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On possible Samsung-SanDisk deal; AMD’s fab-lite path

September 6, 2008 Comments off

Last week, the global semiconductor industry has been hearing and reading about two big speculative stories:

a) A possible acquisition of SanDisk by Samsung, and
b) A possible chance of AMD taking the fab-lite route.

First on Samsung’s buyout (possible) of SanDisk! There have been rumors of a possibility of Samsung acquiring SanDisk. While it is still a possibility, it also leads to several interesting questions!

Should this deal happen, what will be the possible implications for the memory market? Will this also lead to a possible easing off on the pricing pressures on the memory supply chain? And well, what happens to the Toshiba-SanDisk alliance?

A couple of weeks back, iSuppli, had highlighted how Micron had managed to buck the weak NAND market conditions, and was closing the gap with Hynix in Q2, and that NAND recovery was likely only by H2-2009.

I managed to catch up again Nam Hyung Kim, Director & Chief Analyst, iSuppli Corp., and quizzed him on the possible acquisition of SanDisk by Samsung.

A caution: Remember, all of this is merely based on speculation!

On the possibility of Samsung’s takeover of SanDisk, he says: “Samsung at least said that they consider it. Thus, it is a possible deal. But who knows!”

Kim is more forthright on the implications for the memory market, should this deal happen, and I tend to agree with him.

Consolidation inevitable; no impact on prices
The chief analyst quips: “The NAND flash market is still premature and there are too many players in flash cards, USB Flash drives, SSD, etc. The industry consolidation should be inevitable in future.”

So, will this possible buyout at least ease some pricing pressures on memory supply chain? “I don’t expect this deal to impact the prices. Prices will depend on suppliers’ capacity plans. In the memory industry, the consolidation has never impacted the prices in a long run. (maybe, just a short-term impact). As you know, Micron acquired Lexar a few years ago, but no impact,” he adds.

Is there any possibility of SanDisk delaying its production ramps and investments at two of its fabs? And, what will happen should it do so?

Nam says: “SanDisk has already said that they would delay its investment and capacity plan given difficult market condition. This is a positive sign to the market as we expect slower supply growth than expected in future. However, in a long run, consolidation won’t impact the market up and down.”

Negative impact likely for Toshiba?
Lastly, what happens to the SanDisk-Toshiba alliance, should the Samsung buyout of SanDisk does happen?

Nam adds: “It is negative to Toshiba. The company [Toshiba] not only loses its technology partner, but also loses its investment partner. It should be burden for Toshiba to keep investing themselves to grow its business.”

Well, in SEMI’s Fab Forecast Report, there is mention of how Toshiba and SanDisk are among the big spenders in fabs, in Japan. Considering that Japanese semiconductor manufacturers are more cautious, it would be interesting to see how this deal, should it happen, affects the Toshiba-SanDisk alliance.

Now, AMD goes fab-lite?
While on fabs, this brings me to the other big story of last week — of AMD going the fab-lite route, possibly!

Magma’s Rajeev Madhavan had commented some time back that fab-lite is actually good for EDA. It means more design productivity. Leading firms such as TI, NVIDIA, Broadcom, etc., are Magma’s customers.

Late last year, Anil Gupta, MD, India Operations, ARM, had also commented on some other firms going fab-lite! Gupta pointed out Infineon, NXP, etc., had announced Fab-Lite strategies. Even Texas Instruments was moving to a Fab-Lite strategy. “IDMs are going to be the fabless units of today and tomorrow,” he added.

So much for those who’ve taken the fab-lite route, and industry endorsements.

On the fab-lite subject, iSuppli’s Kim will not speculate whether AMD would actually break up into into two entities: design and manufacturing, and also prefers to wait and watch.

How does fab-lite actually benefit? He comments: “Fab-lite has not been working well in the memory industry, which requires very tight control. It works, IF two companies (an IDM and a foundry) work very closely. For example, the industry leader, Samsung, produces all of the memory alone without any foundry relationship.”

Watch this space, folks!

Semicon to grow 4-8pc in 2008; ASPs trending up

September 2, 2008 Comments off

It has really been a tumultuous year for semiconductors, which has held up very well, despite the memory market turmoils, so far.

Just a day ago, Future Horizons reported on the June sales for semiconductors. According to Malcolm Penn, chairman and CEO, June’s WSTS results brought both good and bad news! The good news being that the recovery momentum strengthened, with Q2 sales up 3 percent on Q1.

