Who Designs Medical ICs

The medical chip market is heating up as sensor and processing technologies reach maturity, seeing off a frenzy of activity by systems companies and startups looking to plant a stake in a vast and largely untapped arena.

As with any industry, there are a variety of business models, which can spread out the design burden over many companies or just one large one. This was limited in the past by the relatively low volumes for medical device chips, which kept a lid on design activity. But as more design services companies enter the picture, they are able to provide economies of scale across multiple vendors. That is further boosted by aging populations, demand for more at-home medical services, and better accuracy and more widespread availability and affordable electronic medical devices, such as wearable monitors.

There are three main types of companies designing ICs for medical applications:

• OEMs or large medical device manufacturers;
• Semiconductor engineering firms that specialize in ICs for medical products, and
• Semiconductor manufacturers, including IDMs and fabless companies utilizing foundry services.

Large medical tech companies that make and market medical devices, such as Medtronic, still design chips in-house for their medical devices. They have a team of semiconductor engineers, along with software and hardware engineering departments, that design the rest of the medical devices. These are typically captive models, where they design and sell their own medical devices using their own chips using commercial EDA tools, and they obtain their own regulatory approvals.

But there also are a growing number of engineering services firms specializing in medical applications. They serve small to large medical device OEMs, designing chips and systems for a variety of companies, some of which have never designed a medical device before. They also help these customers through design and fabrication, because the customers do not have the fab relationships or the engineering expertise.

Alongside of this, some customers — typically large companies — are outsourcing some design services work, paid by the hour, to beef up their own engineering staff. These engineering firms need to understand the complex regulations of the medical market, but they generally are not involved in regulatory approvals. An independent chip design firm may see common threads among customers’ products and create ASICs as their own products that could be used by several customers.

Similarly, semiconductor manufacturers, which make chips for a variety of industries and adapt their existing chips and tools for multiple medical customers, do not have to deal with the regulatory approvals, but they do have to be aware of what is required. Semiconductor manufacturers can sell medical chips as parts of ecosystems, that may include lifecycle management.

“What is important for all customers is that Infineon not only delivers semiconductors, but will provide fully tested and assembled (packaged) devices,” said Ralf Leuchter, segment head, Customized Solutions at Infineon Technologies. “Additionally, they also will choose wafer or singulated die delivery with a logistic system behind that. By using an ASIC approach, customers will get a device that is not available for purchase on the market. With integration possibilities, they can save space (size) and system costs, beside protecting their IP, as these devices cannot be found by competition on the open market.”

Another third-party service is the managed medical device cloud (MMDC), a regulatory-compliant cloud service that manages the device project. “To support this wave of connected medical devices, we’re also seeing the emergence of rapid medical device development platforms such as L2S2 MMDC, which builds on top of Arm solutions,” said Peter Ferguson, director of health care technologies at Arm. “Platforms like MMDC provide turnkey medical device hardware development with pre-integrated cloud and medical community connectivity. Using solutions like this enables new certified medical devices to significantly reduce the risk and cost from prototype to scaled patient care.”

An example of semiconductor design and build firm is the integrated circuit development team at Cirtec Medical. In 2019, Cirtec acquired Cactus Semiconductor, a semiconductor design company founded in 2002 that specialized in ASICs for medical use. The integrated circuit development team, based in Chandler, Arizona, designs custom ICs from product design through production. The team has expertise in medical integrated circuits, power management circuits, and analog and mixed signal ASICs.

“The typical business model is what we call turnkey ASIC provider,” said Andrew Kelly, director of applications engineering at Cirtec Medical, who worked at Cactus Semiconductor and prior to that at Medtronic. “In the turnkey ASIC provider role, which is our primary focus, we find a customer who is trying to develop a device, and for whatever reasons the customer thinks they need a custom chip. We help them define their system, define that custom chip. We then specify the chip. We develop it. We do all the work. And then, if it’s all good, we sell it to them. But it’s one chip typically — one chip for one customer for one application. So it’s highly specialized.”

Cirtec’s applications engineering group also has its own chips — application-specific standard products (ASSPs) that it developed after seeing a trend among customers projects. “We take, let’s say, a piece of an application where there might be four or five or even 10 or 20 different customers that are not doing the exact same thing, but they’re sort of doing something similar. And so we would make a chip that we invest in and we say, ‘If we make this, we think 10 or 20 people are going to buy it.’ And if nobody buys it, we wasted our money. If 40 people buy it, we win. So we have a couple of those,” said Kelly. His group also provides engineering design services for hire.

