Opinion

Global Trends, Semiconductors, and Evolving Market Demands

By June 24, 2021 July 7th, 2021 No Comments

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The semiconductor industry enables and supports all aspects of modern life. Semiconductor products provide the processing for data centers, the network edge and in embedded industrial and consumer devices. It also provides fast network communication required for data centers and connected devices. Semiconductor memory/storage products such as DRAM and NAND flash provide the memory and long-term storage of information required to support data processing and to keep the results of that processing available for future access.

Vehicles are becoming mobile computers with semiconductors ensuring efficient operation, ADAS and autonomous driving services as well as infotainment. Embedded connected electronics control factory operations and enable smart cities. They are an essential element in Internet of Things (IoT) applications, including wearable devices that help us stay connected and provide ways to monitor our health and motivate us to stay healthy.

Let’s take a look at how the semiconductor industry works, the impact of the COVID-19 pandemic on the industry and how the increasing capabilities of semiconductor devices will enable an amazing array of products and services that will allow us to work more effectively, manufacture products more efficiently, keep us healthier and entertain us in more engaging and immersive ways.

Big Breakthroughs for Smaller Tech

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The semiconductor industry creates small electronic devices (chips) that can be incorporated into various products. These chips use electric energy to process data, control operations, encrypt and decrypt data and store data temporarily or long term.

Semiconductors are made on mostly silicon wafers in large factories and using sophisticated and expensive equipment. For instance, a modern 3D NAND flash fab costs more than $10B to equip and build, and if it is a brand-new plant, may take a year and a half to come online with high production volumes. The equipment required for a semiconductor fab depends upon what sort of wafers are being processed.

Some semiconductor companies, such as SK hynix, make all or most of their own wafers and chips. Many other semiconductor companies own no semiconductor fabs and instead have their chips manufactured in large semiconductor foundries. These companies are called fabless semiconductor companies. There are several large semiconductor foundry companies in various parts of the world that service these fabless companies.

Semiconductor development is following what has been known as Moore’s Law, named after Gordon Moore, one of the founders of Intel. This “law”, which is a projection of a historical trend first observed in the 1960’s, said that the number of transistors on semiconductor integrated circuits (ICs or chips) doubles about every two years. This doubling of circuit density was accompanied by various other scaling trends, increasing the performance and lowering the power required by the ICs as well.

Moore’s Law has become more difficult to sustain in recent years as the size of the features that make up a transistor have shrunk. The equipment to manufacture these small features has also increased significantly in price. Currently semiconductor devices are available in volume at down to 7nm minimum feature sizes with 5nm planned and work underway for 2nm and less.

But, because of the cost to make these small features, new ways to design chips have emerged. For instance, some companies are breaking up the capabilities that might have been built into a single chip using one lithographic node into multiple chips with different minimum lithographic feature requirements, called chiplets. These chiplets are located next to each other in a chip module. Another approach is to stack and connect wafers on top of each other that may differ in their lithographic processes and even their particular operations (e.g. CPUs, memory and specialized processing for particular tasks).

With these new approaches for semiconductor devices, chips with larger lithographic features can be used for many functions, focusing the more expensive small features processes where they do the most good and avoiding the expense of converting all the semiconductor operations to the smaller lithographic node.

The Pandemic-Induced Shortage Felt Around the World

With the COVID-19 pandemic in 2020, many semiconductor fabs went idle for a time and the semiconductor supply chain was temporarily disrupted. At the same time global demand for mobile devices, PCs and data center equipment surged in response to online learning, remote work and other activities.

Also, during the pandemic, some industries, such as the automotive industry, cut back on their orders for chips, anticipating weaker demand. Semiconductor companies responded by allocating more output to semiconductors for other applications. As the pandemic has eased with the introduction of vaccines, demand for products such as automobiles has increased, but many semiconductor companies don’t have additional capacity to meet this demand. Because of the time it takes to bring new semiconductor capacity online, several semiconductor companies have said that it could take a couple of years for capacity to meet demand.

Leveraging New Technologies, Broadening Markets

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In addition to semiconductor shortages for products like automobiles, the overall demand for semiconductors is increasing to provide advanced cloud services, wireless networks (such as 5G and WiFi6) and to support the application of artificial intelligence (AI) at the network edge and in industrial, civic and consumer endpoint devices.

5G smartphones may use $25 worth of chips compared to $18 in 4G and $8 in 3G phones. Nearly three-quarters of all cars will likely ship with cellular connectivity by 2024 and the cost of electronic components in cars was about 45% of the total car cost in 2020, up from 20% in 20001.

Semiconductors and wireless connectivity are enabling new wearable and embedded devices that will help us stay healthy. They will also power a new generation of robots used in human/robot manufacturing teams and for home health care and companionship.

In addition to computing, communication, healthcare and transportation, entertainment systems use lots of chips. With the introduction of high dynamic range 8K video, virtual and augmented reality and even more advanced immersive audio-video technologies, demand for semiconductors to produce, process and deliver this content will soar.

Semiconductors will help the unconnected have access to the Internet and a better life, create safer transportation and cities, make our factories more efficient, keep us healthier and entertain and educate us in new ways.

 

1https://www.fool.com/investing/2021/04/27/6-causes-of-the-global-semiconductor-shortage/


ByTom Coughlin

President, Coughlin Associates
IEEE President Elect Candidate in 2021
Board Member of the Consultants Network of Silicon Valley (CNSV)