Industry Squibs

Over the last few months we have seen several innovative semiconductor startups raise some serious money, nevertheless it seem that as a whole, Venture Capitalists (VCs) seem to be a pessimistic bunch at the moment - at least the three guys Rick Merritt interviewed for his "Silicon Stratups get the Squeeze" article. Among the VCs interviewed were Andy Rappaport from August Capital, Mark Stevens from Sequoia Capital, and Lip-Bu Tan from Walden International. The main reason for the pessimism is well know to anyone in the chip industry, namely the prohibitively high cost of bringing a new fabless semiconductor startup to market.

I won't recap Rick's whole article for you can read it on your own, but there were a few interesting takeaways. According to Andy, if companies doing big SoC designs adopt open interfaces, there will be a chance for startups to at least play a part in supplying designs for specific functions to be integrated onto the SoCs. Further, he points out that system designers will have to do more in software in the future as chip choices will become limited. Mark very much agrees with this point of view, adding that with IPO exits largely non-existent these days and with established companies paying less and less for acquisitions, the return on investment (ROI) for funding semiconductor startups is simply no longer there. Lip-Bu is even more pessimistic, arguing that a substantial percentage of the approximately 2,200 companies funded over the last decade will have to fold and that the R&D mantle will pass once more to the big chip makers. He further points out that plenty of talented engineers, who will not be interested in joining these conglomerates, will choose instead to pursue careers in the clean technology and solar areas. Of the three guys interviewed, Lip-Bu seems the one most committed to semiconductors, but you better approach him only if the majority of your company is going to be located in China, India, or Taiwan. He firmly believes that the semiconductor center is moving west rapidly. If green technologies are not your thing and you want to stick with semiconductors, you better brush up on your mixed-signal and analog skills since both Andy and Lip-Bu prefer these areas at the moment.

I'm somewhat surprised that not one of the interviewed VCs discussed opportunities for low-power semiconductor startups in the life-sciences area. It seems to me that this field in particular could benefit from novel analog and mixed-signal designs and should be well suited for startups. I'm also somewhat skeptical about the large sum of money, on the order of $100 to $200 million, that the VCs claim are needed to get a fabless semiconductor startups funded. Additionally, a budget of $2 million dollars for a verification team per month as claimed by Andy seems unreasonable for a startup - even large chip design houses would find this to be expensive. Most companies we have written about on this site fall somewhere in the $20 - $60 million range when it comes to total funding, which while not cheap compared to a software startup is a far cry from the numbers that the VCs are suggesting. It almost seems that the exaggerated price tag that VCs are attaching to semiconductor startups is their indirect way of saying that they have found cheaper investments that have a quicker ROI elsewhere.

If the recent economic events are not gloomy enough for you, why not read about how the American semiconductor industry has been in a slow decline over the last thirty years? To be fair, Brian Bradshaw’s article is not all depressing with a portion devoted to the initial rise of the American semiconductor industry. The fall section however is significantly longer and more detailed, discussing such topics as Japan’s DRAM dominance in the mid 1980s to the limited success of the American Sematech initiative. An interesting observation made by Brian is that Sematech allowed the chip industry to reach a level of maturity at which point the price of capital and labor became the dominant factors in selecting sites for future manufacturing plant location. This, according to Brian, is the reason why of the last 40 chip factories, 35 were built in Asia, and only 5 in the United States (US) and Europe combined. He further examines the ascend of South Korea to DRAM and Flash memory dominance and the emergence of the chip foundry business. Finally, Brian spends a little bit of time musing about the future of the US industry and the major players.

Reading through the article one can’t fail to notice how Texas Instruments to some degree or another is quite connected with the current state of affairs. Whether through joint ventures with other companies, board members, or spin-offs, the company has its fingers in more places than one might imagine - quite fascinating. As far as the discussion on the future is concerned, it would have been nice if Brian had expanded his analysis of some of the major players. For example, many engineers question IBM’s commitment to the semiconductor industry? If they could find a buyer with deep enough pockets would they try to get rid of the division? How about Oracle’s recent acquisition of Sun? How much of Sun’s engineering will survive the acquisition? There have also been rumors of Sun being interested in developing x86 processors. Then there is Intel’s recent success with the Atom processor and the collaboration agreement with TSMC. And finally, increasing amounts of rumors are emerging regarding Apple’s ambitions for chip design as described in a recent Wall Street article. As a matter of fact, quickly browsing through the current Apple job opening yielded several chip design positions ranging from circuit design, to verification, and implementation, all of which seem to be located in the Santa Clara Valley - Maybe the outlook for chip design in the US is not so bleak after all.

Some people prefer to let bygones be bygones, and move forward. Maybe they are naturally motivated or perhaps they prefer to follow their own direction. On the other hand, others such as myself, enjoy taking an occasional trip down memory lane and pay homage to some of the great achievements accomplished by previous generations in the semiconductor world. Not only do their achievements serve as inspiration, but they also put into perspective where the industry has been and where it might be going. For people who enjoy history and have a particular affinity for semiconductors, there exists a great web-site appropriately titled "Silicon Genesis: An Oral History of Semiconductor Technology."

The project was inspired by Rob Walker, co-founder of LSI Logic Corp. (1981), who has been involved in the semiconductor industry since the early days through a variety of past engineering positions at Fairchild Semiconductor and Intel. Over the last couple of decades he has been working as a consultant and currently owns his own firm, Walker Research Associates, which specializes in business development for emerging technology companies. He has also authored a book titled "Silicon Destiny: The Story of Application Specific Integrated Circuits and LSI Logic Corporation", which very much served as a prelude to this project. The project is currently being hosted at Stanford University and the video count is quickly approaching seventy.  The interviews feature some of the famous semiconductor and computing pioneers including Gordon Moore, John Hennessy, and many others. One great thing about the project is that the videos are completely un-edited from the originals and often time contain glimpses into more personal moments of these individuals, moments that these days would be cut from most documentaries in favor of commercials. A gem in the collection is the 180 minute long documentary titled "The Fairchild Chronicles." It combines excerpts from many of the available video clips to tell the 29 year story of Fairchild Semiconductor from when it was found in 1957 until it was sold to National Semiconductor in 1986. The availability of transcripts for each of the videos is another nice touch, in case one needs to search for a specific moment or obtain a particular quote.

Even with all of the nice features, the actual project site leaves a lot to be desired. The browsing of the videos is rather primitive; links are all placed on a single page in alphabetical order with short descriptions which often time tell one little about the actual content of the interview. This approach will surely become unmanageable as the number of videos increases. There also seems to be no key word search, so you are forced to dig through the individual transcripts. While the project information page does provide a link to search digitally streamed videos, at present that link seems to be broken. Another major gripe is the low video resolution which is unsuitable for full-screen viewing. Additionally, you may also need some good speakers, for the audio volume is quite low in some videos. It would be nice for the project to allow users to tag videos and to at least leave comments and opinions to make it a little bit more interactive - in other words to update the site features to accommodate the modern web surfer’s social and visual demands, as is nicely exemplified by the Computer History Museum and their YouTube integration.