Synopsys' Dr Chi-Foon Chan on India, low power design and solar

There have been reports about the troubles within the EDA industry in recent times, especially those related with quarter sales. Interestingly, Synopsys has been the one sailing along fine! If that’s not enough, it made its intention known of playing a role on the solar/PV segment, an area where lot of investments have been happening!

Given this scenario, I was fortuitous enough, rather, extremely lucky to be able to get into a conversation with Dr. Chi-Foon Chan, President and Chief Operating Officer, Synopsys Inc., during his recent visit to India.

On the state of the global semiconductor industry, he said, it was somewhere now in the low 10s [well below 10 percent]. The EDA industry is currently tracking below that level. However, Synopsys has been growing at around 10 percent. He said, “The technology challenges today are very high.”

Synopsys has a substantial number of R&D population based out of India. Giving his assessment of the Indian semiconductor industry, Dr. Chan added: “Our main interest in India is largely talent and the academia. India can very well get more into the product development side. Even the outsourcing of designs have increased. Our capabilities, of the Indian team, have also increased.”

As with any good semiconductor ecosystem, the Indian industry also needs a proactive industry association, a role played to near perfection by the ISA (India Semiconductor Association). Acknowledging the ISA’s role, Dr. Chan said, “The ISA has also formed a very cohesive team.”

There is little doubt about India’s growing importance in technology strengths and managerial leadership. Dr. Chan added: “We are more on the high-end side and also track what others design. In India, the profiles of designs are definitely high-end in nature. This is largely due to the presence of a large number of MNCs. A very high percentage of designs are in the 45nm and 65nm process technology nodes.”

There is another significant indicator of India’s growing importance, and that is the huge rise in the attendance of the SNUG. In 2000, this event attracted 180 people. However, in 2008, the SNUG attracted over 2,000 people.

Moving India to next level
Given the very high level of commitment on Synopsys’ part toward India, there was a need to find out from Dr. Chan what exactly India needs to do to move to the next level in the value chain in the semiconductor ecosystem.

He advised: “India can do two to three things. One, for the system to grow, you need the government, academia and industry to grow together. India has all of the ingredients required to drive products.”

Comparing India with China, he highlighted the fact that while in China, the local consumption was higher than local supply, that was not the case with India!

“Therefore, looking at merely the local market is not the only thing. Products developed here can also be targeted at the Middle East and Southeast Asia.” He was quite forthright in his analysis, adding: “Industries start when you find markets. The skill sets are already present here. There can well be multiple startups.”

Dr. Chan also touched upon the fab vs. fabless issue, noting that there could well be more of fabless companies in India. “Building a fab requires lot of capital. Also, consolidation will continue to happen.”

What role does Dr. Chan see Synopsys playing in the Indian context? He said: “Synopsys will continue to be a catalyst for the industry. A healthy design industry in India continues to help us. We also work well with the Indian universities. Having more people from the universities will always help. We also invest a lot in application support. The application team also trains others. I now look forward to seeing more fabless companies here and India to become even more global.”

On low power design
India is also a centre of expertise in low power design, given that low power is hugely important in today’s electronics ecosystem. Dr. Chan commented that low power has always been the number one design issue. It cannot be taken care of at one single stage.

He added: “A slightly new concept that has emerged is low-power verification. There are so many schemes for attacking low power, such as multiple voltage islands. We (Synopsys) are spending a lot of effort in low power.

“As a designer, you require detailed analysis. Low-power verification is now coming up. Another area is testing. As an example, if so much power is required, how do you have the power cut from the tool you are using to test? From a Synopsys point of view, we are involved in several points, such as front-end synthesis, testing, sign-off, verification, etc. We are trying to put in a whole lot of methodologies.”

Synopsys in solar
EDA may be able to help by lowering power requirements and leakage on better products. Especially, the Synopsys’ TCAD product can be used to create more efficient and effective solar cells. Now, this is not a new development anymore. Synopsys, along with Magma, have already made known their intentions about setting foot in the solar/PV space.

On the TCAD, Dr. Chan said: “We have a very strong position in the TCAD, commercially. Now, it is one of our most critical elements in high-performance. Our TCAD is among the strongest in the EDA industry.

“In solar, it does not have to be a complicated place-and-route, etc. From an entire solar industry point of view, we have now used some effort from TCAD into this space. Heat transfer issues, etc., are more in the EDA space.”

I will continue my conversation with Synopsys on its solar initiative sometime later. Keep watching this space, folks

On possible Samsung-SanDisk deal; AMD's fab-lite path

Last week, the global semiconductor industry has been hearing and reading about two big speculative stories:

a) A possible acquisition of SanDisk by Samsung, and
b) A possible chance of AMD taking the fab-lite route.

