An era in which semiconductor companies will simply put up the shutters and walk away from the market is looming.
“I expect we’re going to see companies closing and going out of business,” said Malcolm Penn, CEO of Future Horizons at the
IEF2007 meeting in Athens last week.
His conclusion comes because of seismic changes allowing new players in semiconductor process, design, software and intellectual property (IP) generation to take more of the industry’s value-added business.
For instance, in process technology the chip foundries are on a par with the integrated device manufacturers (IDMs). Top foundry TSMC is getting to volume production on the 45nm process at about the same time as leading IDM Intel.
In design, the new business model design houses like Verisilicon, eSilicon and Alchip, with design skills as good as anything the IDMs have, take a design on-board at no cost or risk to the customer, only requiring payment on delivery of finished, working silicon.
In IP creation, the independent IP industry is growing at 20 per cent a year and the foundries are getting into it. TSMC is spending $100m a year on IP. “The independent creators of IP are like the rock stars of the music industry. The foundries are recruiting the rock stars to release on their record labels first before they release on someone else’s label,” said Wally Rhines, CEO of Mentor Graphics.
No wonder that, at IEF2007, Rhines asked the CEO of Renesas, Satoru Ito: “Will Renesas, over time, become a system integrator of IP?”
Meanwhile new business models for independent design and verification are emerging. The first of these, LogicFab was recently financed by venture capitalist Rahul Sud.
With all this third party expertise soaking up the industry’s value-add, where is there to go for the IDMs?
Maybe those private equity firms queuing up to buy IDMs in the belief they are buying the future, are actually buying the past.