OAKLAND, Calif. — A global shortage of semiconductors has cast a
cloud over the plans of carmakers and other companies. But there is a silver
lining for Silicon Valley executives like Aart de Geus.
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He is chairman and co-CEO of Synopsys, the biggest supplier of
software that engineers use to design chips. That position gives de Geus an
intimate perspective on a 60-year-old industry that until recently was showing
its age.
Everyone now seems to want his opinion, as shown by the dozens
of emails, calls and comments he received after addressing a recent online
gathering for customers. Synopsys said people tuned in from 408 companies —
more than double the number for an in-person event last held in 2019 — and many
were not conventional chipmakers.
They came from cloud services, consumer electronics companies,
defense contractors, auto component providers, US government agencies,
universities, two Bitcoin mining companies and a furniture-maker. Their
overriding question: How do you develop chips more quickly?
Even as a chip shortage is causing trouble for all sorts of
industries, the semiconductor field is entering a surprising new era of
creativity, from industry giants to innovative startups seeing a spike in
funding from venture capitalists that traditionally avoided chipmakers.
Taiwan Semiconductor Manufacturing Co. and Samsung Electronics,
for example, have managed the increasingly difficult feat of packing more
transistors on each slice of silicon. IBM on Thursday announced another leap in
miniaturization, a sign of continued US prowess in the technology race.
Perhaps most striking, what was a trickle of new chip companies
is now approaching a flood. Equity investors for years viewed semiconductor
companies as too costly to set up, but in 2020 plowed more than $12 billion
into 407 chip-related companies, according to CB Insights.
Though a tiny fraction of all venture capital investments, that
was more than double what the industry received in 2019 and eight times the total
for 2016. Synopsys is tracking more than 200 startups designing chips for
artificial intelligence, the ultrahot technology powering everything from smart
speakers to self-driving cars.
Cerebras, a startup that sells massive artificial-intelligence
processors that span an entire silicon wafer, for example, has attracted more
than $475 million. Groq, a startup whose CEO previously helped design an
artificial-intelligence chip for Google, has raised $367 million.
“It’s a bloody miracle,” said Jim Keller, a veteran chip
designer whose résumé includes stints at Apple, Tesla and Intel and who now
works at the AI chip startup Tenstorrent. “Ten years ago you couldn’t do a
hardware startup.”
The trends are not necessarily good news for chip customers, at
least for the short term. Scarce supplies of many chips have manufacturers
scrambling to increase production, and are adding to worries in Washington
about reliance on foreign suppliers. Extra demand could extend the shortages,
which are already expected to last into 2022.
High demand was evident in earnings for chip companies last
quarter, which ended in March. Revenue grew 27 percent, for example, at NXP
Semiconductors, a big maker of auto, communications and industrial chips, even
though it temporarily closed two Texas factories because of a cold snap.
The industry has historically been notorious for booms and
busts, usually driven by purchasing swings for particular products like PCs and
smartphones. Global chip revenue slumped 12 percent in 2019 before bouncing
back with 10 percent growth last year, according to estimates from Gartner, a
research firm.
But there is widening optimism that the cycles should moderate
because chips are now used in so many things. Philip Gallagher, CEO of the big
electronics distributor Avnet, cited examples like sensors to track dairy cows,
the flow of beer taps and utility pipes, and the temperature of produce. And
the number of chips in mainstay products like cars and smartphones keeps
rising, he and other executives say.
“This is a lasting growth cycle, not a short spike,” said Kurt
Sievers, NXP’s CEO.
A longtime industry watcher, Handel Jones, who heads the
consultancy International Business Strategies, sees total chip revenues rising
steadily to $1.2 trillion by 2030 from roughly $500 billion this year.
That growth could arrive just as the industry fundamentally
changes. More companies are concluding that software running on standard
Intel-style microprocessors is not the best solution for all problems. For that
reason, companies like Cisco Systems and Hewlett Packard Enterprise have long
designed specialty chips for products such as networking gear.
Giants like
Apple,
Amazon and Google more recently have gotten
into the act. Google’s YouTube unit recently disclosed its first internally
developed chip to speed video encoding. And
Volkswagen even said last week that
it would develop its own processor to manage autonomous driving.
Chip design teams are no longer working just for traditional
chip companies, said Pierre Lamond, a 90-year-old venture capitalist who joined
the chip industry in 1957. “They are breaking new ground in many respects,” he
said.
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