What’s Really Going On?

An industry in transition is much more difficult to predict than one that is more mature. Even putting the past into perspective will take time.

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At the end of the year it’s common to make predictions about what’s coming next year or to look back at the events that have transpired over the past 12 months. It’s becoming more difficult to do both.

To begin with, there’s the question of re-aggregation or disaggregation. While most industries swing back and forth between aggregation and disaggregation, that process has become increasingly unpredictable in the IC business. In part it’s because what we consider a system or a subsystem are changing.

An industry in the midst of a transition is more difficult to digest than one that is stable. The move to stacked die, the rise of a new class of assemblers, and a reconfiguration of the entire supply chain run much deeper than just the acquisitions made in a single year. It will take until the middle of the decade to sort out some of these changes and see which companies maneuver themselves into a better position.

Second, the lines between what’s done in hardware and what’s done in software are blurring. What drives which part of the industry remains to be seen. Hardware companies believe it’s the hardware. Software companies think it’s the software. The truth is probably somewhere in the middle, which is interesting considering neither side speaks the same language or has the same goals.

That will change over the next couple years, and ultimately software and hardware development will be much more synchronized. The real goal is to be able to deliver functions with blazing fast performance and minimal energy consumption. But it’s also going to involve a lot of rightsizing of both hardware and software, something that will become increasingly possible with stacked die because of the shorter distances to memory. In addition, better coordination between hardware and software will allow architects to apportion only pieces of memory—as many bits are are necessary to complete the function in a reasonable amount of time and energy.

Third, the industry has become far more global. Parts that were sourced internally are now being sourced from parts of the world that never played a role in the past. Intel’s recent announcement of a slowdown due to flooding in Thailand is a case in point. With a push to more exotic elements on the periodic table, other disruptions will certainly follow.

On top of that, while startup activity in the United States and Europe is down, it’s booming in places like Israel, Brazil and China. How these companies fare in the future remains to be seen, but geopolitical disruptions can have a big effect on all parts of a system—and the demand for all the pieces within it.

It’s tough enough to follow a mature industry that is progressing in a more or less linear fashion over time. In the next five years the IC industry will undergo significant changes that could render it unrecognizable using today’s benchmarks. After six decades, the IC industry is far from mature and static, which is why it can churn out the most advanced technology the world has ever seen. At least that part seems likely to continue. The rest is all a big question mark.

–Ed Sperling