By Ed Sperling
Semiconductor Manufacturing & Design sat down to discuss the transition to IP subsystems with Kevin Meyer, vice president of design enablement strategy and alliances at GlobalFoundries; Steve Roddy, vice president of marketing at Tensilica; Mike Gianfagna, vice president of marketing at Atrenta; and Adam Kablanian, CEO of Memoir Systems. What follows are excerpts of that conversation, which took place before a live audience at the Semico Impact Conference.

SMD: Do subsystems limit the number of players that can compete in the market by raising the cost of entry?
Kablanian: Absolutely. The integrated device manufacturers and large chipmakers have been able to do this integration for years. It includes everyone from software to architect to RTL designer, physical library providers to the fab. They have the whole vertical know-how. For a small company to do this is almost impossible. Naturally it will limit the number of companies doing this, and it will force consolidation among a few players.
Gianfagna: You’ll have to have more investment and more vertical knowledge, and that in general will result in a better deliverable. I don’t think it will limit innovation, though. The market resists being homogenized. Differentiation will continue at a higher level of abstraction.

SMD: Software is a subsystem, right?
Gianfagna: It is.
Roddy: There was a time when you could count 500-plus IP providers. But if there are 3,000 to 5,000 design starts, you can’t have 500 IP providers. They’re all going to wind up with five customers. That doesn’t work. But there can be 30 to 50 IP providers.

SMD: Both of the big foundries have done testing of IP. Will that continue with subsystems?
Meyer: You have to look at that by technology node. The closer you are to the bleeding edge of technology the more expensive that investment is. There you’re going to limit the number of partners. You have to do that because you need solutions as early as possible for existence proof of that technology node. We work very hard on that, and we do that with guys who know what they’re doing and who are capable of providing a level of support at that design level. It’s not just throwing it over the wall and getting IP. The IC integrator has to be involved to do that successfully. But as we start moving away from the bleeding edge, we want to work with innovative companies doing things like power management at 1.3 micron or even 65nm. With embedded and non-volatile we look to work with those companies.
Kablanian: There is room for the foundries to adopt new IP and take some risks. That has not been done.
Meyer: A lot of what we’re doing is anticipating yields. A lot of our focus is on working with companies like Cadence and Synopsys and Mentor on yield enhancement, and we’re working with system providers to understand how that IP will work in silicon. We think our customers get a lot more of an advantage working in those areas, like DFM, as opposed to the system-level aspect. That’s why you can come in with a customer who really understands the value of what you’re doing.

SMD: One of the great advantages of stacking die is that you don’t necessarily need to worry about developing IP at the latest process node. What does that mean for subsystems?
Roddy: If it becomes widespread then the economics of the value chain will change. That’s a dramatically different business model because the IP provider essentially is a contractual silicon provider. They might sell you a 50-cent sliver of silicon that you’re integrating, which is dramatically different business structure. The analog IP provider works to validate with the global partner. You could be sitting back at quarter micron for your analog and your memory might be at 14nm.
Gianfagna: There is certainly more predictability.
Roddy: It adds much more opportunity for the analog part, which has less flexibility because they have so many process-specific attributes. If you get it right, then there will be an emphasis on keeping it in that process.
Gianfagna: If you get it right for subsystems, you can make the same argument.
Roddy: You can still validate a piece of silicon with the proper interface. That may be the next evolution.

SMD: Subsystems aren’t a new concept. It’s been done at the board level for decades. But have we gotten to the point where designers are willing to let others create and verify these subsystems?
Gianfagna: It’s no longer a question of who designs the best circuit. It’s who integrates it the best.
Roddy: There are a handful of companies that still do their own libraries, but the vast majority do not. The vast majority doing SoC design are no longer providing all of the pieces, but they are working with vendors to optimize blocks wherever they can.

By Mark LaPedus

The IC business climate continues to improve in 2012, prompting various firms to raise their respective capital spending forecasts.