First on Samsung’s buyout (possible) of SanDisk! There have been rumors of a possibility of Samsung acquiring SanDisk. While it is still a possibility, it also leads to several interesting questions!

Should this deal happen, what will be the possible implications for the memory market? Will this also lead to a possible easing off on the pricing pressures on the memory supply chain? And well, what happens to the Toshiba-SanDisk alliance?

A couple of weeks back, iSuppli, had highlighted how Micron had managed to buck the weak NAND market conditions, and was closing the gap with Hynix in Q2, and that NAND recovery was likely only by H2-2009.

I managed to catch up again Nam Hyung Kim, Director & Chief Analyst, iSuppli Corp., and quizzed him on the possible acquisition of SanDisk by Samsung.

A caution: Remember, all of this is merely based on speculation!

On the possibility of Samsung’s takeover of SanDisk, he says: “Samsung at least said that they consider it. Thus, it is a possible deal. But who knows!”

Kim is more forthright on the implications for the memory market, should this deal happen, and I tend to agree with him.

Consolidation inevitable; no impact on prices
The chief analyst quips: “The NAND flash market is still premature and there are too many players in flash cards, USB Flash drives, SSD, etc. The industry consolidation should be inevitable in future.”

So, will this possible buyout at least ease some pricing pressures on memory supply chain? “I don’t expect this deal to impact the prices. Prices will depend on suppliers’ capacity plans. In the memory industry, the consolidation has never impacted the prices in a long run. (maybe, just a short-term impact). As you know, Micron acquired Lexar a few years ago, but no impact,” he adds.

Is there any possibility of SanDisk delaying its production ramps and investments at two of its fabs? And, what will happen should it do so?

Nam says: “SanDisk has already said that they would delay its investment and capacity plan given difficult market condition. This is a positive sign to the market as we expect slower supply growth than expected in future. However, in a long run, consolidation won’t impact the market up and down.”

Negative impact likely for Toshiba?
Lastly, what happens to the SanDisk-Toshiba alliance, should the Samsung buyout of SanDisk does happen?

Nam adds: “It is negative to Toshiba. The company [Toshiba] not only loses its technology partner, but also loses its investment partner. It should be burden for Toshiba to keep investing themselves to grow its business.”

Well, in SEMI’s Fab Forecast Report, there is mention of how Toshiba and SanDisk are among the big spenders in fabs, in Japan. Considering that Japanese semiconductor manufacturers are more cautious, it would be interesting to see how this deal, should it happen, affects the Toshiba-SanDisk alliance.

Now, AMD goes fab-lite?
While on fabs, this brings me to the other big story of last week — of AMD going the fab-lite route, possibly!

Magma’s Rajeev Madhavan had commented some time back that fab-lite is actually good for EDA. It means more design productivity. Leading firms such as TI, NVIDIA, Broadcom, etc., are Magma’s customers.

Late last year, Anil Gupta, MD, India Operations, ARM, had also commented on some other firms going fab-lite! Gupta pointed out Infineon, NXP, etc., had announced Fab-Lite strategies. Even Texas Instruments was moving to a Fab-Lite strategy. “IDMs are going to be the fabless units of today and tomorrow,” he added.

So much for those who’ve taken the fab-lite route, and industry endorsements.

On the fab-lite subject, iSuppli’s Kim will not speculate whether AMD would actually break up into into two entities: design and manufacturing, and also prefers to wait and watch.

How does fab-lite actually benefit? He comments: “Fab-lite has not been working well in the memory industry, which requires very tight control. It works, IF two companies (an IDM and a foundry) work very closely. For example, the industry leader, Samsung, produces all of the memory alone without any foundry relationship.”

Watch this space, folks!

10-point program for Karnataka semicon policy

A very interesting question was recently thrown at me: what sort of semiconductor policy should Karnataka adopt as a state! I shall attempt to highlight some of the activities the Karnataka government can look at implementing in the semicon/EMS space.

Let us first go back to last September, when the Indian government issued fab guidelines. Besides wafer IC and solar/PV fabs, the Indian government is seeking investments in ecosystem units for LCDs, OLEDs, PDPs, photovoltaics, solar cells, storage devices, advanced micro and nanotech products, etc.

The ‘ecosystem units’ have been clearly defined as units, other than a fab unit, for manufacture of semiconductors, displays, including LCDs, OLEDs, PDPs, any other emerging displays; storage devices; solar cells; photovoltaics; other advanced micro and nanotechnology products; and assembly and test of all the above products.

