The Prominent Structural Changes in the Semiconductor Sector

By Embedded Advisor | Thursday, June 11, 2020

Structural changes may lead to long-standing trends in the technological industry. The semiconductor industry is witnessing a surge in such transformational trends.

FREMONT, CA: The semiconductor industry has turned inevitable for the world as they are the base for modern-day technologies that enhance the lives of customers and make business ventures more efficient, agile, and smarter. The industry is also reacting and adapting to the latest technological evolution and the altered ways of meeting the requirements of tech-savvy consumers.

Affinity towards Consolidation

Among the most prominent trends in the semiconductor industry, is the ongoing preference for outsourcing specialized functions. Technological development in the chip design, test, and intellectual property are examples of specialized services being outsourced.

For instance, let’s consider the fabrication process. Many semiconductor enterprises prefer to share capital costs involved in fabrication and also innovative process development through outsourcing.

Semiconductor designing is another aspect that is being outsourced. Several specialty design houses have commenced licensing IP from other firms. This way, expert services belonging to different aspects of semiconductor design can be availed. There is a massive growth in IP licensing as well.

Consolidation among Technologies and Enterprises

Consolidation across the semiconductor industry can be categorized as yet another structural change, especially over the last few years. The efforts began with the increasing urgency for acquiring more solutions and technology concerning advanced SoCs for the IoT. The interest levels continue to be centered on the excitement around AI and autonomous vehicles.

What is considered as one of the initial breakthroughs in semiconductor consolidation was the profound interest in IoT during the early 2010s.

The other breakthrough was the growing interest in autonomous vehicles (AV). Key players such as Samsung have automotive groups, which were attentive towards autonomous driving. The final revolutionary factor was the emergence of technologies such as AI and 5G. More instances of consolidation are expected by industry observers fuelled by the emergence of technologies such as the 5G or wireless interconnects.

Investments were taking place significantly in AI, and currently, hundreds of entities continue to develop innovative AI chips and cores. What has been an immediate result of the structural change is the alterations in the conventional business models employed by strategies. Unlike what has been a prevalent trend many years ago, most semiconductor enterprises of today prefer to advance to sell the technology, enterprises, or even both.

The future-oriented business plans of many of the semiconductor enterprises revolve around manufacturing technology or chip and then selling either the firm or its intellectual properties to established IPs, OEMs, and semiconductor enterprises. However, many industry observers are not supportive of this trend. According to them, semiconductor enterprises are surrounded by an abundance of opportunities, and those should be leveraged for more expansion instead of resorting to a sale. Experts also believe that the time is ideal for experimenting with new technologies instead of sticking to short-term business plans.

Custom Manufacturing of Chips

During the initial days of the electronics sector, it was common for enterprises to develop their own chips as they were vertically integrated. The passing years have had a profound impact on the industry, and custom chips are the favorite of the industry. The role that can be played by custom chips to differentiate and optimize seems to impact the semiconductor sector.

Chip designing and production has changed considerably, and the process continues to be disrupted by an innovative set of technological and economic features.

The requirement for specialized chips having enhanced efficiency and higher performance has been forcing enterprises to manufacture their own custom chips. What the industry aims to achieve is chip designing, keeping in mind specific tasks such as AI, data mining, and web services. It is a possibility for enterprises to bring down their operational expenses while enhancing efficiency through lower power consumption, denser system, increased data throughput, and so on.

Custom designed chips have been able to bring in enhancement on ROI for several semiconductor enterprises.

The circumstances are really encouraging for semiconductor firms to evolve and try to lead the next-gen of industry players.