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Worldwide Semiconductor Industry’s Myths Busted

Benny Thomas
Thursday, October 1, 2009
Benny Thomas
Undoubtedly, semiconductor industry is entering a mature phase marked by slower growth like other major industries such as automotive steel and chemicals. The prima facie evidence of this trend cited by many industry pundits is the apparent slowing of adoption of 65/45 nm (nanometer) technology. But is this a reality? What’s really happening in the Semiconductor industry across the world? It’s indeed great to understand.

There are several myths doing rounds across the industry, which are truly far from the actual reality in the industry. Walden .C. Rhines, Chairman and CEO of Mentor Graphics says, “The current period is a period of great opportunity for change, growth and new products, but because there is less money it becomes harder to do new things.” For instance, the advanced nodes such as at 45/65 nm are believed to be expensive and difficult to use, adoption has slowed. However, it is not the case. The design adoption of 45/65 nm technologies shows that it is faster or similar to earlier technologies.

Though the actual utilization capacity of foundries dropped below 50 percent for many technologies because of the crisis of inventory liquidation that occurred late last year and early this year, the capacity utilization of 45/65 nm technologies has recovered very rapidly. “All this shows that the adoption of new technologies is not slowing down, rather occurring at the same rate,” he adds.

Many feel that the semiconductor industry is consolidating because of the several acquisitions that have taken place in the past few years. When the revenue concentration of the semiconductor industry is considered, the market share of the number one semiconductor supplier has remained the same in 2008 as compared to 1972. “Intel’s market share today is just about the same as Texas Instrument’s in 1972,” points out Rhines. The data also shows that the total market share of the top 10 companies has reduced in 2008, when compared to almost four decades ago.

Contrary to the market facts, the semiconductor industry is not consolidating, but deconsolidating since the 1960’s. Between 1965 and 1972, over 29 new companies entered the market, including Intel and AMD. In 2007, all the top 10 companies were IDM (integrated device manufacturers)- who manufacture products in their own wafer fabs. A year later, Qualcomm became the first fabless company to make it to top 10 and half of the top 10 companies have announced their intent to be fablite or fabless in the future.


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