Heading into the new year, it’s traditional to review the passing year and look for upcoming trends. One piece of good news: The semiconductor industry will probably break $300B this year. The bad news: It took 10 years to get back to this level, and some major players continue to take a margin beating.
Trends suggest the industry will grow 3-6% for the next 3-5 years, which is a good sign. Bucking the previous roller coaster ride of ups and downs every couple of years would stabilize the industry and perhaps get funding and startups going again. Semiconductor startup funding has been trending down, while mergers and acquisitions have been trending up.
Trends toward mobile and wearable electronics are driving volumes, but these markets tend to have lower profit margins than the larger networking and infrastructure devices. Geometry shrinkage continues, allowing established players to improve performance without reducing costs. Unfortunately, masked set costs are going up to the point where new players aren’t entering the industry at the new nodes. The cost of entry for startups in the 22-28 nm nodes is just too high, as they may only get one chance before their funding is consumed.
More creative startup or funding models may be needed to generate and feed new ideas. We do see some of this in Kickstarter and other web funding concepts. I have funded several of these projects, and though they haven’t all shown they will have long-term success or be practical, they keep the ideas flowing, help even the playing field, and reward creativity and risk. My wife may complain about the 3D printer only used several times or the time I spend on my toys, but at times I have to remind her that this is what the industry and my job are all about. Unfortunately, most of these projects are not really semiconductor based. Rather, they involve systems and integration into devices. Regardless, if they can excite or interest young engineers to get into this field and even help shake the cobwebs out of those of us a bit more seasoned, it is a positive trend.
A number of my old colleagues have left the semiconductor field and entered less cost-prohibitive fields. They still are driving and funding creative ideas. The semiconductor industry hasn’t always been the direct recipient or beneficiary of these new trends and developments, but when you look under the hood, they are often the drivers.
I see some good trends for the major players in the coming year as the global economy continues its slow recovery. The newcomers will continue to struggle with the price of entry. We can expect more M&A activity, and let’s hope it doesn’t take 10 more years for the semiconductor industry to hit the $400B mark. Let me know what your thoughts are and where you think we are headed.
— Lance Jones is a blogger on Test & Measurement Designline and vice president of technology at Evans Analytical Group