Total semiconductor capital spending is now projected to hit $56.5 billion in 2012, nearly flat from the previous year and almost $6 billion higher than the January outlook, according to a new forecast from VLSI Research Inc.

Industry trade group SEMI will likely boost its capital spending forecast. “The World Fab Forecast report will be published end of this month, but we expect equipment spending to be above the flat-line,” said Christian Gregor Dieseldorff, senior analyst of fab information in the SEMI Industry Research and Statistics group. “We expect the second half of this year to be better and we expect 2013 to be record year for equipment spending.”

In its previous forecast, semiconductor fab equipment spending was expected to remain flat, according to SEMI. Fab equipment spending was estimated at $38.85 billion for 2012 and $45.50 billion for 2013, according to the previous forecast, which was issued in March.

Joanne Itow, an analyst with Semico Research Corp., has been more optimistic than others about capital spending for 2012. “Since the beginning of this year, we’ve been flat to up 4 percent,” Itow said.

G. Dan Hutcheson, CEO of VLSI Research, sees a mixed picture despite the upgrade in capital spending. “Within the equipment market, the back-end is seeing a stronger momentum than the front-end after trailing it for much of 2011. Utilization rates at the subcons are rising fast, driven primarily by strong demand in the mobile space amid new product introductions,” he said.

“Even though VLSI’s forecast for IC sales has been unchanged at +4 percent since the beginning of the year, the equipment forecast was upgraded two months ago to -7 percent from -9 percent and will receive another boost in the next update due to several significant increases in capital spending,” he said.

“Most of the hikes took place in the foundry market with TSMC increasing their capex by $2.3 to a whopping $8.3 billion and UMC raising it (to) $2.0 billion for the year. The memory market has also seen some upgrades; Toshiba is planning to spend $1.8 billion in 2012, up 10 percent from the previous year,” he said. “However, most of the spending in the memory market will go to capacity upgrades, not expansions. Clearly, the outlook for the equipment industry has improved considerably this year; however, the momentum can only be sustained if the IC market continues to improve across the board in the second half of the year.”

By Mark LaPedus, SemiMD senior editor

Bucking the trend in the market, Semico Research Corp. is raising its chip forecast in 2012.

Jim Feldhan, president of Semico, predicts the IC market will grow by 8 percent in 2012, up from about 6 percent in his previous forecast. In 2011, the IC market is expected to grow by 5 percent, he said.

Many of the other research houses have recently cut their respective IC forecasts amid lackluster demand and inventory issues in the market. “We are bucking the trend,” he said.

Looking into his crystal ball, Feldhan sees strong growth in the mobile space in 2012. “We’ve seen a strong rollout of LTE,” he said. “Tablets and smartphones are booming.”

Inventories are expected to be lower than normal in the near term. As a result, the industry will “need to replenish its inventories,” he said.

Others have a different viewpoint. Despite the continuing global macroeconomic problems, semiconductor inventory overbuild early this year, and current DRAM oversupply, semiconductor revenues will register positive year-over-year growth of 3.4 percent and 3.1 percent with $296 billion and $305 billion for 2011 and 2012, respectively, according to IDC.

“We expect the semiconductor market to bottom by the second quarter of next year and growth to resume for the market and accelerate in the second half of 2012,” said Mali Venkatesan, research manager at IDC.
“The enterprise spending cycle should continue in 2012, and the launch of Windows 8 for tablets and ultrabooks will drive demand for computing platforms. Smartphone penetration will accelerate with the growth of lower-cost devices in emerging markets,” Venkatesan said.

“Datacenter and storage will also continue to grow in order to support cloud-based applications and data traffic will drive more investments in networking and computing infrastructure. Double-digit growth is also expected for consumer devices such as media tablets and eReaders,” Venkatesan said. “Finally, the automotive area will bottom sooner than most markets and have a healthy cycle of growth for semiconductor suppliers. Recovery will continue into 2013 and beyond, leading to a compound annual growth rate (CAGR) of 4.8 percent over the 2011-2016 forecast period for semiconductor revenues.”

