Semiconductor boom

2 mins read

Compared to an ailing steel industry, just a few years ago, the semiconductor industry is now enjoying booming conditions.

According to Wally Rhines, the President and CEO of Mentor, we are seeing a wave of very strong growth in the semiconductor industry. Last year it grew by 22 percent and not all of that came from memory – in fact non-memory markets were ahead by over 8 per cent, way up on recent years.

Just a few years ago the industry was described as mature and over-burdened with infrastructure, and was compared to the struggling steel industry. In fact, the design of semiconductors had become so expensive that very few new businesses were able to enter the market.

Fast forward a year, and we are now seeing a wave of growth with hundreds of new entrants coming into the market. Crucially, money is now available for investment, particularly for companies developing new application specific processors that deliver a specific type of functionality, which means that the processor can be optimised.

According to Rhines, design activity, research and development and, significantly, risk takers have returned to the market. Venture capital spending in fabless semiconductor production has skyrocketed over the past year and could touch $2billion in 2018. Just a few years ago that figure was running at just $300million.

So what’s driving this new wave of growth? Well, there are more companies looking to design their own chips for one thing. Bosch is building its own fab, for example, while Tesla is looking to develop its own chips.

The cost of development has tumbled too. New tools are making it possible to develop chips and the use of high level synthesis is cutting not only the cost, but also development times. By using high level synthesis techniques, as opposed to traditional methods, it’s possible to deliver a product in a quarter of the time.

At the end of the day though, the biggest driver appears to be growth in China.

Both at corporate and state level the investment being made in semiconductor research and development, as well as manufacturing, is massive. The Chinese government is investing $20billion in the industry each year, and that is being matched by private investors. And further significant investment is being rumoured.

According to Rhines, China has invested six times that of the US in the past few years and that’s a trend that’s expected to accelerate.

The world is changing and China’s investment binge could pose a real threat to the on-going dominance of the US – but wherever that growth is coming from, the EDA industry looks set fair for a productive and very profitable few years.