Increasing commodity costs and decreasing consumer prices place big pressure on profit margins. How can IC companies and EDA vendors manage the input costs/output prices squeeze?
Recently, the Wall Street Journal (pg 1 June 18, 2010) highlighted the pressure placed by increasing commodity costs and decreasing consumer prices on profit margins. This isn’t anything new to the semiconductor industry.
Commodity costs for critical semiconductor materials, like photomasks or gold, have increased from time to time and yet the industry continues to reduce the cost per transistor by more than 30% per year.
Right now, shortages abound, so it seems premature to worry about costs when customers are demanding far more units than can be manufactured. But the supply/demand imbalance that currently dominates the industry will dissipate. What happens then?
As always, the input costs must continue to contribute their share of the cost reduction for semiconductors or the long term “learning curve” will break down. If gold fails to hold up its part of the cost reduction, other input materials must decrease in cost enough to offset it; or the industry will find ways to use less gold. When a portion of the input costs can’t keep up, the semiconductor industry has cleverly found alternatives that can.
But what about irreplaceable costs, like semiconductor manufacturing equipment or the total cost of design? Can these costs keep up with the aggressive learning curve of the semiconductor industry? Of course they can, as they always have.
Average cost of a 200mm equivalent bulk CMOS wafer from a foundry has decreased 22% in the last decade despite the increasing complexity of manufacturing that smaller design rules cause (Figure 1).
Figure 1. Foundry revenue per wafer (200mm equivalent)
The real measure of a learning curve is cost per transistor. The semiconductor industry has averaged more than 30% per year cost reduction over the last 50 years. As seen in Figure 2, that reduction in cost per transistor continues as we grow the volume of transistors shipped every year. Input costs, semiconductor manufacturing costs, materials, labor, design, etc., contribute a share to make this happen.
Figure 2. 1985-2007 IC learning curve that has enabled the semiconductor industry to deliver an average of more than 30% per year reduction in costs
What about the cost of design? Dire predictions of rapidly increasing design costs have been published in the International Technology Roadmap for Semiconductors for years. VLSI Research has calculated the number of transistors shipped per year (historically, the SIA has also calculated these numbers) and the Electronic Design Automation Consortium (EDAC) tallies the total sales of EDA design software including support. By dividing the EDA license and support TAM (total available market) by the number of transistors shipped, we can plot the EDA software cost per transistor.
SURPRISE: EDA cost per transistor is coming down the same learning curve as all the other input costs like materials, chemicals, labor, etc. (Figure 3) and it has been doing so throughout semiconductor history.
Figure 3. EDA costs per transistor (in blue) are dropping at the same rate as total IC revenue per transistor
As a result, the EDA TAM has remained a nearly constant percentage of the semiconductor TAM (Figure 4) in recent history at 2%.
Figure 4. EDA
revenue has averaged 2% of IC revenue the past 15 years.
A 5G interoperability test system developed by Qualcomm, ZTE and China Mobile, combined with the pending development of the first 3GPP 5G-NR standard, are good indicators of the pending frenzy over 5G; it’s a good time to take a Boot Camp course on 5G.
Not everyone believes that a robo-shuttle/truck crash in Las Vegas was just a minor glitch. Did those involved in the operation and design of the AV shuttle carry out enough of an in-depth risk assessment of the area?