Global semiconductor revenue to decline 17 percent in 2009

STAMFORD, USA: The global semiconductor revenue is on track to total $212 billion in 2009, a 17.1 percent decline from 2008 revenue of $255 billion, according to the latest outlook by Gartner, Inc. This forecast is better than the second quarter projections when Gartner projected semiconductor revenue to decline 22.4 percent this year.

“The semiconductor market has performed better than expected, as was evident when second quarter semiconductor revenue increased 17 percent in sequential sales,” said Bryan Lewis, research vice president at Gartner.

“Consumers reacted strongly to reduced PC and LCD TV pricing as price elasticity was amazing. The industry also benefited from the China stimulus package that worked remarkably well to boost short-term demand. Governments worldwide took action quickly and extensively to avoid a meltdown, and it worked.”

Some of the leading semiconductor vendors reported positive second quarter sequential revenue growth that bodes well for the PC and cell phone segments. For example, Intel posted 12 percent sequential revenue growth, while Samsung, the No. 2 semiconductor vendor based on 2008 revenue, posted a 30 percent increase sequentially in chip sales driven by firming memory prices, exchange rates, and a rebound in PC production. Qualcomm, the No. 8 ranked semiconductor vendor last year, reported that its cell phone chip sales increased 35.7 percent sequentially.

While the outlook for 2009 has improved, Gartner analysts point out that all major segments of the semiconductor market are expected to experience double-digital declines in revenue this year. The largest segment of the semiconductor market, application-specific standard product (ASSP), will reach $57.2 billion in 2009, but this is a 16.5 percent decline from 2008 revenue.

The memory market, the No. 2 segment, is forecast to total $41 billion, a 13.5 percent decline from last year. The microcomponents segment (microprocessors, micro controller units, digital signal processors) is on pace to reach $39.4 billion in 2009, a 19.2 percent decline from 2008.

While the industry did see some better than expected results in the second quarter of 2009, the question is can this optimism be sustained through 2010. Gartner’s latest outlook for 2010 is worldwide semiconductor revenue to total $233 billion, a 10.3 percent increase from 2009 projections.

“The fourth quarter of 2009 and first quarter 2010 will be extremely important in shaping the annual growth for 2010,” Lewis said.

“We are currently expecting the fourth quarter of 2009 to be slightly positive, in line with typical seasonal patterns, but foundries have reported they are concerned that demand may drop off more than seasonal in the fourth quarter, and it may carry into first quarter 2010. Gartner's most likely scenario is calling for a negative 5 percent growth in the first quarter of 2010 as customers take a pause and absorb all the devices they purchased over the previous three quarters.”

Toshiba deploys Magma Talus for 90-, 65- and 40-nm ASICs and ASSPs

BANGALORE, INDIA: Magma Design Automation Inc. announced that Toshiba Corp. has deployed Magma’s Talus IC implementation software for developing ICs at 90-, 65- and 40-nanometer (nm) process nodes that target multimedia, networking and printer applications, in Toshiba worldwide design centers.

Toshiba adopted Talus after an extensive evaluation that proved the software’s ability to drastically reduce turnaround time, increase designer productivity and improve quality of results.

Toshiba deployed Magma design implementation software in Toshiba’s Apex flows in 2001, and now has finished multiple designs including 65-nm and 40-nm tapeouts using Talus through its Apex 4.0 flow.

“Toshiba has demanding delivery schedules and performance requirements, and Magma has been instrumental in enabling us to address ever-increasing design and market challenges,” said Takashi Yoshimori, Assistant Chief Technology Executive of SoC Design, Semiconductor Company, Toshiba Corp.

“Talus recently allowed us to reduce turnaround time drastically and improve leakage power and area for a multi-mode SoC design with more than 10 million gates. Based on this achievement and proven track record, we are now implementing our 90-, 65- and 40-nm designs with Talus.”