For starters, the Karnataka state needs to have a long-term semiconductor policy in place, running 20-25 years or so. This cannot be a short-term plan! It would be prudent to have the top Indian leaders from Indian firms and MNCs, e.g., Ittiam, MindTree, Synopsys, Cadence, TI, Analog Devices, as well as the Indian Institute of Science (IISc.) and some other leading technology institutes, be the part of a core state semiconductor policy team to oversee the implementations. Future state governments would only need to update the status and keep it rolling forward.

Incentives need to be built in as well, including more tax holidays, etc. Whether it needs to be 25-30 percent or higher, is to be debated. Next, the focus of a semicon policy should be aimed at solving some particular local problem, which can go on to solve a much bigger national problem.

All of this should be done with, keeping in view to improving the infrastructure in the state, such as roads, water, electricity, etc. Foreign investors would shy away if infrastructure issues were not tackled first.

In this context, the Karnataka government should first look at having some solar/PV fabs in the state, as well as those in the nanotech space. Next, it would be prudent to pursue a policy of attracting companies in the verification and testing domains. Rather, have companies in the ATMP space, a pointer, which has been coming up in most of the discussions.

As an example, last year, an Israeli company — Nova Measuring Instruments — was keen on entering India. Nova develops, produces, and markets advanced monitoring, measurement and process control systems for the semiconductor manufacturing industry. It should be pursued to start assembly and testing of products in the state.

Wafer IC fabs are going to be a tough act to follow. Unless a company can get the requisite funding for a 300mm fab, it is not advisable to follow that path. However, there is room for developing 200mm fabs, or even 150mm and 180mm fabs. These can be used to develop indigenous and simple applications. If such fabs are developed, those companies offering fab-related services can be attracted as well.

The Indian semicon policy statement speaks about having ecosystem units. It would be advisable to attract smaller companies and look at setting up manufacturing units. As an example, Synopsys’s Subhash Bal had once pointed out how RFID can be used in a host of applications. That’s not all. Why not pursue companies in the OLEDs/LEDs and PDPs spaces as well, besides those manufacturing LCDs, even if smaller-sized.

Finally, consider attracting and promoting companies in the fabless space, as it looks to be the way ahead for the semiconductor industry.

Here is a 10-point program for the Karnataka government to consider as a likely semiconductor policy.

1. A long-term semiconductor policy running 20-25 years or so.
2. Core team of top Indian leaders from Indian firms and MNCs, as well as technology institutes in Karnataka to oversee policy implementation.
3. Incentives such as government support, including stake in investments, and tax holidays.
4. Strong infrastructure availability and management.
5. Focus on having solar/PV fabs in the state.
6. Consider having 150/180/200mm fabs that tackle local problems via indigenous applications.
7. Develop companies in the assembly testing, verification and packaging (ATMP) space.
8. Attract companies in fields such as RFID, to address local problems and develop local applications.
9. Pursue companies in the PDP, OLED/LED space to set up manufacturing units.
10. Promote and set up more fabless units.

There should be some steps to create specific zones for setting up such units — for fabs, fabless, ATMP, manufacturing, etc., all spread equally across the state.

On a personal note, I would be keen and willing to work with the Indian/Karnataka government, or the concerned parties, in formulating such a policy, should I am invited. Nothing would give me greater pleasure than seeing India, and Karnataka, shining in the semiconductor space.

Top 10 global semicon predictions — where are we today

It is always interesting to write semicon blogs! Lots of people come up to me with their own comments, insights, requests, etc. One such request came from a friend in Taiwan, who’s involved with the semiconductor industry.

I was asked forthrightly what I thought of the top 10 global predictions, which I had blogged/written about some time back late last year.

Top 10 semicon predictions
For those who came in late, here are the 10 global predictions on semiconductors made at that time (late December 2007.

1. Semiconductor firms may have to face a recession year in an election year.
2. DRAM market looks weak in 2008.
3. NAND market will remain hot.
4. Power will remain a major issue.
5. EDA has to catch up.
6. Need to solve embedded (software crisis?) dilemma.
7. Consolidation in the fab space.
8. Capital equipment guys will continue to move to other market.
9. Spend on capital equipment to drop.
10. Mini fabs in developing countries.

Well, lot of water has flowed since those predictions were made. Let’s see how things stand, as of now. The updated predictions would look something like these:

1. There have been signs of recession, but the industry has faced it well, so far. In fact, Future Horizons feels that if there is going to be a global economic recession, the chip industry (but not all companies) is in the best shape possible to weather the ensuing storm.

2. Memory market is changing slightly as well, though people are very cautious. According to Converge, memory market prices appear to be stabilizing. iSuppli has predicted a poor year for DRAM though!

