Shokrollahi, founder and CEO for Kandou. “It was also a year of working under difficult constraints and challenges to onboarding new hires. Out of necessity, we became creative in the way we handled ourselves and the business, and I suspect this is true for many if not all businesses. Those who didn’t manage didn’t survive, and those who did manage grew.”

Hiring
How do you hire people when you cannot meet them? “A pleasant surprise is that we have hired people without meeting them face to face, and it’s worked very well,” says Davidmann. “If you would have asked me three years ago, ‘Would you ever hire someone that you’ve never sat in front of,’ the answer would be, ‘Of course not.’ We have adapted our business processes so that we could do things like that. I never would have imagined hiring key engineering stuff without ever meeting them.”

In several companies, managers are just starting to think about meeting people they hired over a year ago. “I was meeting for the first time today with our functional safety manager, who I hired a year and a half ago,” says Shuler. “In the past, if someone said, ‘I want to live in Switzerland or Israel or the south of France, but I am not relocating,’ I would probably pass on them. Today, if this person is good enough technically, and they are mature and experienced enough, I would move ahead. I don’t think you want to do this with a recent college grad, but when somebody has experience under their belt and can work remotely, then ultimately it is all about the people. Trust and credibility amongst the team members is important.”

Global tensions
Supply chains have been a big news subject for this year. “Sustainable supply chains were put to the test in 2021, and many failed,” says Casper van Oosten, managing director and head of business field for Intermolecular, a business of Merck KGaA. “Critical materials suppliers to semiconductor fabs faced challenges of sub-supplier disruptions, increased shipping costs, and uncertain delivery times. Increasingly complex devices require more than 60-plus different materials, and they must work in high-volume manufacturing. EHS regulations such as REACH and TSCA increased the cost and risk of sourcing legacy compounds such as NMP solvent. Chemists continue to reformulate NMP-free solvent blends for qualification in high-volume manufacturing (HVM).”

One of the reasons is continued trade pressures. “We continue to see more geo-political pressures that affect the ability of all players in the semiconductor ecosystem to trade freely,” says Ashish Darbari, Founder and CEO for Axiomise. “However, as much as some markets are getting closed for European and U.S. companies, we can see the emergence of new ones. Although we do not manufacture hardware, as consumers of it we felt the supply chain affected our needs to increase our compute infrastructure. Almost everything from motherboards to processors and memories seem to have an irregular supply.”

Within the EDA and IP industry, there has been little impact. “2021 was a year of supply chain shortages, especially for semiconductors,” says Bipul Talukdar, director of applications engineering in North America for SmartDV. “That was not the case for design and verification IP. In fact, based on the plethora of announcements, it was an exceptional year for all types of semiconductor IP, as well as new interface standards benefitting SoC designers and verification engineers.”

The tension does create some risks. “We have engineering in different parts of the world,” says Shuler. “That complicate things. Some products and parts of products are made in Europe, some here, and some in other places. That gets interesting when looking at export control and things like that. It does have strategic implications, such as regionalization, which is highlighting the fragility of the supply chain in general, especially in semiconductors. Within the EU and U.S. and China, from an economic standpoint, people are saying, we have to get better supply chain security.”

Security is a topic increasingly being talked about. “There is increasing interest in hardware security solutions, both from the semiconductor and system companies as well as government agencies,” says William Ruby, COO for FortifyIQ. “During the DAC panel on hardware security in December, panelists agreed that addressing the ‘clear and present danger’ of malicious attacks requires strong collaboration in the entire ecosystem, and that no single vendor can provide the complete one-stop solution. As we look at the year head, much more collaboration is needed in addressing cybersecurity attacks.

Going forward these concerns may become a positive. “People are starting to see the semiconductor industry as strategic economically,” adds Shuler. “This is ultimately a good thing, but it’s not just at the manufacturing side of things. As you get to manufacturing, it gets more tied to regions. But as you start moving up the chain into logic design and software, it becomes a little bit more amorphous. So there’s fewer restrictions that I see happening. A lot of investment is happening as you get closer and closer to the transistors. And it’s specific within the different regions for protection of supply chains and supply chain security.”

Conclusion
There were no major surprises in 2021 except perhaps for how resilient the industry is to change. What was expected to be a short-term inconvenience of working from home is becoming a part of doing business, and companies are beginning to realize they may have to focus on people more than they did in the past.

There continues to be very high levels of confidence in the future because of the strong, and increasing, tailwinds that are pushing innovation. That brings a level of excitement to the industry that has been missing for quite a while.