Semiconductor companies, large and small, provide services a medical device customer can’t bring in-house. “Most of our customers are — let’s call them second tier or smaller size companies — they can’t realistically build a staff large enough to get all of these different things done, because they’re typically going to design maybe one, maybe two chips, and then what do you do with all the people? There’s just not enough for them to do, but you need somebody in each of those roles,” said Kelly.

When the team works with bigger companies, Kelly noted that is typically under the design services model. “Those guys are much more vertically integrated, and they typically do it all themselves. When we work with them, we are typically in that service model, where they say, you know just X number of dollars per hour for this many hours get the job done. There, we offer the service model to any of our customers. Realistically, most of them are not in the position to take it because, lo and behold, we give them an ASIC and it works. What are they going to do with it? They would have to have all the relationships with the wafer fabs, with the testing houses, with the packaging houses. They would have to manage all of that. And the numbers just don’t really add up when you’re doing it for one chip. Part of our value proposition basically is, if you wanted individually to do all these things you can’t do it, but because we’re working with 20 to 40 customers, we kind of pool the resources and it makes sense now. We start getting some economies of scale on the engineering support, as well as with the vendors. Some of the vendors, they don’t really want to deal with you if you’re only going to buy 10,000 chips from them. But if I sell 10,000 chips to 20 different customers, now we’re talking.”

Low chip volumes
The low volume of chips is always a challenge. Medical devices do not demand the large quantity of chips than other industries do. Low quantity means medical chips fly under the semi industry’s radar. “No wafer fab in their right mind would say we’re going to be an implantable medical device wafer fab,” said Cirtec’s Kelly. “The numbers just don’t add up. But if they say they’re an automotive wafer fab, and then the medical people say, ‘hey, that’s about the same kind of scrutiny that we need,’ it sort of adds up. The focus is the automotive that we’re piggybacking along, not the other way around.”

“It’s not at all uncommon for there to be, let’s say a couple thousand chips on a wafer and 25 wafers in a lot. So maybe you’re talking about 50 to 100,000 chips that get made in one run, and it’s not uncommon for that to last our customers 10 years or more,” said Kelly. “Then you call the wafer fabs and they’re asking how many thousands of wafers per month do you want, and we’re saying approximately zero. That’s the overriding dilemma — semiconductor is all about economies of scale. Medical devices, especially implantable medical devices, are nowhere near those economies of scale.”

Standard components, customized
But many are anticipating those economics will change. While some medical devices may not be producing the demand, the increasing digitization of healthcare, an aging population, and the rise in incidence of certain medical conditions, such as diabetes, may push demand up for some medical chips, either as standard components or customized chips.

The “web-integrated wireless devices are also expected to witness a rise in the use to manage doctor-patient interactions, and digital diagnostic tools might enable remote examinations, which is also expected to aid the integration of semiconductors in the healthcare industry,” according to a report by Mordor Intelligence entitled “Semiconductor In Healthcare Market — Growth, Trends, COVID-19 Impact, And Forecasts (2021 – 2026).” Mordor Intelligence foresees a 10.2% compound annual growth rate from 2021 to 2026 in medical semiconductors.

This will likely include a combination of custom and standardized chips, which will be offered through large semiconductor manufacturer’s ecosystems, including a variety of specialty and general-purpose foundries and packaging houses. These ecosystems often have built-in strengths that have been adapted from other industries, allowing them to take advantage of larger chip runs.

“For medical applications, Infineon is mainly focusing on ASIC solutions that are fully customized for a single medical customer,” said Leuchter. “The beauty of customized devices is that customers will get exactly what they need without requiring an entire IC design team. They just need to share a product idea or specification and Infineon is looking to integrate and implement possibilities. Customers will gain maximum benefits, and we also support the entire system using our standard components.”

Conclusion
Who makes medical integrated circuits depends on who is designing the medical device and the size of their market, but the dynamics of this market are in flux. While a large medical OEM today can afford to have its own chip design teams, other OEMs can send their design teams to work with major semiconductor companies or with an engineering business that specializes in chips for medical devices.

Which model ultimately wins, or whether they will co-exist peacefully, remains to be seen. But competition is growing in this area, and the number of players and the means they use to bring new products to market will multiply rapidly. Change is coming, and at this point it’s too early to tell what that looks like.

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