3. NAND Flash could show some recovery later this year. Yes, Q1-08 QoQ sales seems to have slipped, but the market remains hopeful of a recovery. Even iSuppli warned of NAND Flash slowdown in 2008, while Apple slashed its NAND order forecast significantly for 2008! Keep those fingers crossed!!

4. Power remains a big issue, and will continue to be so. This will remain as we move up newer technology process nodes.

5. EDA is seemingly catching up with 45nm designs. Magma, Synopsys, and the other leading EDA vendors are said to be playing big roles in 45nm designs.

6. Fabless companies are gaining in strength. No doubt about it! The 2007 semicon rankings show that. Also, Qualcomm is now the leader in the top wireless semicon suppliers, displacing Texas Instruments.

7. There have been consilidations (or long term alliances) in: a) fab space b) DRAM space. In the fab space, Intel, Samsung and TSMC have combined to go with 450mm wafer fab line by 2012. And in the DRAM space, there have been new camps, such as Elpida-Qimonda, and Nanya-Micron partnering to take on Samsung. With the global semiconductor market seeing steady decline in growth rate, which would continue, look forward to more consolidations.

8. Investments in photovoltaics (PV) have eased the pressure on capital equipment makers and spend somewhat. In fact, 2007 will be remembered as the year when the PV industry emerged as a key opportunity for subsystems suppliers and provided a timely boost in sales for those companies actively addressing this market. Perhaps, here lies an opportunity for India.

9. Mini fabs — these are yet to happen; so far talks only. In India, a single silicon wafer fab has yet to start functioning, even though it has been quite a while since the semicon policy was announced. Conversely, some feel that India should focus on design, rather than go after something as mature as having wafer fabs. However, several solar fabs — from Moser Baer, Videocon, Reliance, etc., are quite likely.

10. Moving to 45nm from 32nm is posing more design challenges than thought. This is largely due to the use of new materials. Well, 45nm will herald a totally different structure — metal gate/high-k/thin FET/deep trench design, etc. It will herald a new way of system design as well.

Now, I am not a semicon expert by any long distance, and welcome comments, suggestions, improvements from you all.

Semicon to grow 12pc in 2008: Future Horizons

If there is going to be a global economic recession, the chip industry (but not all companies) is in the best shape possible to weather the ensuing storm!

According to Malcom Penn, CEO, Future Horizons, we are dealing with a semiconductor industry in ‘deep trauma.’ He was delivering the company’s forecast at the recently held International Electronics Forum (IEF) 2008 in Dubai, predicting a 12 percent growth this year despite signs of a wobbling US economy.

Is there a need to get back to the industry basics? “Semiconductors are a peculiar business; the only sane strategy is to bet the company regularly,” once remarked Dr Gordon Moore.

Penn noted that the current industry status is somewhat confused and uncertain. Short-term issues are dominating the agenda.

Longer-term structural trends are unclear. The traditional IDMs are currently going through a mid-life ‘new business model’ identity crisis, and the start-ups are struggling to even reach critical mass! And all of this has been happening amidst intense economic uncertainty

“Now is the time for strong nerves and determination,” Penn said. According to him, the underlying industry fundamentals are sound and there is no end in sight to the ‘make-lunch-or-be-lunch’ ethos.

The emerging economies like India and China have so far been less affected by the financial market’s turbulence. In fact, the emerging and developing economies were shifting the global growth dynamics.

Chip industry in best possible shape
A forecast health warning is: IF the global economy collapses, it will take the chip market with it. However, Future Horizons feels that if there is going to be a global economic recession, the chip industry (but not all companies) is in the best shape possible to weather the ensuing storm.

The ASPs are an enigma wrapped up in riddle. The course of ASPs (like love) never runs smooth. Wobbles happen! ASPs are also the perennial (and least understood) industry wild card. ASPs are generally driven by new IC designs, and that takes time (sometimes three to four years). Post-2001, value recovery lost one generation (130nm impact). The ASP recovery ‘wobbled’ in 2007 (memory and MPU price wars). Barring a recession, Future Horizons forecasts that ASPs will recover in 2008 (it has already started).

12 percent growth likely
Future Horizons’ 2008 forecast summary and assumptions (as of May 2008) are — ‘12 percent’ growth — ’10 percent’ units / ‘2 percent’ ASP. There may be no global economic recession, although US/UK/Eurozone might wobble — which they are! No significant inventory correction will probably take place, but there are always Q4>Q1 adjustments, and there’s nothing special about that either.

There could be lower fab capacity expansion due to 2007/2008 capex slowdown, which is inevitable and irreversible. There is also a possibility of a more stable memory price erosion — which means, back to the learning vs. bleeding curve, and prices have since hardened. If the global economy holds, the 2H-08 growth will likely be strong. This, if the capacity, ASP and units are all pulling together, which is said to be happening.

