Special Report: Semiconductor Road Map Survey

First look at the semiconductor industry’s new forecast; China grows as a global center of startup activity and R&D


By Ed Sperling

The upcoming semiconductor industry road map, which sets up the industry’s strategy and identifies trends for the next 15 years, is filled with three very interesting shifts and gaps.

The road map, which will be formally unveiled next month, consists of findings gleaned from all the top chip companies. Juan-Antonio Carballo, a partner at IBM Venture Capital Group who spearheads that report’s design chapters, says the shifts around the edges of the industry are particularly interesting. He cited three major changes and problems that will have a profound effect on system-level design:

Software: There needs to be 1,000% improvement in software just to maintain the level of chip development that exists today. Right now, software accounts for about 50 percent of the development budget for semiconductors.In the past, semiconductor companies were required to generate only the code embedded in the chip. In the future they will be expected to include everything from the operating system and middleware all the way to the browser.

“The software crisis has finally hit,” said Carballo. “We need a 100% improvement every year in software development.”

Carballo said Chinese companies will jump into this market with both feet, fueled by a significant rise in skills in the past couple years and lower labor costs. “It takes more people to develop software in China, but that’s still a smaller percentage of the overall budget. So in China, software is 20% of the overall development cost vs. 40% in Silicon Valley or a similar location.”

Power: Energy usage is emerging as the top priority in developing economies because it’s part of the overall total cost of ownership for a device. While power-efficient devices are convenient in established economies because they offer better battery life, they are a competitive differentiator in extremely price-sensitive markets.

Carballo said this was a surprise to most chip companies. “We thought this was more likely to happen in the Western Hemisphere first,” he said. “We believe there will be a dramatic shift, though, where power consumption will move to the top of the list of features. We’re expecting to see variability in energy consumption over the next 15 years in 600% and 700% increments.

Globalization: Investments in China, in particular, and other developing economies has reached the point of critical mass. That means R&D is being spread out across all geographies rather than being confined to Silicon Valley.

“A typical semiconductor startup in the West requires $20 million to $40 million to get to first product—or maybe just a prototype—and that takes five to six years. In China, the price is $10 million to $15 million, and in two to three years the company will be shipping products valued between $1 million and $10 million. That may be a simpler design and there may be more competition, but the return is quicker.”

Getting to the next step is more difficult, because that frequently involves moving from a single product that may be based upon standard parts and a reference design to internally developed IP. But Carballo said there are enough entrepreneurs in China now, who have worked at startups in Silicon Valley and moved back to China, to make a difference. He said that shift has been noticeable in the past year.

“The differences are starting to blur,” he said. “R&D is starting to shift to Asia. The result will be the amorphous company where they combine products, sales and marketing and R&D from all geographies. This will mean a dramatic change in technology and business. In Silicon Valley, you can still choose from 1,000 vice presidents of business development. In China it’s not 1,000 yet, but it is now in the 100s.”

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