The Semiconductor Industry: A Bigger Bet for a Larger Outcome
Date: Tuesday , October 20, 2015
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.
There is still a market for exceptional companies. There is great interest from the investment community in outstanding companies where returns are significant and predictable. But the challenge for start-ups in the semiconductor industry will persist for both professionals and investors. It boils down to money. There is currently more investor interest in social media companies because these start-ups don\'t require a huge capital outlay and have recently delivered tremendous returns. In launching a semiconductor company, along with their capital, investors need to be patient. For example, investors such as Bosch, New Enterprise Associates, Greylock Partners, Jafco Ventures, and Rusnano invested in SiTime and nurtured our growth over several years, and their patience and faith paid off when SiTime was acquired by MegaChips in November 2014 for $200 million. Semiconductor start-ups need to find the right investors and focus on the businesses that provide returns to both employees and investors.
It\'s a Creative Process
For an entrepreneur, money is not the end-all. The challenge and payoff lies in changing the lives of people which can result in tremendous personal gratification. To become an entrepreneur is a creative process in itself and requires focus, passion and a commitment to success. Companies need an innovative and creative culture which consists of finding the right challenges while pushing the boundaries. A company needs to have an environment that is conducive for an innovation culture. Within the semiconductor vertical, performance, low power, reliability, and low cost are some of the key areas that companies need to focus on. Simultaneously, the products that are developed by a semiconductor start-up must be game-changing, and should deliver tremendous value that can launch a new market in the shortest possible time. If an entrepreneur focuses on these issues, he/she can deliver a great company.
There has never been a better time to be an entrepreneur in Silicon Valley. Semiconductors are a vehicle for providing value. Look for providing value through compelling products that solve pain points for which there is a market. It\'s that simple.
To be successful, one needs to provide the right value and create the right culture. These are fundamental steps. Fauja Singh is 104 years old but he started running marathons when he was 89. Interestingly, he was never a marathon runner before. So how did he do it? He has a simple answer to that \'put on your shoes and start running\'.