As we head into 2022, the semiconductor industry finds itself in one of the most defining moments of its history. While we are clearly still dealing with the global ripple effects of the chip shortage, there are also several other key trends dramatically shifting the landscape of this industry. In this blog, we’ll take a look at these trends and discuss what we can expect over the coming year.
Continued Chip Shortage
The global semiconductor chip shortage has disrupted most industries and constrained supply chains. Automotive and consumer tech manufacturers have felt the biggest strain of reduced chip availability as many have been forced to delay product launches resulting in expected revenue loss.
As demand for chips continues to soar, supply chains could remain constrained for the foreseeable future. That means everyone – semiconductor businesses and their customers – should focus on building more resilient supply chains and use just-in-time models selectively.
Being better prepared for the future depends on re-examining near and long- term strategies and acting on lessons learned from shortages that disrupted manufacturing worldwide.
Today’s mergers and acquisitions are generally involving smaller deals or are taking longer to finalize due to geopolitical considerations. In particular, the environment has not been very conducive toward larger, cross-border deals. Still, select megadeal opportunities have emerged even as the effects of COVID-19 continue to exacerbate global chip shortages. We expect these larger deals would face similar geopolitical constraints, making smaller transactions an attractive alternative. Moving forward, it will be important for companies to learn how to extract more value out of smaller opportunities.
Geopolitical considerations are also impacting the semiconductor industry because some companies are building or planning to build their own fabs to secure chip production capacity. Governments around the world are setting policies and programs to help solidify or establish their position in the global semiconductor supply chain. As a result, we should expect the global semiconductor ecosystem has to evolve as the flow of chips and accompanying hardware and software shift.
Changing Competitive Landscape
Many tech giants such as Apple, Tesla, Google, and Amazon are now making their own ASIC chips designed specifically for their products. This gives them more control over the integration of software and hardware while differentiating themselves from their competition.
For example, Amazon is now using their in-house Graviton processors. Likewise, Google just unveiled its new Pixel 6 and Pixel 6 Pro Phones that leverage Tensor, the first chip designed by Google that brings AI capabilities to their mobile phone line-up. And more recently, Apple’s new 2021 MacBook Pros were based on the company’s in-house-developed M1 chips. In all cases, these companies believe they can achieve technology differentiation through custom-made chips fitting their applications’ specific requirements rather than using the same generic chips as their competitors.
Battle of the Chip Architectures
The x86 architecture has dominated the microprocessor industry for over 50 years. However, this is now changing with the growing popularity of Arm. While Arm’s architecture was born out of a need for low-power chips needed for vertical applications, they are starting to emerge not only as a low-power solution, but also as a high-performance contender, rivaling the established x86 players.
As a result, when hyperscalers such as Google and AWS decided to make their own chips, they opted for the Arm architecture for its performance and low-power consumption that has become so critical for power-hungry data centers, consumer products and sustainability efforts.
As Arm continues to capture new customers, they are on target to experience the same critical mass that x86 experienced long ago. As history has shown, the industry turns to where the volume is, and companies are already starting to develop a wide range of apps and solutions specifically for the Arm platform.
This growing shift towards Arm is changing the dynamics in the semiconductor ecosystem. Unlike the x86 platform, where companies can buy from one or two suppliers, Arm has become a broker that provides their IP to multiple companies. By choosing Arm, businesses have the flexibility to design their own chips while still having them manufactured by TSMC without having to invest in the build-out of an expensive fab.
Additionally, the RISC-V architecture has been gaining momentum in IoT devices and other applications due to its open-source advantage and better power consumption driven in part by fabless semiconductor company SiFive.
The demand for semiconductors has never been greater and is expected to keep increasing due to emerging technologies such as 5G, AI, and the Internet of Things (IoT). To meet this demand, semiconductor production would need to increase, which would cause a massive surge in energy consumption and water usage.
A single semiconductor fab can consume up to 1 TWh of energy per year and two-to-four million gallons of ultra-pure water per day. Industry leaders such as TSMC and Intel are taking proactive steps and have been working on substantial sustainability programs.
For example, TSMC has established various water recycling applications through water resource risk management, expansion of diverse water sources, and the development of pollution prevention techniques to maximize water usage efficiency. Likewise, Intel has unveiled its 2030 operational sustainability goals as part of its aspiration to be a global leader in sustainability. By 2030, the company plans to achieve net positive water use by conserving 60 billion gallons of water and funding external water restoration projects. The company also intends to achieve 100% renewable energy use across Intel’s global manufacturing operations and conserve 4 billion kWh of energy.[“source=accenture”]