CEO Outlook: 2021
The new year will be one of significant transition and innovation for the chip industry, but there are so many new applications and market segments that broad generalizations are becoming less meaningful.
Unlike in years past, where sales of computers or smart phones were a good indication of how the chip industry would fare, end markets have both multiplied and splintered, greatly increasing the number of technologies developed specifically for those markets. The IP world has been used to customizing blocks for large customers for some time. Now demand for customization is spreading. There will still be a handful of billion-unit designs, but the majority of chips being designed and sold in 2021 and beyond will be in lots of thousands or millions.
Interviews with more than a dozen top executives point to a much more complicated, expansive, and nuanced semiconductor industry. As designs become more complex, so do the markets they serve and the ecosystem that supports them. And while there is no shortage of opportunity and technologies being developed, this is no longer a singular and well-defined march toward the next process node. Computing is moving out of a box and into nearly everything, often accompanied by sophisticated power management, communications, new memories, and some form of AI.
“The fifth-generation wave is happening,” said Lip-Bu Tan, CEO of Cadence. “That includes 5G, AI, machine learning, the scale-out of the hyper-scale cloud, progress toward autonomous driving, and a huge Industry 4.0 digital transformation. But even more important right now, it’s all about data. We are entering a data-centric era, where 90% of all data was generated in the last two years. Of that, 80% is unstructured data, and less than 2% of is being analyzed. So the next big thing is going to be about data and analytics, and how to use all of this data effectively to drive different vertical industry. It’s a huge transformation, and all of this is going to drive design activity.”
That view is being echoed across the chip industry. There are no startling technological changes on the horizon, such as the buzz surrounding AI/ML several years ago. The idea of a car with no steering wheel has been pushed to the back burner for at least a decade, except in some very well defined geofenced applications. And while “intelligence” will continue to spread into more end devices, that so-called intelligence will be highly limited.
At the same time, there are opportunities to sell more advanced chips into existing markets, and even into markets that never existed in the past. Chipmakers facing a downside in one market can hedge across multiple market segments.
“In 2021, several major trends will be a continuation of developments from 2020 that will be accelerated,” said Victor Peng, president and CEO of Xilinx. “These include applications moving to the cloud, edge computing, 5G, the explosion of data from more and diverse endpoints, heterogeneous computing — including new domain specific architectures for AI and other workloads — and industry consolidation/integration.”
So while the next big thing in mobile is 5G, it’s far from the only bright spot — and mobile infrastructure no longer can be viewed in isolation.
“We see the digital transformation led by 5G commercialization continuing to stimulate demand over the medium to long term for semiconductors with higher performance and higher reliability,” said Doug Lefever, president and CEO of Advantest America. “In addition to faster networks and 5G, we see several key trends emerging as front-runners in the convergence of technologies as we enter 2021. These include artificial intelligence and machine learning with real-time streaming analytics; accelerated factory automation investments including robotics and AI technology; As-a-Service cloud and edge computing utilizing big data with feed forward/backward capabilities; and growth in extended reality applications necessitated by online learning and remote working circumstances.”
From a high level, the economic outlook for chips is positive. Not every segment will do well, and not every segment that does well will continue to do as well once the pandemic is over.
“2021 will be characterized by a recovery, or overcoming the economic and social consequences of the coronavirus pandemic,” said Peter Schneider, division director at Fraunhofer IIS’ Engineering of Adaptive Systems Division. “The shift to increased use of home offices will have profound changes in people’s mobility. The restrictions in public life have shown that a large number of contacts in business transactions can also be made virtually.”
In addition, not every segment that does well will continue to grow evenly, or recover according to historical trends. “We cannot predict, so be prepared and move forward fast,” said Terry Brewer, president and CEO of Brewer Science. “Learn to navigate uncertainty in the dark. Be prepared to dodge, but not to stop. We can also rightly predict that there will be many, many, opportunities and possibilities available in 2021 — good and bad.”
It’s too early to tell, for example, just how long the work-from-home trend will continue, or how that will be integrated with commercial offices and infrastructure.
