Altera’s vision is to be the leader in the custom logic segment, a segment which includes Asic and PLD.

“At 90nm the cost of Asic development is $30m," says John Daane, Altera’s CEO, “assuming R&D cost at 20 per cent of the revenues generated, and assuming you gain a 10 per cent market share, that means you have to be addressing a market of $1.5bn. Therefore the justification for Asic development requires a $1bn+ opportunity.”

There aren’t, of course, a lot of $1bn+ market opportunities, and the cost of chip development rises with each generation: $55m at 65nm, $60m at 45nm, $80m at 32nm and $110m at 22nm, so companies have to find ways out of this financial dilemma.

One way is to increase your market share and knock others out of the business; another is to add programmability which allows you to address a larger customer base; another is to use older technology; another is to use lower-cost engineers in lower-cost countries.

“But you don’t get production cost decreases or yield improvements on mature processes,” says Daane, “and you get double digit salary increases in Asian but only single digit salary increases in the West while Asian currencies are expected to harden –  the value of the RMB (China’s Yuan basic unit of currency) is expected to double over the next ten years.”

The result is that fewer Asics are being developed for low to medium volume infrastructure markets, and fewer start-ups are getting funded.

Asked about the rash of start-ups in the programmable logic area, Daane replies: “There’s been $1bn of VC (venture capital) money invested in FPGA in the last 15 years and $750m of that has already gone out of business.”

Asked about the sea-of-processors approach to programmable logic pursued by some new companies, Daane responds: “The challenge is how to programme it. It’s the same challenge as Intel has in programming multi-core. The world doesn’t know how to do it. There’s no software that can divide tasks between cores. The multi-processor approach is limited by the software programmers who can’t take advantage of more than one processor core.”

Altera’s approach to the creeping demand by customers for higher degrees of customisation on the chip is to try and promote soft IP. “Every customer wants hard IP”, says Daane, “but cost is exponential with the die size and, unless most of the customers are going to use it, it’s not worth doing.”

“It’s a fine line you tread,” adds Daane, “but more and more we believe in soft IP, Customers can migrate from one family to another, and can move to the new generation with a re-compile. We try and keep everything soft, and we keep all our IP up to date.”

He’s not concerned about the much-touted threat of wafer price rises from Altera’s foundry TSMC. “We have had no issues with TSMC,” says Daane, “TSMC have announced a different pricing model but we typically have had long-term supply agreements. We don’t shop around for the lowest price per wafer.”

Asked how long a long-term supply agreement is, Daane replies: “Six months to two years.”

Asked if he thinks the industry will move to 450mm wafers, Daane says: “I would bet that most of the industry could not afford to go for 450mm. Most customers don’t have the volume to go to 450mm. The equipment industry is looking for a hand-out. I would be surprised if the equipment is developed.”

He does not see private equity worrying the industry for a while. “Private equity can make sense at certain times for certain industries. I think private equity has not much interest in semiconductors. The unfortunate thing is that they can sell your company on by raising debt secured on the company, and make a lot of money for themselves, and sacrifice the long-term future of your company by loading it with the debt.”

Asked if Wall Street’s problems would affect the industry, Daane replies: “It will be harder to get access to capital. If you’re a strong company, and well-capitalised, you’ll be fine.”

Asked if Altera is a strong, well-capitalised company, Daane replies: “Analysts expect us to grow between ten and twelve per cent this year, and we’ve got a billion in the bank.”