Therefore, Penn feels it is too early to call for a (major) downward revision. Q1 08 was a lot stronger than conventional wisdom feared.

“That’s the rational analysis, but semiconductors aren’t rational. It could just as easily be another single digit growth year,” Penn added.

Danger signs to watch out for
So, what are the danger signs one should watch out for? These would be capacity — it is hard to see how this can spoil 2008, provided unit growth holds up, but there is a need to watch capex. Another factor is demand — the current IC unit demand is sustainable provided the economy holds up, so there is a need to watch the inventory.

Next comes the economy! The current outlook continues to be uncertain with risks all on the downside. ASPs are the key to recovery, but always the first line of defence. ASPs could still derail 2008, but the trends are encouraging.

What’s driving the market?
In semiconductor 7.0 — or the 7th decade of the transistor revolution, the same things, as always, are driving the market. These are: technology, legislation — energy saving/conservation and structural — the relentless analog to digital conversion. All of these are combining to do what the chip industry does best — enabling something that was previously impossible. Penn contends, “This industry has nowhere near run out of steam!”

New applications continue to drive the market, with automotive, industrial and medical, mobile phones, and PCs and servers, dominating. The PC market is dominating, but going nowhere fast. Mobile phones have become more interesting, but have conflicting priorities. The challenges are: how to protect the existing cost structure and subscriber base and how to add useful and affordable value-add services! Evidently, “chipset suppliers love the high end, market loves the low end.”

There is definitely an increasing automotive semiconductor content. A solid annual growth has been prediced (CAGR 2006-11) for vehicles — 5.5 percent, systems — 11.5 percent, and semiconductors — 13.3 percent. Some other new areas are motor control and energy, as well as lighting and photovoltaic, besides medical electronics. Robotics is yet another interesting area.

Key industry issues
It is clear that more chips per wafer equals less cost per chip and more transistors per die equals more functionality. Several billion transistors gives phenomenal design flexibility as well. Considering total ICs and MOS ICs, in the MOS capacity build out by technology node, there has been no change in volume ramp profile despite the hype.

As for the evolution of the technology node, definitely, 45nm is a revolutionary step from 65nm. In all likelihood, 32nm will be a natural evolutionary. However, Penn cautioned that 22nm would be another ‘difficult’ transition!

There is no doubt that 65nm will be tomorrow’s leading-edge workhorse, having the same basic Si gate/SiO2/MOSFET structure. Nevertheless, 45nm will herald a totally different structure — metal gate/high-k/thin FET/deep trench design, etc. Also, 45nm will herald a new way of system design.

Is fabless right?
Is Fablite a valid option? While there is nothing wrong with being fabless, people are just not sure whether the best starting point is being an IDM. Teamwork has to be perfectly orchestrated as competition is tough.

As for the market share dynamics, the top 10 companies (IDMs) have been losing share. Fabless share has been growing, but it is still relatively small.

Coming to the realities of the foundry market, TSMC’s lead is now unassailable. Were it an IDM, it would be No. 2, challenging Intel and passing Samsung. Moving more into design looks inevitable.

Finally, execution, and not technology, is everything! Execution has and will continue to make the difference. Applications (software) will play the role of the key differentiator as well, and it has value. Design is the means to an end, and not the end.

From the chip industry’s perspective, the electronics market was traditionally Japan, North America and Western Europe. It now encompasses the entire Asian rim, China, Eastern Europe and India. Far from maturing, the chip industry itself is still in its volatile, high-growth phase, with at least a further 20 years of strong growth in prospect. Penn said, “The underlying growth drivers for chips has never been better.”

Back to basics
We started with the need to get
back to industry basics. We end in the same way! Stick to basics like:

* Don’t invest in low cost areas just because they are cheap — they have a habit of becoming high cost tomorrow, plus the hidden extras.
* Don’t make outsourcing decisions just because they are easy — especially if there’s no way back.
* Don’t make strategic cut-backs just to trim the bottom line — some decisions, e.g., R&D, take a long time to impact, then it’s too late.
* Stop looking for high volume/high value market niches — they don’t exist, need to learn how to compete
* Do show strong leadership
* Do have a long-term plan and stick with it — even if it negatively impacts ‘the next quarter’ balance sheet
* Do show a commitment and determination to succeed
* Do stay focused and resistant to external meddling
* Do execute ruthlessly — this is the key competitive differentiator)
* Do … just do it with passion — it’s the passion that makes the difference

Top 25 semicon vendors of 2007

Here are the top 25 global suppliers of semiconductors, according to iSuppli. First up, there are no surprises in the top 5 — Intel, Samsung, Texas Instruments, Toshiba and STMicroelectronics retain their spots for this year too. The surprises occur in the second rung — or, in the next five spots.