“For the products needed for mobile work or for the home office — notebooks, webcams, network infrastructure, servers, etc. — I expect low to moderate increases in market figures,” said Fraunhofer’s Schneider. “Many companies and private individuals made necessary investments during the lockdown phase in 2020. The further expansion of infrastructure will continue, especially to increase robustness, reliability and quality of service. For microelectronics, which helps overcome crises like the current one, I see high economic potential in the near future. There are a lot of R&D activities in this field, which will enter the market in the next few years. This includes the entire field of medical technology, from the monitoring of vital parameters, improved (mobile) devices for diagnostics, test systems for the detection of pathogens, to products for good care of the sick, e.g., in intensive care units. In addition, systems for contactless shopping, the monitoring of people’s presence and movements in public spaces, and also modified logistics concepts for the delivery of goods, will become increasingly widespread and will certainly have a positive influence on economic development.”
But even long-established trends for the chip industry may be tossed into upheaval. Some of the biggest consumers of advanced-node semiconductors are now developing their own. That includes companies such as Apple, Google, Amazon, Facebook and Alibaba, which are seeking orders of magnitude performance improvements through hardware/software co-design, unique architectures, and a mix of accelerators and various types of processors and memories. As a result, volumes for processors will be much smaller than when every company would simply buy off-the-shelf chips from Intel, AMD or IBM.
The impact of that has yet to be gauged. It’s possible that processor giants will make up the volume through customization at the edge. But the formula for success could change significantly. “It’s an undeniable fact in 2021 that as 5nm goes into production, the remaining semi players who offer high-performance products will internalize the development cost of 3nm products,” said Xilinx’s Peng.
Tools and architectures
All of these devices are becoming more complex. The slowdown in Moore’s Law scaling — a function of both higher costs and diminishing improvements in power and performance — has forced chipmakers to embrace new architectures, advanced packaging, and innovative ways of handling more data. At the same time, end markets are demanding longer lifetimes for their investments, which have increased due to both complexity, customization, and smaller production batches.
“On the technical side, there are more foreseeable outcomes, including the need for continuous verification of hardware platforms throughout the product lifecycle, and the increased scrutiny in managing security threats,” said Raik Brinkmann, CEO of OneSpin Solutions. “In order to keep pace with changes in demand, customization to the hardware over time is critical. Reconfigurable hardware platforms allow the needed flexibility and customization for upgrading and differentiation without requiring rebuilding. Heterogenous computing environments that include software-programmable engines, accelerators, and programmable logic are essential for achieving platform reconfigurability, as well as meeting low latency, low power, high performance, and capacity demands. These complex systems are expensive to develop, so anything that can be done to extend the life of the hardware while still maintaining customization will be essential.”
Achieving quality over longer lifetimes is made more difficult because chips need to be updated as algorithms or use cases change. “Achieving this flexibility and continuity requires an ongoing verification effort as customizations and variations are made,” Brinkmann said. “This increased verification complexity necessitates detailed tracing of the requirements, features, tests, and coverage for each instance. If we look at an Agile development flow, one of the principles is to perform continuous integration and testing. If we apply that to hardware development, we can begin to understand that as changes are made. Verification also must be done to ensure that changes don’t introduce new bugs, safety issues, or security vulnerabilities.”
EDA and data analytics companies see this as a huge opportunity, albeit one that has taken years to gain a solid foothold. “An increasing number of these advanced systems companies will begin to leverage silicon lifecycle management technologies,” said Joseph Sawicki, executive vice president for Siemens EDA IC. “This enables companies to insert particular IP blocks (along the lines of Design For Test) into their design during early phases of the IC design process. These IP blocks monitor such things as performance, power consumption, errors, and even security breaches inside the IC. When the ICs are implemented and running in the system, they can (with a bit of engineering) report real-time performance, power consumption, errors, and even security-breach data. This information then, in turn, can be used to identify problems, trigger a warning for the operator, schedule preventive maintenance, or even be used to further refine design and manufacturing for derivative/future-generation ICs.”
A big shift, which already has been implement at IDMs such as Intel, AMD, and Marvell, is the move toward chiplets. That trend is expected to gain steam as other chipmakers begin leveraging pre-verified hard IP blocks. All of the major foundries have chiplets on their roadmaps.
“Chiplets will become increasingly important,” said K. Charles Janac, chairman and CEO of Arteris IP. “Some will be for specific functions. Some will require specialized processors. But to make all of this work, the interconnects will need to become even more sophisticated than they are today. The good thing about the interconnect is there are almost unlimited innovation possibilities. There are a lot of ways to add value.”
