Some people are seeing low valuations for the acquisitions of startup companies and asking if it means doom and gloom. Peter Clarke sees it as part of an industry adapting to new economics.
People ask me is there something wrong with the semiconductor industry if apparently good companies with good technologies such as SiliconBlue Technologies Inc. and PicoChip Ltd. are being sold for less than the venture capital invested in them over several years.
I don't think there is anything fundamentally wrong with the semiconductor industry – but it is in a process of resetting approaches to the market and technology, expectations of investors and transforming itself from something that was just hitching a ride down the escalator of Moore's Law in a race towards the bottom.
What had happened is that many protagonists had got hooked on Moore's Law as a way to get superior performance and reduced unit cost and therefore as a way of making sales by displacing their rivals. This made sense in the past and started in a time when chip companies all made similar building-block components. So, for those chip companies back in the day, the added value was not in the design but in the manufacturing expertise.
And indeed years ago the miniaturization that resulted from Moore's Law always seemed to bring economic success. The faster an integrated device manufacturer could get to the next manufacturing process node the more quickly a component could be designed-in through lower pricing and the faster a rival's component could be designed out. And it was also accompanied by exponential increases in the global electronics and semiconductor markets.
But now we are getting very close the atomic bottom of that escalator and the non-recurring engineering (NRE) costs of research and production are going up far more than can be routinely justified by the economic benefit of working at those leading-edge geometries. The few exceptions are the very high volume mass-produced devices such as memories, processors, FPGAs and some high volume system-chips.
And another flip around is that for IDMs and the fabless the added value is now more in the design than the manufacturing. Most companies are more or less able to get to the same CMOS process node and what makes a difference in sales is likely to be a superior design, or at least a design-win with a big system partner which guarantees the initial volume of chips.
The industry and the systems our ICs go in need both -- the advanced process geometries for the Big D-Little A SoCs, and the larger geometry boutique processes for the Big A-Little D analog, power and MEMS functions.
Miniaturization is still critically important, but there are other ways to achieve it besides making one big die in the latest process -- SIP and TSV for example.
There are still plenty of opportunities for fabless startups, but the name of the game is IP, whether digital, analog or electro-mechanical. This has been true for a very long time, ever since the rise of the fabless business model.
Startups are by definition fabless and also don't have deep pockets. Show me a startup with valuable new IP and patents to protect it, and I'll show you a potential ROI. But show me a startup whose business plan is based on taping out the next great 28 nm SoC and I'll show you a bunch of dreamers who will never get funding.
Peter--what you are saying is that success comes from going with analog and MEMS--"we" analog folks knew this all along! Many analog companies have done very well by NOT looking to the next process node for success, but by using older processes to the max--fab is easier to get, less expensive, and plenty of good, used equipment for fab and test is available cheap!