He says, “This was significantly better than even we dared to predict in last month’s Report, despite the fact we raised eyebrows and disbelief by suggesting a 2.3 percent quarter on quarter growth.”

The bad news was the Jan-May YTD WSTS numbers for standard logic (and thus, the total ICs and total SC) were revised downwards by a sizeable US$1.4 billion, a restatement that will knock 2 percentage points off the 2008 year on year growth number!

What were the reasons for the recovery momentum to have strengthened, with Q2 sales up 3 percent on Q1? Penn adds: “The first half year sales were much stronger than everyone (except us) believed. It has depresses, only by memories.”

Also, the Jan-May YTD WSTS numbers for standard logic (and total ICs and total SC) were revised downward by a sizeable US$1.4 billion. Why did this happen? It is interesting to note that one company mis-reported its sales for Jan-May and corrected this reporting error in June.

Penn adds: “This often happens, but not before at this magnitude. Individual company details are secret, so we do not know who the culprit was or how the ‘error’ happened.”

Forecast revised to 4-8 percent
Future Horizons further says in its report that the downward revision in standard logic numbers would knock 2 percentage points off the 2008 year on year growth number. On quizzing, Penn agrees: “Yes, our ‘revised’ forecast range is 4-8 percent. We are currently still erring on the high side of this range. More important though is the market momentum.”

Memory has been a constant problem this year. iSuppli has mentioned in an earlier report that NAND recovery will be likely in H2-2009.

DRAMeXchange, in another report today, indicates a new record low for DDR 1Gb. Even Penn agrees that recovery is definitely not in sight. When do we actually get to see some recovery? He adds: “There is still over capacity, however, Q3 is typically the strongest demand quarter.”

Still on memory, does Future Horizons forsee Hynix bouncing back? Penn says: “They did; in 2000-02, they were on the verge of bankruptcy. Now, they are fitter and financially strong.”

ASPs were trending up earlier, and the status quo is maintained. “ASPs are still trending up, slowly, but surely. We will be commenting more on this in September’s report,” he adds.

Fab spends trending down
Just a few days ago, a SEMI analyst highlighted the chief reasons for decline in fab spends. Christian Gregor Dieseldorff, Senior Manager of Fab Information and Analysis at SEMI, said: “Given the weaker economic conditions globally, coupled with higher energy and commodity prices and the financial crisis, the overall outlook for semiconductor growth in 2008 is for low-single digit growth in both revenues and units. As such, device makers have responded by cutting back their capital spending and pushing out fab projects or putting them on hold.”

On the status with fab spends, Penn agrees, “Those are still trending down, and will continue to do so for at least the next three quarters.”

Solar not much help
There have been lot of investments happening in solar/PV. One may imagine that all of this would be helping the global semiconductor industry. So, is the spend in solar/PV really helping the industry? Penn disagrees, saying this only helps the equipment guys.

One last query, and this is regarding the smaller IDMs, ‘fab-lite’ IDMs, and fabless semiconductor companies. Are they growing at below average? Penn concludes: “They are mostly not. The fabless firms outgrew the market 2x in the first half of 2008.”

Perhaps, here also lies a message for India!! One hopes that India does not get too carried away by all those investments in solar/PV, and focuses more on the semicon side. Semicon in India, does need concrete planning, after all!

Semicon to grow 12pc in 2008: Future Horizons

May 14, 2008 Comments off

If there is going to be a global economic recession, the chip industry (but not all companies) is in the best shape possible to weather the ensuing storm!

According to Malcom Penn, CEO, Future Horizons, we are dealing with a semiconductor industry in ‘deep trauma.’ He was delivering the company’s forecast at the recently held International Electronics Forum (IEF) 2008 in Dubai, predicting a 12 percent growth this year despite signs of a wobbling US economy.

Is there a need to get back to the industry basics? “Semiconductors are a peculiar business; the only sane strategy is to bet the company regularly,” once remarked Dr Gordon Moore.

Penn noted that the current industry status is somewhat confused and uncertain. Short-term issues are dominating the agenda.