“For Toshiba and its customers, reducing turnaround time is key,” said Premal Buch, general manager of Magma’s Design Implementation Business Unit. “Toshiba’s adoption of Talus firmly establishes Magma’s software as the fastest path to silicon.”

Market for key system semiconductors set for recovery

EL SEGUNDO, USA: After seeing its revenue fall by nearly one-third over the past six months, the global core silicon market appears to have hit bottom, with sequential growth set to resume in the third quarter, according to iSuppli Corp.

Global core silicon revenue is set to rise to $19 billion in the third quarter, up 8.3 percent from $17.6 billion in the second quarter. This will mark the first sequential rise since a year earlier, in the third quarter of 2008, when revenue increased by 6.7 percent.

The figure presents iSuppli’s forecast of global quarterly core silicon revenue.*Core silicon is comprised of Application-Specific Integrated Circuits (ASICs), Application-Specific Standard Products (ASSPs) and Programmable Logic Devices (PLDs).

Core silicon semiconductors are the key chips that implement the specific, individual functionality in an electronic system—that is, the Integrated Circuit (IC) that makes a DVD player a DVD player, and not some other type of system. In the core silicon category, iSuppli includes ASICs, ASSPs and PLDs.

“The current downturn is fundamentally different from any previous semiconductor cycle,” said Jordan Selburn, principal analyst for core silicon at iSuppli. “This cycle is driven by forces external to the chip industry, primarily the global economy, that are impacting both business and consumer spending. It’s unclear even to economic experts and financial czars when the various bailouts and reductions in interest rates will turn the global economy around.”

However, there are clear signs of a resumption in demand for core silicon.

“Core silicon suppliers are experiencing increasing demand from some of the market’s largest application drivers,” Selburn said. “The core silicon market hinges on a few major applications for most of its revenue. While some areas, most notably desktop PCs and 1G/2G mobile handsets, now are forecast to actually suffer a decline in unit shipments from 2008 to 2009, others, such as 3G wireless phones, netbook PCs and set-top boxes, are still expected to grow despite the crippled economy. These markets alone will be enough to keep the core silicon market moving down the tracks toward an expected expansion in 2010.”

Bottom’s up
The second quarter will mark the low point for the core silicon market during the current downturn. Revenue in the second quarter is set to decline by 33.9 percent from $26.6 billion in the third quarter of 2008.

While the return of sequential growth is an encouraging sign for the market, a more important metric is year-over-year growth, i.e. comparing quarterly revenue with the same period a year earlier. The core silicon market is not expected to resume quarterly year-over-year growth until the first three months of 2010. When this occurs, it means the core silicon market will be set to achieve annual revenue growth.

After a 24.2 percent decline in 2009, revenue will bounce back to double-digit growth in 2010, with a 10.1 percent increase for the year.

Positive signs ahead
The electronics industry is giving other indications that a real recovery in demand is afoot.

One of the latest positive signs is the recent announcement that the China Purchasing Manager’s Index (PMI) has rebounded to about the 50 percent level, indicating that in that country at least, the purchasing managers believe that we are already headed back into a period of expansion. The PMI in other countries has not yet surpassed the 50 percent mark, but the data from China certainly adds another few lumens to the light at the end of the tunnel.

Cautiously optimistic
It is possible that the timing of the core silicon recovery could be delayed if the economy degrades beyond current expectations, Selburn warned.

“However, This scenario seems unlikely, and the current signs of optimism—at least optimistic in relation to the past six months—are lighting the way toward the end of what remains a very gloomy, dark tunnel,” Selburn observed.

Programmable imperative: Changing semicon landscape!

This post is based on a presentation recently made by Amit Dhir, Senior Director, Business Operations, Xilinx, prior to the launch of the Xilinx Virtex-6 and Spartan-6 FPGA families. Xilinx was very kind to share this with me, and I need to thank him and Neeraj Varma, Country Manager - Sales (India/ANZ) for Xilinx.