This, in turn, should make customization simpler and less costly. Efforts across the industry already are underway and will continue in 2021 and beyond, including everything from specialized accelerators to more standardized characterization and better defined algorithms.
“What we’re seeing is all these machine learning algorithms are being well defined, and now people are trying to build hardware architectures to implement them efficiently,” said Simon Davidmann, CEO of Imperas Software. “If you’re driving in a car, you need data in real time. It’s different for a security camera. If you get it within a few seconds, that’s okay. But with a car, you need instant recognition if a person is walking in front of you. That requires tremendous amounts of computation, and because you can’t just speed everything up, you end up doing this in parallel with lots and lots of processors.”
China and geopolitics
All of this technology needs to be seen in the context of geopolitics, something that until the past couple years was largely absent in the chip industry. Throughout 2020, one of big stories was the trade war between the U.S. and China. It’s unclear how the Biden administration will deal with China, but the general consensus is that relations will improve even if they don’t entirely thaw.
“We’ve got a new president coming in, and there is great anticipation — and some cases of concern — about the policies of the new administration,” said Richard Otte, president and CEO of Promex, the parent company of Quik-Pak. “But they’re clearly going to be different in many respects than what we have in the past. I personally anticipate that we will continue to have difficulties in our relationship with China, and a little bit of strain with Europe. And those are impacting business. I don’t know if I would call it a Cold War, but there’s certainly a cool war with China. Much of our industry sources product out of China, and because people can’t travel to China, we’re having difficulty communicating many programs and resolving issues. That’s causing delays. There’s going to be a trend toward holding things in the U.S., too. It won’t stop the flow of Asian goods to North America, but things will be held on-shore much longer, and more things will be held here permanently. That’s going to be a gradual trend over the next few years. And with the increasing interest of the federal government in supporting American technology and manufacturing, you’re going to see more money invested in it directly, and mostly indirectly, by the government to support American manufacturing — particularly to support the military and maybe the emerging space industry.”
The impact of the trade war already has had a direct effect on many parts of the chip industry. This is of particular concern in Taiwan, home to two giant commercial foundries — TSMC and UMC — as well as ASE, the world’s largest OSAT. In Taiwan, the balance between politics and business is both delicate and complicated.
“The semiconductor industry is a collaborative, symbiotic ecosystem,” said Tien Wu, COO of ASE, during a recent SEMI roundtable discussion. “Taiwan does not own the market. We do not own the critical material equipment technology. What we own is processing and manufacturing flexibility. And we became 22% of the global semiconductor manufacturing because everybody knows Taiwan is nice and can never go independent. That is a great position to be in because no one is concerned about us. Everybody needs us. Everybody’s willing to help you. We’re getting critical equipment from Europe. We’re getting all the critical material process equipment from Japan. And we’re getting business for the U.S. and from China, and no one is upset about this.”
Automotive, security, medical
One of the biggest emerging markets for chips is automotive. The market ramped up rapidly between 2015 and 2018, then slowed considerably as carmakers stepped back and reassessed their goals and architectures. Rather than trying to build a supercomputer in every car, which is economically unrealistic, carmakers instead have focused on scalable architectures to handle increasing levels of driver assistance.
That work is happening despite the lull caused by the pandemic, which took a toll on commuting and new car sales.
“This, and the restrictions still expected in vacation travel, inevitably will have a negative economic impact on suppliers of electronic components in the automotive and aviation industries,” said Fraunhofer’s Schneider. “Overlaying the difficult situation for the automotive industry are — at least in Europe — increasingly stringent climate protection requirements. Innovative assistance and entertainment systems will not compensate for the loss of sales caused by the switch from combustion engines to electro mobility.”
Nevertheless, as all electronics companies have learned, the only way to successfully emerge from a downturn is through design innovation. As a result, automotive chip designs are starting to increase once again, and with that will come a need for electrification and communications infrastructure on the edge.
“We have been supporting automotive requirements for about 10 years now,” said Ashraf Takla, president and CEO of Mixel. “It’s really amazing how that has changed in terms of the requirements and what we need to do. It’s like a new ecosystem being born from scratch, and everybody is learning. There really are no experts. Every year there are new requirements, new simulations we need to do, more rules we need to follow.”
But automotive also brings a stringent set of requirements, both industry-driven (ISO 26262 and ASIL A,B,C,D) as well as OEM-driven (zero defects for 18 years), and that has repercussions for the tools sector.
