By PETE SINGER, Editor-in-Chief
Consolidation in the semiconductor industry continues apace, with more than $100 billion in mergers and acquisitions announced in 2015, and more to come in 2016 (versus $62.6 billion of 2010 to 2014 combined).
“With our industry growth rates being so low, it’s a lot cheaper to acquire market share than it is to invest and beat your competitor over the head,” said analyst Bill McClean, speaking at SEMI’s Industry Strategy Symposium (ISS) in January.
One potentially negative impact of consolidation is reduced innovation, said Ivo J. Raaijmakers, Chief Technology Officer and Director of R&D at ASM International, speaking at ISS on consolidation in the equipment supplier market. “The tail has been cut off. A lot of innovation happens in this tail,” he said. “The question we have to ask ourselves is how can we ensure efficient innovation in such a consolidating landscape of equipment suppliers?”
The challenge is compounded by exponentially increasing chip complexity and R&D spending, along with rapid increases in material diversity.
Raaijmakers provided an equation that captures the mathematics of
innovation:
dI/dt α I x η/τ
where I is the number of innovations being worked on: loosely relates to R&D budget
η is the average success rate: what fraction of projects are successful, and τ is the time constant: how long does it take from innovation to production
He noted that Industry consolidation lowers the number of innovation projects, the success rate decreases with complexity, and development time increases with complexity. “We are in deep trouble, unless we manage η and τ,” Raaijmakers said.
There’s not much hope in reducing the time constant. New developments have historically taken 7-10 years on average from conception to high volume production. “Can we decrease this by collaboration along the value chain? I think it will be difficult and if you can do it, it will not be a huge gain,” Raaijmakers said.
On the other hand, there’s much to be gained by increasing the efficiency factor, and collaboration can be effective here. “Collabo- ration along the innovation chain can significantly lower the risk of adoption, increase the success rate, and may increase the speed,” Raaij- makers said. “Are we all working on the right things to push through into manufacturing? How quickly can you narrow down choices?”
Raaijmakers said a company needs to be ambidextrous. “You have to be good at taking things into volume production and supporting it there. And you have to be good in R&D. Maintaining those two traits is not so easy,” he concluded.