Xilinx's next-generation FPGA families are said to enable new, targeted design platforms. Incidentally, Altera, too, decided to launch its Stratix IV GT and Arria II GX FPGAs, the same day as Xilinx.

Back to Dhir's discussion on the programmable imperative and a changing semiconductor landscape! According to him, the key market trends changing the technology landscape include the empowered consumer, hyper-connectivity and social networking. In this scenario, time-to-market and flexibility are the key attributes for success.

Customer challenges today revolve around doing more with less, and now! Companies now need to monitor their market and competitive leadership, time-to-market and profitable growth, spiraling development cost, and risk aversion and product complexity. Business constraints are now forcing customers to reduce internal R&D investments. The graph shows the IC cost by process nodes.
Time for programmables NOW!
The time for programmables is now! It is an ideal technology to help combat customer challenges. The programmable imperative is driven by factors such as market forces, financial constraints and technology drivers. Really, it all boils down to accelerating the programmable imperative!

Looking back at the logic IC landscape, business dislocation has been underway for the incumbents. From 1998 through 2004, a significant amount of IP migrated from system OEMs to ASSP vendors, particularly in the communications market.

Even ASICs present a bleak outlook and are likely going the way of gate arrays! The graph here shows the declining ASIC market share.
The increasing development costs and reduced R&D investments by OEMs has been leading to accelerated erosion of ASIC market share going forward. In fact, the long-awaited tipping point where FPGAs replace gate arrays is upon us.

ASSP vendor challenges
Looking at ASSP vendors, those vendor in tier 1 face challenges such as business model viability and poor profitability. High risk environment leads to poor customer loyalty. The large capital outlay on fabbed is moving on to fablite and fabless. Next, market and customer consolidation means fewer deals for such vendors. Chase of >1M units means few applications and customers.

What about the tier 2 ASSP vendors challenge? They have been forced into very high volumes and compete poorly against the tier 1 vendors. Hence, profitability and business models are under severe pressure. It is to be noted that out of the 115-odd companies followed by the GSA (Global Semiconductor Alliance), 29 have market caps less than their cash.

As for the tier 3 ASSPs and startups challenge, the Round-A VC funding has dried up! Incidentally, the round-A funding (dollar amount) declined 82 percent from 2000 and 2007. Through Q308, only two chip companies received round-A funding, totaling $12 million.

Programmables next business disruption
Looking at the logic IC landscape, programmables are emerging as the next business disruption. FPGAs are no longer seen as a yearly cost burden prior to ASIC release, but more as a solution that could live in products and platforms over time.

The tipping point should happen in 2009, and programmables should reach a plateau of productivity by 2016!

Where Xilinx fits in!
Today, Xilinx sees growth opportunity ahead, and it is more of a pragmatic reality now! The company understands that new attributes are required to meet the challenges of the future. It lists three attributes to bring about this change:

* Transformation: Market led, semiconductor leader.
* Ushering in the era of targeted design platforms.
* World class, thriving third-party ecosystem.

Transformation is already underway at Xilinx, which is now becoming a market led, semiconductor business leader.

It is ushering in the era of targeted design platforms, which is enabling innovation. A view at the ASIC/ASSP class applications reveals that the positioning has become more market focused. The architecture is more toward market tuned platforms. Xilinx also focuses on low power leadership. Its design methodology has now become open, scalable and hierarchical.

Targeted design platforms also enable customers to do more, and faster, and focus on their differentiation! Xilinx also boasts a world class and thriving third-party ecosystem. The software and IP is scalable, standardized, extensible and collaborative.

Xilinx is striving to accelerate the programmable experience by giving what customers need, and when they need it! Its Virtex and Spartan silicon form the programmable foundation. It offers base targeted design platforms -- devices, software, IP, boards, etc. It also offers domain specific platforms, along with domain specific IP and tools, as well as market specific platforms, which are inclusive of market specific reference designs and IP.

According to Dhir, the company is offering innovative technology to address diverse market requirements and to drive programmable logic beyond the tipping point!