“This is very good for CAD companies,” Takla said. “You need a whole lot more tools. Aging and electromigration are very important. For consumer electronics, the design is usually Three Sigma. For automotive it’s Five or Six Sigma. Luckily it didn’t all happen overnight. But it will continue in 2021 and in future years.”
The pandemic also has opened a big market for medical devices and equipment, which had stalled for years behind a wall of government regulations and resistance among medical professionals to adopt new technology.
“Medical devices historically were mechanical things made with unique materials,” said Promex’s Otte. “But in recent years, people have started combining electronics with their devices that now are able to gather information, and the electronics can process information and present the information as a radio signal, flash a light, beep a horn, or run a display. The integration of electronics with medical devices and needs is driving things very fast. A massive number of things are possible, and many of them operate in conjunction with the processing power and connectivity to the Internet that a cell phone provides.”
The possibilities for remote diagnosis and communication are just beginning to gain recognition.
“There is more emphasis on remote access,” said Takla. “Technology in those areas has benefited, and will continue to benefit even post-COVID. The new normal will be more people working remotely, so networking and semiconductors that support those kinds of activities, can only benefit. Tracing will continue, as well, maybe not so much in the U.S., but certainly in China and other parts of the world. We’ll also see more 5G and AI.”
Security going mainstream
Connecting more devices comes with a different kind of price tag, though. Security is a growing problem, and concerns will continue to grow with the growing semiconductor content in safety-critical devices such as automobiles.
“Security is following the same trend we saw years ago in software,” said Andreas Kuehlmann, executive chairman and interim CEO of Tortuga Logic. “Everyone is at a different stage, and with the events that have been happening, they are really struggling. Security will become a much more intensive practice. It’s not just semiconductor companies saying here is the security issue and they know what to do. The bigger question is how they evaluate the risk. This already has started in the financial industry and it is moving over to automotive. We expect to see the same sort of effort in medical devices.”
Security affects every layer of every device and every process used to make those devices across a far-flung supply chain.
“If we dive deeper into the topic of security, we’re reminded of the recent headlines regarding the SolarWinds hack,” said OneSpin’s Brinkmann. “This attack has confirmed that the software supply chain is vulnerable, but we need to keep in mind that the hardware supply chain is susceptible to security risks as well. Specifically, IP blocks, such as processors, on-chip communication, and data routing all pose a significant unprotected attack surface, especially early in the design process. These vulnerabilities are hard or nearly impossible to detect with standard approaches. If these security bugs are not detected early in the flow, they could remain dormant until systems are deployed resulting in disastrous consequences.”
The pandemic and other issues
Much has been written and speculated about the coronavirus pandemic’s aftermath. The general consensus is that global pandemic will end with a vaccine and herd immunity, but it will end in some places much faster than in others. That will determine economic recovery timeframes for various regions.
“The CEOs of Pfizer, Johnson & Johnson, and others said they will come out with 100 million doses of the vaccine by March,” said Cadence’s Tan. “By the second half of next year, the vaccine should be widely available. So the first quarter will still be challenging because of COVID, especially in the U.K. and the U.S., but Q2 will be more stable. And then, Q3 and Q4 will be good because of pent-up demand. So with robust semiconductor demand plus a healthy inventory level, I’m cautiously bullish about 2021, and even 2022.”
OneSpin’s Brinkmann agrees. “As we enter 2021, there are some obvious factors affecting the market that will carry over from 2020. The pandemic is still raging and most likely won’t start letting up until the vaccine has been widely distributed. This means that 2020 business practices will be conducted in much the same way for at least the first half of the year. Beyond that, there are other environmental factors that will cause uncertainty, including how Brexit will be handled, the impact of a new presidential administration, and the fallout from the trade war.”
Still, where and how engineers and scientists will work in the future remains uncertain. “COVID-19 in 2020 was a revelation in terms of remote work, learning, health care, entertainment, factory operation, and so on,” said Xilinx’s Peng. “The pandemic will further accelerate these trends in 2021 and drive new innovations and business models. In more general terms, we’ll witness the acceleration of the digitization of everything, pervasive and connected intelligence, from end points to the edge and cloud, the need for high-performance, low-latency and adaptive computing, and dealing with the end of Moore’s Law.”
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