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.
MEMs integration into CMOS will be the next big opportunity. Stand-alone MEMS in MCM or other exotic packaging may be cost prohibitive unless there are no options for such integration for performance or complexity reasons. MEMs oscillators especially could be a dying business since CMOS based XTAL osc replacement is possible (e.g. IDT or Silicon Labs). The performance gap has narrowed significantly for such oscillators compared to XTAL.
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