With NXP, Freescale, STMicroelectronics and Texas Instruments all giving up on advanced digital CMOS technology, how are they going to differentiate their products from eachother and from the rest of the industry?
Wally Rhines, CEO of Mentor, asked the question at the Globalpress Summit conference in Monterey yesterday and answered it the same way as everyone else: by design.
"But how", asked Rhines, "do you measure design differentiation?" His answer was: "The best method is the profitability it generates."
Rhines has set about trying to measure this profitability which is not easy because companies don't split out the margins on different product lines.
"We looked at 60 companies", he said, "analogue is the most differentiated. The higher the percentage of analogue in a product, the higher the margin, culminating in 70/80 per cent for pure analogue."
One the other hand, there's memory. "The higher the percentage of memory in your business, the lower the gross margins", said Rhines, "the functions in memory are standardized, there are pin-compatible multi-source suppliers. Customers want standard pin-out, functions and performance and that's what they get."
Rhines' study concluded that margins on discretes were 20-40 per cent; on microcomponents, 50 per cent plus and on ASICs and application specific chips, 40 per cent.
Interesting things are done to improve profitability, said Rhines. For instance, when TSMC were getting very low yields from a high volume device, it was decided to connect the test database to the layout database.
That's not usually done", said Rhines, "but they did that, and found there was a very subtle layout problem causing a short, and they very quickly got a major yield improvement."
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