Longer-term structural trends are unclear. The traditional IDMs are currently going through a mid-life ‘new business model’ identity crisis, and the start-ups are struggling to even reach critical mass! And all of this has been happening amidst intense economic uncertainty

“Now is the time for strong nerves and determination,” Penn said. According to him, the underlying industry fundamentals are sound and there is no end in sight to the ‘make-lunch-or-be-lunch’ ethos.

The emerging economies like India and China have so far been less affected by the financial market’s turbulence. In fact, the emerging and developing economies were shifting the global growth dynamics.

Chip industry in best possible shape
A forecast health warning is: IF the global economy collapses, it will take the chip market with it. However, Future Horizons feels that if there is going to be a global economic recession, the chip industry (but not all companies) is in the best shape possible to weather the ensuing storm.

The ASPs are an enigma wrapped up in riddle. The course of ASPs (like love) never runs smooth. Wobbles happen! ASPs are also the perennial (and least understood) industry wild card. ASPs are generally driven by new IC designs, and that takes time (sometimes three to four years). Post-2001, value recovery lost one generation (130nm impact). The ASP recovery ‘wobbled’ in 2007 (memory and MPU price wars). Barring a recession, Future Horizons forecasts that ASPs will recover in 2008 (it has already started).

12 percent growth likely
Future Horizons’ 2008 forecast summary and assumptions (as of May 2008) are — ‘12 percent’ growth — ’10 percent’ units / ‘2 percent’ ASP. There may be no global economic recession, although US/UK/Eurozone might wobble — which they are! No significant inventory correction will probably take place, but there are always Q4>Q1 adjustments, and there’s nothing special about that either.

There could be lower fab capacity expansion due to 2007/2008 capex slowdown, which is inevitable and irreversible. There is also a possibility of a more stable memory price erosion — which means, back to the learning vs. bleeding curve, and prices have since hardened. If the global economy holds, the 2H-08 growth will likely be strong. This, if the capacity, ASP and units are all pulling together, which is said to be happening.

Therefore, Penn feels it is too early to call for a (major) downward revision. Q1 08 was a lot stronger than conventional wisdom feared.

“That’s the rational analysis, but semiconductors aren’t rational. It could just as easily be another single digit growth year,” Penn added.

Danger signs to watch out for
So, what are the danger signs one should watch out for? These would be capacity — it is hard to see how this can spoil 2008, provided unit growth holds up, but there is a need to watch capex. Another factor is demand — the current IC unit demand is sustainable provided the economy holds up, so there is a need to watch the inventory.

Next comes the economy! The current outlook continues to be uncertain with risks all on the downside. ASPs are the key to recovery, but always the first line of defence. ASPs could still derail 2008, but the trends are encouraging.

What’s driving the market?
In semiconductor 7.0 — or the 7th decade of the transistor revolution, the same things, as always, are driving the market. These are: technology, legislation — energy saving/conservation and structural — the relentless analog to digital conversion. All of these are combining to do what the chip industry does best — enabling something that was previously impossible. Penn contends, “This industry has nowhere near run out of steam!”

New applications continue to drive the market, with automotive, industrial and medical, mobile phones, and PCs and servers, dominating. The PC market is dominating, but going nowhere fast. Mobile phones have become more interesting, but have conflicting priorities. The challenges are: how to protect the existing cost structure and subscriber base and how to add useful and affordable value-add services! Evidently, “chipset suppliers love the high end, market loves the low end.”

There is definitely an increasing automotive semiconductor content. A solid annual growth has been prediced (CAGR 2006-11) for vehicles — 5.5 percent, systems — 11.5 percent, and semiconductors — 13.3 percent. Some other new areas are motor control and energy, as well as lighting and photovoltaic, besides medical electronics. Robotics is yet another interesting area.

Key industry issues
It is clear that more chips per wafer equals less cost per chip and more transistors per die equals more functionality. Several billion transistors gives phenomenal design flexibility as well. Considering total ICs and MOS ICs, in the MOS capacity build out by technology node, there has been no change in volume ramp profile despite the hype.

As for the evolution of the technology node, definitely, 45nm is a revolutionary step from 65nm. In all likelihood, 32nm will be a natural evolutionary. However, Penn cautioned that 22nm would be another ‘difficult’ transition!

There is no doubt that 65nm will be tomorrow’s leading-edge workhorse, having the same basic Si gate/SiO2/MOSFET structure. Nevertheless, 45nm will herald a totally different structure — metal gate/high-k/thin FET/deep trench design, etc. Also, 45nm will herald a new way of system design.

