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Vinod Abraham, Practice Manager, Semiconductor Solutions
Ganesh Iyer, Practice Head, Semiconductor and Capital Equipments
Semiconductor Industry: Rising Up The Value Chain
Table of contents
03 ...........................................................................................
04 ........................................................................................... Increasing focus and deepening value
04 ............................................................................................. Drivers of change
04 ............................................................................................. New materials and technology: Shape of things to come
05 ........................................................................................... End consumer markets: the change agents
06 ............................................................................................. The road into the future
Major changes driving growth and innovation
Major Changes Driving Growth and Innovation
The semiconductor industry has been at the center of the digital revolution in the 20th Century.
Now, within the first few years of the 21st Century it is facing challenges. The industry is being
reshaped as end-market demands from consumer electronics, mobile devices, computing,
entertainment, automotive, aviation and healthcare call for innovation. The evolution is being
propelled by new power-hungry devices that demand improved features, calling for cost and
power efficiencies. Device manufacturers want chips that can deliver better graphics for gaming..
In the next few years the consumer electronics business will want to take 3D technology to its
users. Once driven by the single goal to put as many transistors as it can on the same chip, the
semiconductor industry is now being forced to build downstream capabilities, get closer to the
customer, and rise up the value chain.
03
that global semiconductor sales for 2011 reached US$ 299.5 billion, a
year-on-year increase of 0.4% from the US$ 298.3 billion recorded in
2010. This may not have been brisk growth, but Gartner says that
ramping production of smartphones will propel and dominate
semiconductor growth in 2012 and along with tablets and solid-state
drives will account for 77% of the semiconductor market through 2015.
1
http://www.sia-online.org/news/2012/02/06/global-sales-report-2012/semiconductor-industry-posts-record-breaking-revenues-despite-2011-challenges/
2
http://www.gartner.com/it/page.jsp?id=1869717
From memory chips and microprocessors to Commodity Integrated
Circuits (or standard chips) and complex integration with SOC (System
on Chip) and now to packaging with SIP (System in Package), the
semiconductor industry is in a state of never-before transition.
Traditionally, the business has been highly cyclical. As demand for
products peaks, the industry booms. When demand falls, it sinks into a
depression. The Semiconductor Industry Association (SIA) reported
04
The challenge for the semiconductor industry is apparent: it has to go
beyond Moore's law of cramming transistors on ICs. It has to address
what many are calling "More than Moore". Georgia Tech's Microsystems
Packaging Research Centre believes that Systems on Package
technology (SIP by another name) will see component density on
boards double every year. Densities will move from 50 components per
square centimeter of 2004 to a million per square centimeter in 2020.
The impact this giant change will have on integration platforms,
manufacturing techniques and product design is staggering. Products will
shrink by a factor of many hundreds and even thousands rather than
the factor of 10 expected every few years now.
However, component density may not result in a directly proportional
increase in computing power. Memory and disk access speeds have
lagged behind and could become potential roadblocks in leveraging the
capabilities of these super chips. Operating Systems and software -
especially software because it will need to take advantage of these
capabilities -- will need to go through a paradigm shift, "a technological
change so rapid and profound it represents a rupture in the fabric of
human history." The outcome of these changes will be to drive rapid
innovation in end products, and for the nimble, opportunity. For the
industry the developments spell an increase in focus and deepening of
value as it grows closer to end OEMs.
Increasing Focus and
Deepening Value
The industry is rebalancing itself. With current developments, it is
almost impossible for newer players to succeed, as the cost of entry is a
major barrier. The emergence of the Capital-Lite Semiconductor Model
could ensure that companies in the industry that are witnessing
shrinking demand but are cash and IP rich create monetization
opportunities around their IPs. On the other hand, smaller fabless
semiconductor companies are creating alliances and new partnership
models to share manufacturing costs. It's interesting to examine the two
key drivers that are forcing chipmakers to go back to the drawing
Drivers of Change
Plastic/ flexible materials are being experimented with as an alternative
to the rigid silicon based semiconductors. The outcome could be, as an
example, a tablet that you can roll up, or a wearable fabric that is
embedded with electronics. New high-speed organic semiconductors
could allow displays to bend, play a critical part in next generation solar
cells, bring about unparalleled change in electro-chromic devices and
biosensors in terms of flexibility, power efficiency, weight etc. In addition
to the flexible nature of the new materials, the wavy and ultra
stretchable properties could lead to unimaginable innovation. The
industry, dominated by Silicon as the most commonly used
semiconductor material, is today looking at next generation alternatives
such as Amorphous Oxide semiconductors, carbon nanotubes,
quantum dots, Graphene, Molybdenite etc. that could change industry
shape and dynamics. While the new materials have the potential to
bring radical change they also present challenges that have yet to be
entirely overcome. Many of these materials are relatively rarer than
silicon, have bandgap issues, on/off ratio problems, pose difficulties in
controlling composition, etc. And, of course, for the moment, the
primary advantages of silicon continue to remain attractive: it is
abundant, cheap and easy to process. The new materials will have to
become more cost-effective before they see widespread usage.