Renasas and Hynix exchanged places, with Hynix moving up from 7th position in 2006 to 6th position in 2007, and Renasas dropping from 6th last year to 7th. This is very interesting, because, despite memory market pains during 2007, South Korea’s Hynix Semiconductor and Japan’s Toshiba and Elpida Memory achieved memory-chip revenue growth of 15, 14.5 and 8.8 percent respectively in 2007, as per iSuppli.

Infineon, Sony major movers
The next three positions are the major surprises of the year. Well, the 10th position was no surprise to me — AMD, dropping from 8th in 2006 to 10th in 2007. Sony and Germany’s Infineon Technologies have been the biggest gainers of the year!

According to iSuppli, Infineon acquired TI’s DSL CPE chip business and its wireless baseband semiconductor unit, boosting its revenue. Qimonda, which spun off Infineon, dropped from 12th in 2006 to 16th this year. This split had seen Infineon go out of the top 10 last year.

As per iSuppli, logic application specific integrated circuits (application specific standard products and ASICs) enjoyed the strongest performance among all semicon segments in 2007. Sony and Toshiba were key drivers of growth in this segment due to their sales of semiconductors for the PS3.

Fabless is surely in
The presence of Qualcomm and nVidia in the top 25 list speaks volumes of the power of fabless companies. Qualcomm moved up from 16th to 13th position this year, while nVidia moved up from 25th to the 20th position this year. There is every chance that we will see a fabless company in the top 10 next year! There is an even better chance that more fabless companies will make it to the top 25 companies next year and in future.

All other key players dropped in their rankings. NXP dropped from 9th to 11th; NEC dropped from 11th to 12th; Freescale from 10th to 14th; Micron from 13th to 15th; Elpida moved up from 19th to 17th; while Matsushita and Broadcom dropped a place each.

An iSuppli release says: “Overall, the top 25 semiconductor suppliers significantly outperformed the combined performance of companies ranked lower than them in 2007. The Top-25 as a group achieved revenue growth of 4.5 percent in 2007 while the combined growth of all other semiconductor suppliers was only 0.8 percent.”

On a personal note, I would love to see names like SemIndia and HSMC making it to the list. If not now, then at least sometime in the near future. However, it seems from certain published reports that the Indian fab story has gone all wrong. I’ll take up this topic in a future blog for sure!

Top 10 global semiconductor trends for 2008

It is really difficult to stick your neck out and predict. That’s what makes the analyst’s jobs so difficult. Things happen and pass you by so quickly. For instance, as an example, who would have thought that Samsung would face a substantial blackout that would halt six chip production lines in a complex operated by the world’s largest flash memory producer?

Plans for the fab in India are now well under way. There have been questions like, do we need fabs? The year 2008 is the year of presidential elections and the Summer Olympics. Will we really see a recession in 2008? Here are some of the trends that are visible for 2008. Would love to hear from you.

1. Semiconductor firms may have to face a recession year in an election year

Yes, strange as it may sound, this just might happen! Concerns about consumer spending, caused by higher oil prices, mortgage crisis in the US and fears of a possible recession have made analysts more cautious, albeit optimistic. Analysts are wary of an impending recession in semiconductors during 2008. That, it should fall in the year of the US presidential elections makes it all the more intriguing. The nervousness is already showing in the slowing down of some markets.

2. DRAM market looks weak in 2008

Will DRAM prices rebound? Remains to be seen, although DRAMeXchange says that Taiwanese suppliers are likely to have their output to trim by 10-25 percent during February (Chinese New Year) as they usually plan for an average of 3-7 days of annual facility maintenance during this period. DRAMeXchange regards this as a possible catalyst for a price rebound in near term. Analysts haven’t helped either, with some saying DRAM will be on the slow side or even negative in H1-08.

3. NAND market will remain hot

You can bet, it will! Analysts remain upbeat for a positive NAND market in 2008. The reason being – new applications such as wireless USB, increase in cell phones memory capacities, higher content in portable media players, etc. We hope it is not a flash in the pan. There are rumors of another iPhone along the way!

4. Power will remain major issue

This isn’t going to change anytime soon! Power awareness is crucial for portable applications. It determines battery lifetime, and there’s an increased amount of computation involved as well. Power awareness is extremely crucial for high-performance applications. It determines cooling and energy costs. Many chip designs today are power limited and still require maximum performance.

5. EDA has to catch up

And fast! Analysts at a recent webcast hosted by Semiconductor International elaborated how the EDA industry was in a position of lag in the market. The DFM issue is increasingly becoming more complex. There is said to be a move to restrict the design rules that is in place now for 45nm. We are likely to see major changes in 32nm. That will have an impact on the EDA tools.

