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The Great Imbalance

Why are options increasing while the semiconductor industry is undergoing consolidation?


The number of options for chipmakers is growing while the number of chipmakers is shrinking. So what does this mean for the semiconductor industry? Short answer: No one is quite sure yet. But a lot more people are beginning to ask that question these days, including investors and analysts.

There are a number of factors at play here. To begin with, there are more nodes to choose from than at anytime in the past, and notably more than one that could work well for any specific application. A 28nm process may suffice for the next several years if price is a consideration, and it actually may be a market advantage if competitors move to finFETs and can’t sell enough volume to warrant the investment. Unlike in the past, when companies could count on everyone moving to the next node every couple years, including their competitors, the market dynamics have shifted considerably.

The addition of FD-SOI at 28nm and now 22nm, along with increased availability of silicon germanium, clouds the issue even further. So now, instead of just choosing between process nodes, chipmakers have to weigh process nodes using bulk CMOS versus nodes using FD-SOI—or other more specialized materials.

There are more choices at each node using the same materials, too. Those may be easier to figure out when focusing on one application in a known market with well-understood use cases, but that’s not so obvious in developing markets such as the IoT. Moreover, it’s much tougher to figure out from one foundry to another. After 40nm, processes began diverging significantly from one foundry to the next. The specs are easy enough to read for sophisticated chipmakers, but the availability of optimized, off-the-shelf IP and EDA tools is much harder to digest.

Add to that more architectural choices—2.5D, 3D, fan-outs, on-chip memory, off-chip memory—along with continued uncertainty over lithography, and the number of variables becomes almost mind-boggling.

Major chipmakers can make almost anything work. Much has been made about the leakage current at 20nm, which prompted foundries to invest billions of dollars in finFETs and begin work on next-generation 3D structures such as gate-all-around FETs and nanowire FETs. Yet some of the highest volume chips in production today, including those used in the leading smartphones, still use 20nm planar technology.

So why all of these choices? The simple answer is that foundries are revving up for new markets such as the IoT and all of its permutations—medical, automotive, home, industrial—where more options need to be explored to see what sticks. Just as there were hundreds of wearable electronics devices on display at the Consumer Electronics Show this year, there are dozens of options being prepared to manufacture them and bring them to market. The most conservative estimates for the IoT are the tens of billions of devices, while the more optimistic are in the hundreds of billions range.

No one expects every idea or process or material to survive. Despite predictions about billions of things talking to other things, the number of companies making those things will consolidate and the number of options for making them will dwindle. But no one wants to be caught without enough options to offer to chipmakers and their customers while that market gets sorted out. Until then, the semiconductor market will likely get even more confusing before the winners are selected. And after that, the industry can take everything it learned and optimize it for PPA and manufacturability, which is what has propelled it forward for the past half century.


Dev Gupta says:

The “imbalance” kind of makes sense does n’t it ?

More technology options ( FD SOI, Si – Ge, FinFET, III-V gates,.. ) mean a need for more capital to do the R&D and then set up new & more expensive Fabs. Only a few can afford the big bucks ( $ 10 – 15 billion ! ). But neither Wall St. nor VCs would fund Mfr. any more. Hence the migration of Fabs & US technologies to Foundries in the Far East where they are happy with margins lower than that demanded by Wall St. and / or this cycle of consolidation in the semiconductor mfr. industry

What is going on in the US semiconductor industry today is not new and even cunning Fabless co.s like QCOMM that insisted on staying Fabless are finally getting their comeuppance in the hands of China.

Wall St. had done this already to US industry in the ’70s and ’80s by starving the US Steel & Auto industries, and thus the whole US economy, but gotten away with it. In contrast since WW II Germany has been free from these upheavals caused typically by an arrogant minority in the name of efficient use of capital.

Ed Sperling says:

Interestingly, though, there are fabs migrating back to the United States. GlobalFoundries has fabs in NY, Samsung has a fab in Texas and Intel has most of its manufacturing capacity in the United States. Labor arbitrage is no longer a factor (although it may be more of a factor now that China just devalued its currency), and fears about supply chain integrity and security are increasing.

That has a direct impact on the increasing number of options. It’s clear there are too many of them for all to be economically viable, and that raises some interesting questions about how long tech investments will be valid/valuable, whether companies will play it safe or try out new approaches, and whether there is room for some new players to enter into the market.

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