New Materials and Technology:
Shape of Things to Come
boards, both in terms of product as well as business models:
New materials and technology
Evolution of end consumer market
The dual thrust is bringing about strategic pressure, resulting in massive
structural and product changes in the industry.

3
http://spectrum.ieee.org/computing/hardware/moores-law-meets-its-match
4
http://spectrum.ieee.org/computing/hardware/moores-law-meets-its-match
5
Ray Kurzweil, The Age of Spiritual Machines
6
http://www.gsaglobal.org/capital_lite_working_group/docs/EvolutionofSemiStarupInvestment-AUG15-final.pdf
05
Shrinking geometry demands from applications that need high
performance (such as graphics) and low power consumption (such as
wired networks and wireless mobile devices) are increasing chip
complexity. The focus of the industry as chips shrink from the 40nm
technology node to 28nm, 20nm, with 14nm next is to create more
cost effective design processes/ rules where traditional scaling
techniques fail. Immersion lithography with double patterning can
resolve chips down to 20 nm, while the Extreme Ultraviolet
Lithography (EUV) approach has only been able to resolve them down
to 28 nm. The next decade in semiconductor development may not be
dominated by concerns of speed and power, but rather by reliability
and consistency issues. Users who have come to expect a high degree
of reliability from semiconductors may face challenges, especially in the
20nm node and below as chip structures become complex. Which is
why the industry's aggressive nanometer technologies are also throwing
up fresh materials as traditional materials may fail.
Fab moving to 450mm wafers presents fresh challenges related to
increased fragility, handling and packaging issues, edge defects,
uniformity of process, loading, equipment & tools scaling and wafer
geometry effects such as wafer weight and sag. 450mm wafers will lead
to a reduction in die costs (about 20% to 25 % in cost per die at 20nm)
and subsequently production costs but the transition will mean large
and potentially risky upfront investments in areas related to wafer
fabrication. The next generation nodes must also deliver yield
improvements and rapidly accelerate to efficiencies of existing
technologies. This will call for significant lithography advances.
3D ICs are being tried out and the form factor of chips may not remain
flat for long. The traditional direction of semiconductor development
has been to thin down the width of ICs from 90nm to 65nm to 45nm
and now down to 22nm nodes. However, as costs of thinning down go
up, designers have begun to explore 3D integration. Fueled by the
nanometer rush, 3D ICs could offer easier analog/ digital integration,
smaller footprint and lower power. But there are challenges in yield,
tool complexity for stacked dies, heat dissipation (as dies are stacked on
top of each other), etc that call for new processes, tools, tests and
End Consumer Markets:
The Change Agents
The silicon content in today's devices and equipment has increased
several folds. Computers, laptops, tablets, e-readers, modems, mobiles,
digital photo frames, cameras, personal navigation devices, audio players,
automobiles, watches, even medical wellness devices that are being
pushed into homes use semiconductors. These are smart, connected
devices that are driven by the latest chip technology.
As the demand for comfort, safety, reliability, entertainment and energy
efficiency go up, today's automobiles have begun to use an increasing
amount of chips in equipment for video detection (to prevent
collisions), powertrain, infotainment, navigation and system diagnostics
creating further opportunities for the semiconductor industry.
Medical equipment today is dependent on large silicon content. CT
machines, patient monitoring systems, cardiac implants, lab
instrumentation and even use-at-home blood pressure gauges and
glucometers (the consumerization of medical devices is here) have
grown the demand on semiconductors.
The proliferation of tablets has become a major game changer. Market
analyst IHS in March 2012 reported that media tablets will become the
world's fourth largest application for semiconductors by 2014, up from
35th in 2010. Sales of semiconductors for media tablets are expected
to grow from US$ 2.6 billion in 2010 to US$ 18.2 billion in 2014.
7
http://www.intel.com/content/www/us/en/silicon-innovations/intel-22nm-technology.html
8
http://www.isuppli.com/Semiconductor-Value-Chain/News/Pages/Led-by-iPad-Media-Tablets-Expected-toBecomeFourth-Largest-Semiconductor-
Market-by-2014.aspx
9
http://www.berginsight.com/News.aspx?m_m=6, Shipments of NFC-enabled handsets reached 30 million units in 2011, 26 March 2012
standards. 3D ICs will stack heterogeneous elements (analog, digital,
logic and memory), moving closer to being devices. 3D ICs appear to
be the future. However, until they become cost effective, it is difficult to
say how widespread their application could be. Intel, that created the
first 3D Transistor for high volume manufacturing, says that "the new
technology (3D) enables innovative microarchitectures, System on Chip
(SoC) designs, and new products -from servers and PCs to smart
phones, and innovative consumer products."
06
The industry is seeing one of the most exciting phases in its evolution.