6. Need to solve the embedded dilemma

It is said that in 2007, the cost of designing or developing the embedded software for an SoC actually passed the cost of designing the SoC itself! We seem to be in the middle of a software crisis that is going to hit the entire electronics industry in the next five to six years.

Analysts are wary of an impending recession in semiconductors during 2008

7. Consolidation in the fab space

Some of the other older IDMs and fabs are said to be actually shutting down and going over to the foundries and process wafers for less than what they can do on their own. In this respect, we are seeing a lot of consolidation within the fab space. The mid-level players are consolidating. The customer base is clearly narrowing. The field is narrowing in 65nm and 45nm, and as we get to below 45nm, the field is going to get much, much narrower.

8. Capital equipment guys will continue to move to other markets

The best example, you can think of, is Applied Materials, which is into innovative equipment, service and software products for fabrication of chips, flat panel displays, solar photovoltaic cells, flexible electronics and energy efficient glass. Even the smaller guys are moving into LEDs or MEMS markets. That tells us what these companies are thinking about the semiconductors market.

9. Spend on capital equipment to drop

Gartner is expecting the long overdue capital spending correction in DRAM market to push the capital equipment market into contraction. Another slow year from foundry, along with concerns of US economic recession, adding to the downside. However, NAND spend should ramp up.

10. Mini fabs in developing countries

India has announced fab plans. There have also been talks of mega fabs and mini fabs elsewhere. There are going to be different types of fabs! With globalization, lot of countries may decide they want to have a fab. The market’s going to change.

However, bear in mind that the outlook on new fab starts appears weaker, as many companies have cut back on spending to wait for the market to improve. After a forecasted 8 percent YoY increase in fab construction spending in 2007, levels are likely to be flat in 2008.

Movers and shakers in semicon; new fabs in Asia

While speaking with the Fabless Semiconductor Association, USA, some time back, I quizzed them on the major movers and shakers (or slips) among the top 25, and what are the reasons for those.

Qualcomm has broken into the top 10 for the first time. It’s the first time in the history of semiconductors that such a thing has happened, and is probably a sign of the times ahead.

One reason for this growth has been — Increasing foundry orders. A Digitimes article reported that Qualcomm will increase orders by 15-20 percent in the September quarter to meet projections of strong 3G handset sales. According to the article, sources at Qualcomm suggest that wafer starts per month in the December quarter could surpass 30,000.

There have also been reports of strong June quarter for 2007. Qualcomm’s $2.32 billion in June quarter sales represents 19 percent year-on-year growth. Record chipset volumes of 65 million were at the high end of 62 million-65 million guidance. UMTS chipset shipments were noted to have increased by 127 percent year-over-year and 79 percent quarter-over-quarter, with the quarter-over-quarter growth rate roughly 4 times the market growth rate.

Finally, chipset ASPs increased by 2 percent year-over-year and quarter-over-quarter, and are likely to remain stable.

Situation in Asia
FSA quoted the Strategic Marketing Association’s Quarterly Spot Report – July. While there have been announcements in India by SemIndia, HSMC, Moser Baer, etc., for fabs, there is every likelihood of another fab in the eastern Indian state of West Bengal. The technology ministry announced plans for a yet to be named fab at the India Design Center. Another possibility is a fab in Kochi, South India, by the NeST Group.

In China, Strategic Marketing Association expects that eight new fabs will start construction this year. Two fabs have started construction in the first quarter (Hua Hong NEC and ProMOS), and two more have started construction in the second quarter.

Grace Semiconductor, now headed by former Infineon boss, Dr. Ulrich Schumacher, which opened its first fab in 2003, began moving equipment into the shell of Fab 2, which was built at the same time as Fab 1. The company is installing used equipment and plans to begin production in Q1 0f 2008. The company also plans to begin building a 300mm fab, perhaps as early as next year, although financing is said to remain an issue for such a project.

Also in China, IC Spectrum began building a 200mm fab in Kunshan, about 45km east of Shanghai. Using 0.35micron technology from Toshiba, the new foundry expects to begin volume production by the first quarter of 2009.

TSMC began production in the second phase of its 300mm Fab 14 in Tainan in the south of Taiwan. This $2.4 billion fab will start production at 65nm and move to 45nm in 2008. There are also plans for a 300mm Fab 14, Phase 3 at the same location.

Looking at capex
In 2007, companies with capital spending budgets of $1 billion or more (the Billion Dollar Club) will account for 77 percent of all capital spending. Most of these companies (13 out of 20) are memory companies. Nine of these companies are from Asia Pacific (South Korea, China, Taiwan and Southeast Asia). Together, they plan to spend $23 billion this year, more than half of what the Billion Dollar Club has budgeted for capital spending.

