The semiconductor industry is a ‘challenged industry’ according to the chairman of the Global Semiconductor Alliance Dr Dwight Decker, who is also chairman of Conexant.

“GSA is an industry support organisation aimed at accelerating industry growth and increasing its return on invested capital”, Decker told EW.

However he pointed to a number of factors which were making those objectives difficult to achieve.

The slowing growth rate of the industry to single digit annual growth; escalating design and product costs; a technology treadmill which doesn’t turn any slower; a decline in VC funding; increased stringency in operational excellence requirements; critical importance in hitting market windows; chips so complex that IP has to be bought in accounting for 20 to 30 per cent of the cost of a chip; R&D costs as a percentage of sales going up; and foundries, back-end assembly houses, and test companies reducing capex to increase their profitability.

The financial community is also having a negative effect on the semiconductor industry. “Large companies tend to under-innovate”, said Decker, “the financial markets don’t let them do it.” So are the Wall Street analysts stopping semiconductor CEOs investing in R&D? “There’s no doubt about it”, replied Decker.

The current technology is running out of road. “The industry needs a new transistor, a new device”, added Decker, “we’ve been lucky to put it off for 20 years. We need to reduce the cost of manufacturing dramatically.”

The net result of all these challenges is that the rate of new start-up companies is reducing. “There’s a slowdown in the rate of start-ups because of a slow down in VC investments”, said Decker.

GSA grew out of the Fabless Semiconductor Association (FSA) but now has most of the big IDMs on board as members. “Intel, Samsung, NXP, Infineon are members and STMicroelectronics will become a member shortly”, said Decker.