"Semiconductor growth was surprisingly strong until recently, given the very weak economic environment, but this will start to change in the fourth quarter of 2008," said Bryan Lewis, research vice president at Gartner. "Mounting evidence suggests that the semiconductor industry will see negative growth starting in the fourth quarter of 2008, and that this will continue throughout most of 2009."

In a bad economy, semiconductor companies can no longer continue business as ususal. Instead, if they are to ride out—or even prosper—in the economic downturn, they need to adopt "business unusual" practices.

From the fabless semiconductor companies to SoC vendors, chip makers are still largely hardware focused. Yet, an examination of industry constraints indicates that that software is the elephant in the room. Product delays, budget overruns and other problems are more often traced to software glitches, not to hardware.

If semiconductor companies were to reinvent themselves as software-centric companies, they could solve many of their biggest operational problems--even if they can't solve the economic crisis.

Some IC companies are beginning to look at the back-end of the problem and to collaborate within their ecosystems. Traditionally, chip companies wait until SoC silicon and evaluation board availability before developing their ecosystem.

This results in months of delays in software for new devices. However, by leveraging virtual software development, IC companies can collaborate with their RTOS partners and enable simultaneous full-system development of both hardware and software well in advance of silicon availability.

As a result, they're shrinking the time-to-market timeline for the entire ecosystem and generating millions of dollars. For example, Freescale Semiconductor and it's software partners have successfully leveraged virtual platforms to develop software solutions for the new Freescale QorIQ P4080 multicore processor well ahead of silicon availability. For OS, tools and middleware, system simulation provides software developers with key benefits that include scaleable development, faster time-to-market, and higher productivity. Additionally, full system simulation addresses a variety of software development lifecycle issues from design validation to virtualized testing accompanied by significant economies of scale.

Working more closely with software partners is only a first step in making semiconductor companies more software-centric. To reinvent their business operations, IC vendors need to embrace software development from within and reinvent themselves as software companies. Those who do will realize an immense market advantage that could well determine whether they emerge from this recession a winner or a loser.

—Michel Genard is an industry veteran with more than 20 years of experience in the software and hardware embedded market.