The newest trends in the industry, from new design tools to new product categories, promise to give the semiconductor industry a lift.
In today’s installment of my series, I’m addressing the thoughts of another batch of semiconductor pundits and industry leaders quoted in a volume titled Fabless: The Transformation of the Semiconductor Industry, by author Daniel Nenni and contributor Paul McLellan. My responses to these leaders are based on macroeconomic principals on the theory of mass capitalism that I’ve been exploring in my writing.
The newest generation of electronic design automation (EDA) tools has increased designer productivity in order to keep up with Moore’s Law, Srinath Anantharaman, CEO of Cliosoft, said in the book. At the other side of the equation, growing teams invite inefficiency.
To his point, certainly the productivity of designers has been steadily growing with new technological innovations. This employee productivity increases the supply of goods into the economy. In case of EDA, productivity increases stem mainly from new and innovative circuit designs for electronic products.
However, in order to increase the economic demand in proportion to increased supply from rises in productivity, CEOs must ensure that the wages of the designers who are highly productive grow with their productivity. Smaller organizations increase the efficiency of employees. Higher efficiency in larger organization can be achieved by decentralization of different engineering teams so that they are each about the right size to allow management to ensure that wages keep track with productivity.
Of course, historically and into the future, semiconductor makers are betting on new technologies and processes to stay ahead of the pack. Mike Jamiolkowski, CEO of Conventor, estimates that $50 million to $100 million is spent every two to three months on new process technology development that focuses on iterative trial-and-error cycles of learning, using wafer-based experiments in fab for 3D IC process development.
Based on Jamiolkowski’s estimates, when the semiconductor industry spends so much money on new process technology development, it is advisable for the industry to ensure that the high-tech manufactured products are in good demand in the economy. What is the use of making huge investments when there won’t be a significant demand to give a good return on the investments? This points us to the fact that for making the continuous capital investments sustainable, the semiconductor industry, like other industries, should have a business model that boosts consumers’ purchasing power so that there is a continued demand for better products. This would force the manufacturer to keep investing in newer technologies and make these investments sustainable.
Another top exec, Joe Sawicki, vice president and general manager of Mentor Graphics, is betting on the emerging Internet of Things (IoT) market to drive an increase in productivity that will dwarf that gained by PCs and mobile. “Semiconductor systems enabling this trend will need to respond to difficult cost, size, and constraints to drive real ubiquity,” he said in the book.
I do not doubt that IoT would drive an increase in productivity as long as net neutrality is maintained. However, if wages of people in industry do not catch up with their productivity, the economy will continue on its unbalanced path, which will result in diminished consumer purchasing power that could translate into poor demand for the IoT.