How will the semiconductor industry emerge from the COVID-19 pandemic and perform in 2021? The extent to which people’s daily lives now depend on chip technology makes this a critical question. From AI-reliant smartphones to automobiles to online shopping, nothing has been left untouched by semiconductors. Like many similar organizations, semiconductor companies had to move decisively in early 2020 to protect employees, secure supply chains and adapt to more agile methods of working. But a full recovery of this industry rests largely on the pace and volume of the return to a “new normal” for both the supply chain ecosystem and the many verticals they supply.
Here are some of the insights we’ve gleaned from working with some of the leading players in the industry about what to expect in the coming year:
#1: AI chips will continue to disrupt the semiconductor industry, and beyond
Joe Rash,
Industry VP,
Semiconductor &
Electronics,
Altran
The market for AI chips will continue to grow, driving evolutionary features for some companies and enabling disruption for others. Poised for exponential growth in edge devices, AI chips or IP is essential when low-latency performance is mission-critical, such as in many AR/VR, facial and voice recognition, pattern detection, data filtering and sensor fusion use cases. Beyond edge computing, AI-enabled applications such as computer vision andnatural language processing (NPL) are being widely used across industries. These typically require processing speeds and dedicated components for performing complex mathematical computations. This is pushing the growth of AI application-specific integrated circuits (ASICs) designed and developed for specific use cases as well as enhanced performance and power efficiency.
Beyond 2021, we’re likely to see the functionality provided by AI start to migrate into on-chip subsystems. Here, designers will need to balance the needs of the target market and applications against the increased complexity of chip architecture, the supply chain and the software to enable various use cases.
#2: Expect highly strategic industry consolidation to continue
A trend likely to continue through 2021 (and beyond), there were a number of key mergers last year that brought industry leaders together and created new market dynamics. Most mergers aimed to strengthen portfolios or drive market alignment by leveraging strategic capabilities or technologies for target markets. Others were meant to slow the market share lost to product/system companies in other verticals that are designing their own silicon, a trend (discussed below) that continues in 2021.
Some of the most notable mergers in 2020 included:
- AMD + Xilinx createdthe strongest portfolio of high-performance and adaptive computing products in the industry with leadership in central and graphics processing units and system on chips
- Marvell + Inphi expanded each company’s reach into cloud, edge and the 5G network
- Nvidia + Arm brought together Nvidia’s leading AI computing platform with Arm’s vast ecosystem to create the “premier computing company for the age of artificial intelligence”
As consolidations continue, two scenarios are likely. First, larger companies could cannibalize smaller product lines, discarding or selling off services that are not part of the new company’s strategic goals. Some smaller product lines and intellectual properties are likely to be picked up by startups or existing product companies. These may even reemerge under different brands. As these product lines are remixed in different environments or companies, new opportunities for engineering and research & development (ER&D) will be created.
#3: Continued focus on value closer to the product
As the semiconductor industry continues to mature, companies in this space will continue to invest in offering more comprehensive solutions based on their chips as a go-to-market strategy. For some, bringing their chips “closer to the product” through reference designs, proof of concepts (PoCs) and embedded platforms has become a market differentiator. Ultimately, this will help original equipment manufacturers (OEMs) reduce time to market with more targeted solutions. While some semis bring R&D of these “chip-up” capabilities in-house, many look to their ecosystem for partnerships to help create this value to drive chip sales.
#4: Chip development will continue outside the semiconductor industry
Over the last few years, the market for chip design outside of the semiconductor industry has continued to grow. In vertical industries, most notably consumer electronics (CE), automotive and aerospace, some companies have brought select chip designs in-house to create solutions highly optimized for their specific use cases. This strategy gives them more control over cost, performance, features and time to market, often leading to market differentiation and a competitive edge.
Market size and growth rate vary by vertical, as does the reason to bring this rather expensive endeavor in-house. Where CE companies seem to be on a quest to gain more control over customer experience, datacenter and networking companies continue to seek improvements in bandwidth and latency.
To 2021 and beyond
Similar to almost every other industry in 2020, semiconductor companies had to grapple with a range of challenges. Thanks to geopolitics, the industry itself has even been in the spotlight. As the world starts to recover in 2021 and beyond, the semiconductor industry will continue to evolve – finding its own new normal and fueling the new digital normal of other industries.
