Consumerization stressing out semiconductor industry

by Phil LoPiccolo, Editor-in-Chief, Solid State Technology

While the consumerization of the electronics industry is creating huge demand for semiconductor content, it is also causing enormous stress for chipmakers and equipment suppliers alike, according to representatives from each group speaking at a SEMI Executive Panel on Monday (July 16) at SEMICON West.

“The consumer now represents about 53% of the demand for semiconductors,” including those for game consoles, iPods, and the like, as well as for those portions of the PC and cell phone markets that are for personal use, according to George Scalise, president of the Semiconductor Industry Association. One benefit of consumerization is that the market is being driven much further and faster by the consumer than it has traditionally been driven by enterprise IT over the last several years, he said.

“We expect unit volume growth of 10%-15% per year,” Scalise said, but bit growth will likely grow 55%-60% per year. At the same time, a consequence of having consumers account for the majority of semiconductor sales is that product lifecycles are shorter — down to slightly more than one-year cycles, instead of two- to three-year cycles that the industry has been accustomed to. “Consumers are fickle buyers,” he said. “Once they get their fill of a product, they look for the next one.”

How is this shift affecting the industry? “From a design perspective, the effect of consumerization is enormous,” said Aart de Geus, chairman and CEO of Synopsys. “In the last four or five years, we’ve seen the consumer become the driver for design,” a trend that started with proliferation of the cell phone, and is now continuing thanks in part to the emergence of video, he said. With video, he noted, consumers are demanding an ever greater number of pixels, which will spur manufacturers to build increasingly higher-capacity technologies for data capture, transmission, processing, display, and storage, with no end in sight.

In parallel, the degree of globalization of the end markets will be great, de Geus said, explaining that the next 10 years will see a doubling of the number of consumers of electronics. Unfortunately, most of this new wave will not be at the same economic level as the earlier adopters, so there is tremendous pressure to reduce costs, he said. Moreover, the people who buy cell phones in places such as China, India, or (in the not-too-distant future) Africa, fundamentally want the same capabilities while at the same time demanding better quality, as they will be spending a greater portion of their resources on these products, he said. “From the design perspective, this has increased the stress level enormously, and it has increased the stress level on manufacturing because slight variations in yield directly affect the cost equation.”

Consumerization is also creating stress among equipment suppliers. “We’re finding that consumer products are creating a dramatic compression of market cycles versus IT investments, which are longer with larger peaks and valleys,” said Ed Grady, president and CEO of Brooks Automation. There’s also greater seasonality, with Christmas and summer vacation seasons creating higher demand patterns. In addition, because the market is consumer driven, macroeconomics is having an impact — for example, companies need to consider how sales of products might be affected by, say, a drop in disposable income levels due to rising gas prices, he said.

Also, in the fabs, because the chips are becoming more complex (i.e., in the number of different materials and levels on a chip), all of the process steps (e.g., lithography, PVD, and CVD) are becoming more difficult, and require a greater number and diversity of tools, Grady contended. Moreover, the fabs are being forced to change to remain productive and efficient in a high-product-mix, short-product-lifecycle environment, he said, versus 10 or 15 years ago when you could produce an entire generation of product in a DRAM fab, for instance, and run out your capital investment. — P.L.


Easily post a comment below using your Linkedin, Twitter, Google or Facebook account. Comments won't automatically be posted to your social media accounts unless you select to share.