Newer, emerging technologies such as Augmented Reality (AR), Near
Field Communication (NFC), Nanoelectromechanical systems (NEMS),
smart sensors (such as in smartphones) and advanced imaging technology
like hyperspectral imaging will continue to present fresh challenges.
These technologies hold tremendous promise and are being pursued
aggressively. Augmented Reality, a layer of live, contextual information
and data over reality, has widespread applications and is already
impacting product development, design and servicing in the
manufacturing industry. AR's immersive capabilities have the ability to
increase process and production accuracy and bring down costs. AR as
a technology is starting to show up on the radar of every CXO. NFC is
currently driving an exciting development in mobile contactless
payments, as well as enabling the reading of tags and bringing simplicity
to pairing devices for data exchange. Last year, says a study by Berg
Insight, 30 million NFC enabled smartphones were shipped and the
number is expected to grow to 700 million by 2016. NEMS, which
form the core of physical, biological, and chemical sensors, are already
around us. Check your smartphone, if it has an accelerometer you are
already a NEMS user and it can be, as an example, deployed to record
seismic activity. NEMS can enable radical technology such as chemical
sensors in mobile phones. The idea of embedding a chemical sensor
into a mobile device may appear odd, but it could result in delivering
accurate and real-time air quality information via mobiles over very
small geographies; as another example, they present the very real
possibility of detecting explosives using nothing more than cheap
smartphones and tablets that are everywhere. In a world plagued by
terrorism, this could be a new tool to fight the threat.
The Road Into the Future
Doubtless, the industry will build adequate intellectual capital and
technical capability but will it be driven by change outside its control?
Chip density will increase, but will performance be reliable? Innovation
will increase but will competition decrease as the cost of entry becomes
prohibitive and product and investment gestation cycles grow longer?
Or will new materials and eco-friendly processes become game
changers? Ultimately, it appears that the semiconductor industry will
have to partner more closely with end device manufacturers to retain
stability through these changing times.
The end consumer market is evolving rapidly along 3 critical trends. Each
of the trends demands innovation from the semiconductor industry:
1 Devices with different form factors across industry segments like
consumer electronics, mobile devices, computing, automotive, etc
are converging, leading to innovation in uniform user experience
2 The proliferation in the Internet of Things is driving innovations in
semiconductors to enable ubiquitous computing
3 Devices that demand energy efficiency are leading to innovations in
power management - from low power to no power.
The industry today is grappling with several questions. It is concerned
about convergence that could lead to shrinking demand for product
categories. For example, as phones and cameras converge, will people opt
for just one device? Will this reduce the demand for semiconductors? On
the other hand, will convergence lead to products using a variety of
platforms and features, thus fragmenting markets and bringing an end to
high volume markets? Or, in what appears to be the emerging scenario,
will markets opt for multiple products and adopt faster use-and-discard
cycles, thereby fueling demand for semiconductors?
In terms of volumes and growth, the segments that will see the highest
exploitation will be mobile handsets, computers and tablets (see table
below). But other areas such as digital home appliances, electronic
wellness home products and automobile-related products cannot be
ignored as they are seeing semiconductors built into their core.
Doubtless, the industry will build adequate intellectual capital and
technical capability but will it be driven by change outside its control?
Chip density will increase, but will performance be reliable? Innovation
will increase but will competition decrease as the cost of entry becomes
prohibitive and product and investment gestation cycles grow longer?
Or will new materials and eco-friendly processes become game
changers? Ultimately, it appears that the semiconductor industry will
have to partner more closely with end device manufacturers to retain
stability through these changing times.
Source: IHS iSuppli, March 2012
Five Top Semiconductor Applications in 2014
(Ranked by revenue in millions of US$)
Rank
Application
Revenue
Mobile Handsets
Mobile PCs
Desktop PCs
Media Tablets
LCD TVs
$ 58,589
$ 48,239
$ 19,213
$ 18,447
$ 17,489
1
2
3
4
5
07
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About Wipro
Ganesh Iyer has 18 years of experience in Telecom, Product Engineering and IT Services. He currently heads the Presales and Solutions functions of
Wipro's Semiconductor and Capital Equipments business. He is responsible for creating Client Solutions and Semiconductor industry specific offerings
across R&D, IT and BPO services. Prior to this, he was responsible for a variety of roles related to Delivery & Program Management in Embedded
Software for Semiconductor & Telecom domains.Prior to Wipro, he began his career as an R&D engineer in Digital Signal Processing at C-DoT. He is
based in Bangalore, India.
Vinod Abraham has over 13 years of experience in the IT Services Industry. In his current role, he is responsible for Pre-Sales and Business
Development across Wipro's global Semiconductor customers. Prior to this he was a Client Partner responsible for Wipro's business with a large
Semiconductor customer in the US. He has also held various roles in Sales and Account Management supporting multiple Manufacturing and Hi-Tech
customers in the US with Wipro's Consulting, IT, BPO and R&D Services. He started his career as an ASIC Design Engineer. He is based in
Bangalore, India.
About the Authors
IND/BRD/ 2012 - APRIL2013 JUNE