Photo by Jason Leung on Unsplash
THE SEMICONDUCTOR INDUSTRY STATUS
In 2020, the semiconductor industry has seen both negative and positive trends.
The first half of 2020 showed mostly the negative trend driven by the COVID-19 restrictions, as it lead to slower semiconductor production and increased inventory due to decreasing sales. The second half of 2020 has been more positive. The sales have gone up and production lines are 100% occupied, to cater the newly launched devices and products by vendors across the globe.
Apart from the steady increase in design, development, and production, merger/acquisition have gone up too. There have been some unexpected takeovers which are bound to have a strong impact in the long run.
The semiconductor industry from a product point of view can be divided into:
- CPU
- GPU
- SoC/MPSoC/RFSoC
- ASIC/FPGA/ASSP/ACAP
- Digital/Analog/Mixed
- Memory
The mergers and acquisitions that have occurred in 2020 have affected each of the above product domains.
- NVIDIA will acquire low power CPU/GPU provider ARM for $40 Billion
- AMD will acquire FPGA/SoC solution provider Xilinx for $35 Billion in an all-stock transaction
- Intel sold NAND memory and storage unit (including the manufacturing unit) to SK Hynix for $9 Billion
- Marvell Technology’s plans to buy analog and mixed-signal devices provider, Inphi Corp, for $10 Billion
All these acquisitions from the design have shaken up the semiconductor design industry. However, at the same time, it is turning out to be a boon for semiconductor manufacturing, as many IDMs plan on becoming FAB-LITE to focus more on the design aspect and increase share the mobile, AI, and data center market.
This raises the question of how the future of semiconductor design and manufacturing is going to be.
THE SEMICONDUCTOR INDUSTRY SHAKE UP AND FUTURE
Taking a look from the semiconductor design point of view, it is getting clear that companies are more focused on a specific product domain and want to dominate the market. To achieve this, companies are either creating new asset via acquisition or selling old asset that do not align with the goal.
Intel last year sold its smartphone modem business to Apple and this year Intel also decided to sell NAND memory business. This shows that Intel wants to focus on its strength of personal and data center computing. For sure, NVIDIA’s acquisition of ARM is concerning for Intel, given how much strength an established IP from ARM will give NVIDIA and also allow it to extend its business from GPUs to CPUs, and that too smartphone business which is not Intel’s primary domain.
On top, with AMD’s solid performance and acquisitions, the fight for smart computing is going to heat up. AMD (since 2009) and NVIDIA are FAB-LESS semiconductor companies. This allows AMD and NVIDIA to focus more on the design aspect and let external manufacturers take care of the manufacturing. This is a big advantage as semiconductor manufacturing is hard and takes a long time to perfect.
All these points towards a major shake-up that will occur in near future. The business mode; will change and semiconductor companies will go either:
- FAB-LESS
- FAB/Pure-Play Foundry
Competing in both the arena as a single entity is going to be challenging. Spinning off or selling part of the semiconductor manufacturing might be a more viable solution. Such shake-up will eventually end up creating more business for the semiconductor manufacturing companies and they will have to predict today and start planning on increasing the capacity (or acquisition) to keep the business running.
It will be vital for countries like India to take advantage of such market business change by coming out with policies that heavily incentivize semiconductor manufacturing.