But heading into 2012, the news has been gloomy. In recent times, Altera, Intel, TI, Xilinx and others have separately cut their forecasts for the fourth quarter in 2011.

In a research note, VLSI Research said: “The shortfall of nearly 60M HDD units in Q4 was simply too much for the industry to overcome. So it was only a matter of time before chip companies would dial their expectations lower. The HDD shortage has prompted PC OEMs to trim inventories for other components, like DRAM and MPUs.”

C.J. Muse, an analyst with Barclays Capital, said: “Intel lowered its 4Q sales outlook due to HDD shortages and suggested that the overhang would last through 1Q into 2Q followed by a rebuilding of CPU inventories as HDD production normalizes in 1H12.”

Commenting on Intel’s lowered guidance, Canaccord Genuity analyst Bobby Burleson said: “While we acknowledge supply disruption to be severe and likely to worsen in Q1, we see additional negative issues with demand softening for motherboard makers and ODMs (original design manufacturers) while component inventories build downstream.”

Vijay Rakesh, an analyst with Sterne Agee, added: “We believe PC supply chain inventories are at very low levels and should position for strong C2Q12 rebound. HDD shortages as a result of the Thai floods have caused OEMs to align chip orders with component shipments in the near term. HDD shortages are expected to be peak in January, with supply chain recovering into March.”

Craig Berger, an analyst with FBR, said: “In short, we expect chip shipments to trough in late 4Q11 or early 1Q12 as global supply chain inventory reductions wane and chip shipments recover back toward consumption levels. Indeed, the further that inventory levels fall into 1Q12, the sharper the cyclical recovery should be for chip firms in 2H12, with the potential for a ‘snapback’ if inventories bleed down too low.”

IHS iSuppli has cut its semiconductor revenue growth forecast for 2011.

The latest forecast predicts semiconductor revenue will rise by a mere 2.9 percent in 2011 to reach $313.3 billion, up from $304.5 billion in 2010. This compares to the previous forecast issued in August of 4.6 percent growth.

“Mounting economic weakness is taking its toll on the worldwide electronics and semiconductor industries just as these markets are entering the critical pre-holiday sales season,” said Dale Ford, vice president of electronics supply chain and semiconductors for IHS.

“While economic challenges have persisted into 2011, consumer spending could have still sustained a reasonable level of growth in electronics demand if conditions had remained reasonably stable,’’ he said.

“Unfortunately, the accelerating decline and instability of the economy has reasserted itself as the primary driver of tepid electronics and semiconductor revenue growth in 2011,’’ he said. “The continuing impact of a weakened and stagnant economy is expected to continue to drag on the semiconductor market in 2012, limiting revenue growth to 3.4 percent.”

Propelled by growth in smartphone and media tablet shipments, semiconductor revenue in the wireless market is expected to jump by 16.7 percent in 2011, according to the firm.

In spite of pressures on the notebook PC market by media tablets, expected mid-single-digit growth in PC shipments should enable semiconductor revenues in data processing markets also to expand in the low single-digit range, according to the firm.

NAND flash, image sensors, light-emitting diodes (LEDs) and other sensors are expected to achieve strong double-digit growth, while DRAM revenue is set to fall by more than 18 percent.

Others have also lower their IC forecasts. In comparison, Semico recently released its industry forecast outlook for the balance of 2011 and 2012. Semiconductor sales will end the year 1.6 percent lower than 2010, according to Semico.

The semiconductor market is on pace to have revenue total of $299 billion, a decline of 0.1 percent from 2010, according to Gartner Inc., a market research firm. This outlook is down from Gartner’s previous projection in the second quarter for 5.1 percent growth this year.

The deteriorating fundamentals in the silicon foundry arena, along with ongoing weakness in DRAM, have prompted VLSI Research to cut its worldwide chip forecast to 3 percent revenue growth in 2011, compared to its previous forecast of 8 percent.