5/30/2021

CHIP INNOVATORS CLAP : MASTER ESSAY



Despite production lag, chip innovators are busy. A burst of creativity in the semiconductor field attracts venture capital.

A longtime industry watcher, Handel Jones, who heads the consultancy International Business Strategies, sees total chip revenues rising steadily to $1.2 trillion by 2031 from roughly $500 billion this year.

A global shortage of semiconductors has cast a cloud over the plans of the carmakers and other companies. But there's a silver lining for Silicon Valley executives like Art de Geus.

He is chairman and co-chief executive of Synopsys, the biggest supplier of software that engineers use to design chips. That position gives Mr. de.Gues 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 says people turned up from 408 companies - more than double the number for an in-person event last held in 2019 - and many weren't conventional chip makers.

They came from cloud services, consumer electronics companies, defense contractors, auto component providers, U.S. government agencies, universities, two Bitcoin making 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 start-ups seeing a spike in funding from venture capitalists who traditionally avoided chipmakers.

Taiwan Semiconductor Manufacturing Company and Samsung Electronics, for example, have managed the increasingly difficult feat of packing more transistors on each slice of silicon. IBM last Thursday announced another leap in miniaturization, a sign of continued U.S. 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 that plowed more than $12 billion into 407 related 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 2010 and eight times the total of for 2016.

Synopsys is tracking more than 200 start-ups designing chips for artificial intelligence, the ultrahot technology behind products as varied as smart speakers and self-driving cars.

Cerebras, a start-up that sells artificial-intelligence processors that span an entire silicon wafer, for example, has attracted more than $475 million. Groq, a start-up whose chief executive 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 resume includes stint at Apple, Tesla and Intel and who now works at the A.I.chip start-up Tenstorrent. ''Ten years ago you couldn't do a hardware start-up.''

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. Revenues 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 boom 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, chief executive of the big electronic 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 the mainstay products like cars and smartphones keeps rising, he and other executives say.

The Publishing of the Post continues to Part 2. The World Students Society thanks author Don Clark.

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