Qualcomm rocks top 10! Is fabless the way ahead?

For the first time in semiconductors, a fabless company has cracked the Top 10! This honor has gone to Qualcomm, which broke into the Top-10 ranks of the global chip industry in the second quarter of 2007, according to iSuppli!

The list is consumed by the usual suspects, the giants — Intel, Samsung, Texas Instruments, Toshiba, STMicroelectronics, Renesas, Hynix, NXP — from no. 1 to no. 8, and then, Qualcomm — the surprise entrant at no. 9, and finally, Infineon Technologies.

This leads to a question: is fabless the way ahead for the future? Maybe, there is! After all, iSuppli reports of an “Asian flu” — read: all leading Asian semicon suppliers witnessing declines in revenues, even as Qualcomm moved up!

Here’s what Future Horizons has to say in its monthly semiconductor forecast:

If May’s WSTS results were “disappointing”, June’s were a real proverbial kick in the pants, with 2Q07 down 2 percent on the 1Q07. Whilst we had anticipated in last month’s Report that the quarter would be down “at least 1 percent versus 1Q07”, we had expected it to be closer to 1 percent, not 2. This year is turning out to be even more of a white-knuckle ride than normal, testing the industry’s vision and faith to new limits. With short-term industry momentum still refusing to rebound, all bets are still on for the second-half of the year. ASPs remain the underlying cause of the industry’s problem, given June’s IC units were up 11.8 percent on the same period last year. With first-half year units up a respectable — and sustainable — 7.7 percent year-on-year, the value growth limped in at only 2.6 percent, due to a 4.6 percent decline in IC ASPs.

While Qualcomm surged in the second quarter, Asian biggies such as Samsung, Toshiba, Hynix, Sony and NEC saw semiconductor revenues decline. iSuppli reported Hynix and Toshiba as taking the biggest hits among the Top-10 suppliers.

What about India then, where you often hear cries for fabs? Does everyone know what kind of investment is required for a fab? And well, do people even have an idea how long would it take for a fab to break even?

Let’s try something easier! Even if India currently has close to 200mn mobile phones and is growing, how many of those chips for mobile phones are currently being made in fabs located in India? Would a fab located in India only cater to the domestic market or should it cater to the overseas market as well? How many Indian companies are making those chips and how much is it all adding to India’s GDP? Most importantly, are those fabs run by home-grown Indian companies? Are there any chances?

There are several fabless companies in India, especially in Bangalore. It won’t take long to find them! There has been an endless debate on fabs vs. fabless. There’s a reason why India has been stronger in semicon design!

However, to move up the value chain, India is being pushed hard to join the fab community. Given the current market dynamics, it may a long while before we get to see real success, should, as and when a fab or multiple fabs come up. Success may come, but it won’t be easily achieved.

Chipping away at wireless USB

I happened to meet up with MosChip Semiconductor Technology, a well known fabless semiconductor company, which is listed on the BSE (No. 532407). What attracted me was the fact that MosChip is said to be focusing on wireless USB. as well.

It has been concentrating more on the digital side and is talking with a company for providing the radio (analog) chip, for a licensing agreement. As and when the market for wireless USB picks up, MosChip would be ready and waiting! Now, this is great! An Indian company, chipping away at the wireless USB market, waiting for its time to pounce and capture it!

Its engineering team is capable of designing end products that work across different operating systems and multiple platforms of various hardware configurations. MosChip has engineering expertise in PCI, USB, IEEE 1394, serial–parallel, SoC, device drivers, embedded firmware, engineering and reference platforms, PLL, transceivers, and A/D and D/A.

It is also developing custom products and IP for customers. Although Moschip is currently working on USB, PCI and IPSec, it is now going toward the SoC, according to its CEO, Ram Reddy.

The company adds application packages as software platforms are required for people to plug in the board. MosChip has 45+ software engineers who work on both embedded and platform to support such activities.

MosChip can give the complete object code to companies and source code to bigger companies with an agreement in place. It focuses mostly on OEM and ODM companies in the Far East. MosChip has strong distribution ties in place in China, Hong Kong, Japan and Taiwan.

Moschip, being a fabless company, contracts work to UMC, TSMC, etc. As and when, proposed fabs comes up in Hyderabad, Moschip would partner with any one of them. MosChip also announced the MCS8140, a highly integrated network processor. This network processor can be used with USB, multiple servers, etc., rather, with everything that is on IP. A maximum of 16 devices can be supported on the USB ports via IP. It is a single-chip solution.