Is fabless right?
Is Fablite a valid option? While there is nothing wrong with being fabless, people are just not sure whether the best starting point is being an IDM. Teamwork has to be perfectly orchestrated as competition is tough.

As for the market share dynamics, the top 10 companies (IDMs) have been losing share. Fabless share has been growing, but it is still relatively small.

Coming to the realities of the foundry market, TSMC’s lead is now unassailable. Were it an IDM, it would be No. 2, challenging Intel and passing Samsung. Moving more into design looks inevitable.

Finally, execution, and not technology, is everything! Execution has and will continue to make the difference. Applications (software) will play the role of the key differentiator as well, and it has value. Design is the means to an end, and not the end.

From the chip industry’s perspective, the electronics market was traditionally Japan, North America and Western Europe. It now encompasses the entire Asian rim, China, Eastern Europe and India. Far from maturing, the chip industry itself is still in its volatile, high-growth phase, with at least a further 20 years of strong growth in prospect. Penn said, “The underlying growth drivers for chips has never been better.”

Back to basics
We started with the need to get back to industry basics. We end in the same way! Stick to basics like:

* Don’t invest in low cost areas just because they are cheap — they have a habit of becoming high cost tomorrow, plus the hidden extras.
* Don’t make outsourcing decisions just because they are easy — especially if there’s no way back.
* Don’t make strategic cut-backs just to trim the bottom line — some decisions, e.g., R&D, take a long time to impact, then it’s too late.
* Stop looking for high volume/high value market niches — they don’t exist, need to learn how to compete
* Do show strong leadership
* Do have a long-term plan and stick with it — even if it negatively impacts ‘the next quarter’ balance sheet
* Do show a commitment and determination to succeed
* Do stay focused and resistant to external meddling
* Do execute ruthlessly — this is the key competitive differentiator)
* Do … just do it with passion — it’s the passion that makes the difference

Growth drivers for semiconductor industry

October 19, 2007 Comments off

Michael J. Fister, president and CEO, Cadence Design Systems Inc., who was in India for the CDNLive event, delivered a wonderful keynote at the recently held CDNLive. Here’s what he had to say!

The semiconductor industry is maturing. Since 2000, the industry’s annual growth rate has experienced extreme highs and lows.

Though the semiconductor industry’s revenue growth will be low in 2007, the good news is that growth rates are smoothing out as costly fabs demand consistent production. Wireless communications, computers, and consumer products continue to be the growth drivers for semiconductors. A couple of the semiconductor technology trends driving electronic design and product development are:

* More designs at advanced nodes — Beginning this year, 90nm designs will outnumber those at 130nm. Meanwhile, 65nm is design activity is ramping up and advanced designs are targeting 45nm.

* Growth in transistor count and logic — Not only are transistor counts increasing according to Moore’s Law, those transistors are being used to create more functions -– and therefore more complexity -– on a single chip, not just adding memory to the existing designs.

A related trend is that the amount of chip production outsourced to foundries continues to grow, with many Integrated Device Manufacturers (IDMs) moving to a ‘Fab-lite’ strategy for advanced nodes. This is happening as design is becoming a greater product differentiation than production.

Note that Fister’s reference to Fab-lite is interesting, even though lot of new investments are said to be getting into, and he himself says, “costly fabs demand consistent production.” There is another point that should not be overlooked — the one concerning Qualcomm, a fabless company, making it to the Top 10 semicon companies, for the first time.

Coming back the Cadence CEO, all of these trends create two kinds of challenges for chip design. These are: 1) manufacturability at advanced process nodes like 90nm and below, and 2) increased complexity and scale of chip design of system-on-chip (SoC).

Design solutions today must address these challenges, and increase team productivity and schedule predictability. To accomplish this, Cadence is focused on a holistic approach to the design flow. The Cadence Low-Power Solution and the Encounter Timing System are good examples of this holistic approach addressing the challenges of escalating scale and complexity.

The same holistic approach is shown in Cadence’s approach to manufacturability, which is to integrate design for manufacturability (DFM) into all aspects of the design flow, rather than just apply DFM techniques as a post-design step.

Categories: 45nm, 65nm, 90nm, Cadence, CDNLive, DFM, EDA, IDM, Michael J. Fister, SoC Tags: , ,
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