The Semiconductor Industry: A Bigger Bet for a Larger Outcome

Rajesh Vashist
Tuesday, October 20, 2015
Rajesh Vashist
The semiconductor industry has come a long way over the past three decades. Semiconductors have penetrated every aspect of our lives and growth has been massive. The semiconductor content in everything we use 'automobiles, homes, consumer or industrial products' has increased dramatically over this time period. Today, semiconductors contribute over $300 million to the global economy and play a significant role in driving innovation in electronics.

While these are exciting times for semiconductor industry, now the barriers to entry are higher. A few decades ago, it was much easier to start a semiconductor firm because capital requirements were smaller. Now, to attain success as a semiconductor venture, one has to see the billion mark. It's a bigger bet, but for a larger return, with success resulting in tremendous wealth creation.

Innovation has always been the key growth driver for the semiconductor industry. Today, emerging technologies, particularly in the areas related to the wearables and IoT markets, are the key drivers of semiconductor growth.

These markets are driving the development of new functionality, such as MEMS timing and sensors, as well as dramatic reductions in size, power and cost. Along the way, semiconductor companies have been forced to change, and are being driven closer to the customer in the value chain. For example, products using semiconductors traditionally required human intervention. But as Machine-to-Machine applications have grown and minimized human intervention, system, software, and user interface design are key solutions that a semiconductor company has to provide.

Investors Should Take the Leap
Fifteen years ago, there were more than 100 semiconductor start-ups in the San Francisco Bay Area and the entrepreneurial spirit was soaring. Since so many companies existed, engineers were comfortable switching from one start-up to another. The wide availability of opportunities mitigated the risk of changing jobs and starting over. But now, the scenario has changed, especially for professionals working in large organizations. Because larger companies are focused on retaining key talent, and because there are fewer highly successful IPOs or acquisitions today, many professionals are unwilling to move to a smaller company.

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