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Capex Restraint Not Always a Bad Thing

A recent article by Peter Clarke, EETimes, ‘TSMC Overtakes Intel in Chip Capex Ranking’ seemed to imply that a lower capital expenditure in 2015 was a bad sign. A growing capital expenditure budget does not always signal good times ahead just as a small capex does not mean disaster. Most companies are talking about the slowing or end of Moore’s law. Intel is one of the few companies that is back on Moore’s Law transistor density curve with their 14nm second generation Tri-Gate process. In fact, Intel has publicly stated that at 14nm they are ahead of Moore’s Law! Increased transistor density typically means smaller die sizes. All other variables being equal, this also translates to higher yields and less wafers required to meet market demand. A reduced capex is one of the benefits of improved efficiencies when a process obtains its sweet spot. Is it possible that others have to spend more in capex in anticipation of larger die sizes, lower yields and the need for more wafer throughput? A growing capex could mean expanding sales or the promise of a new market, but declining capex is not necessarily a bad omen. Remember when the industry experienced huge crashes because of the cycles that were caused by capex overspending? We haven’t experienced one of those in a few years, but I’m sure that can’t be erased from our memories yet.

Capex Growing to a Record High in 2015

Semiconductor companies are spending more than ever to stay competitive.  In 2015, the total amount spent is forecast to be $68.7 billion, up 9% from 2014’s $63.3 billion.  This breaks the previous record set in 2011 at $63.8 billion, as shown in the following graph. 

Total Semiconductor Capital Expenditures, 2009-2015

2015-06 capex blog - total capex.png

Source:  Semico Research Corp.

The Top 15

Accounting for almost 90% of the total spending are fifteen companies.  The top fifteen companies stayed the same from 2014 to 2015, but their order did change somewhat.  The top five spenders are no surprise, with Samsung in the top spot, followed by TSMC.  What is unusual is Intel slipping into the third position.  To round out the top five, GLOBALFOUNDRIES and Hynix switched places as the foundry expects to increase spending 22% this year versus Hynix’s 5% increase.  In the top fifteen, the company with the largest increase is Sony, with a 207% increase to almost US$2 billion.  The bulk of this increase is to expand image sensor production capacity, but some will also be spent on camera module production capacity, a relatively new market for Sony.  Sony’s dollar increase is second only to Samsung’s, but this is partly due to the decline in value of the yen.

AMD’s High Bandwidth Memory Opens Up Performance Path and New Market Opportunities

On June 16, 2015 at the E3 show AMD rolled out its high end graphics GPU, Fiji, which features its High Bandwidth Memory (HBM) on its high end desktop graphics cards, the Radeon R9 300 series.

AMD’s top of the line GPU, Radeon Fury X has 4 GB of HBM delivering up to 512 Gbits/sec of memory bandwidth (increase of 63% over previous generation), with 4,096 stream processors and 64 compute units up to 1.05 GHz. The 28nm Fury X is liquid cooled. AMD also introduced air-cooled models, Fury with 56 compute units operating at 1 GHz and the R9 Fury Nano. All of these GPUs use HBM.

AMD is touting HBM for its improved performance and power consumption compared to GDDR5. The memory technology was developed by SK Hynix. The resulting solution offers three times the performance per watt with 94% less PCB area. This enables a smaller graphics card for the Fury nano card.

The enabling technology for HBM is the 2.5D packaging technology.  AMD and SK Hynix partnered to define and develop the first complete specification and prototype. The technology employs through silicon vias (TSVs) and micro-bumps to connect one stacked DRAM to the next. The stacked die also connect via TSV and micro-bumps to a logic die which provides the PHY interface to the GPU. Up to 4 stacks surround the GPU on an interposer.

NXP Key Partnerships for IoT

NXP Key Partnerships for IoT

On May 5, 2015 NXP made two important announcements. NXP is partnering with Xiaomi to make smart home products.  In a separate announcement, Qualcomm will use NXP’s NFC and embedded secure element technology across the Snapdragon processor family.

Xiaomi is a fast growing Chinese consumer electronics firm. It is offering the Xiaomi Smart Home Suite which includes four wireless products: a motion sensor, door and window sensors, a wireless switching device for controlling appliances, and a multifunctional gateway that wirelessly links all the components together using ZigBee Wi-Fi interconnectivity.

Qualcomm and NXP are looking to expand NFC into new markets outside of smartphones, such as consumer electronics, automotive, home automation, smart appliances, personal computing and wearables.

Semico Spin

NXP has been deeply involved with the Internet of Things (IoT) since it first emerged. Partnering with Xiaomi will help develop the more effective Smart Home IoT.  Semico has forecasted that by 2020 there will be 36 billion connected devices worldwide. About half of these will be in smart home applications and the largest market will be in China. NXP is positioning itself for this trend.

Semico’s IPI Index Points to 9% Revenue Growth in 2015

First quarter 2015 is now history, and companies will soon be reporting their Q1 earnings.  Here at Semico we’ve checked the IPI Index against our forecast and year-to-date actuals to see if the industry outlook is on track for 2015.  Here’s the critical review.

First of all, Semico’s forecast for total semiconductor sales in 2015 is $378 billion, up nearly 9% over 2014.  Units will increase to 849 billion representing a 10.5% growth over 2014.  However, there is an upside to this forecast.  DRAM pricing is expected to remain strong as demand remains healthy and more complex fabrication processes reduce wafer output per fab line, limiting the potential for an over-capacity situation.  In addition, the largest memory supplier, Samsung, is slowing its DRAM ramp, i.e. pushing out capex for DRAM capacity.  The memory market has played a major role in the growth of semiconductor revenues over the past two years. 

On a quarterly basis, Q1 2015 is expected to result in a sequential decline of 2.1% compared to Q4 2014 and a 5% year-over-year increase compared to Q1 2014. 

 

Quarterly Semiconductor Revenues and Units

(In Millions of US Dollars and Units)

Source:  SIA/WSTS and Semico Research Corp.

Full Steam Ahead For China Inc.

Were you in Shanghai last week? If not, you missed the biggest Semicon event in the world. Semicon China broke records this year. With more than 1,000 companies participating, and 570,000 square meters of exhibition space, Semicon China attracted more than 50,000 visitors, making it the largest Semicon event in the world. All the sessions we attended were standing room only.

Key areas of focus this week included IoT, the JCET/STATS ChipPac merger and the China National IC Fund. AMD CEO Lisa Su set the stage with an opening keynote highlighting the exciting possibilities still ahead for the industry. She pointed out the opportunities and challenges facing electronics as we move toward photorealistic, real-time virtual reality. New applications such as mobile VR require the processing power to transmit a million times faster than the speed that we use to transmit today. These applications will require immersive computing. The need for performance, bandwidth and low power is not subsiding.

The cocktail parties and networking breaks were buzzing over the merger of JCET/STATS ChipPac and the new government investment program, which is focusing on developing China’s IC industry. JCET’s chairman and CEO, Xinchao Wang, views the merger with STATS ChipPac as a strategic move to broaden their worldwide market, as well as improve the opportunity to expand R&D to meet advanced and specialized market needs required by the new emerging markets.

NXP and Freescale Merging

The semiconductor industry continues to consolidate. Some mergers are stronger than others.  On March 1, 2015 it was announced that NXP and Freescale plan to combine forces.  Both companies have a significant presence in automotive and microcontrollers. Following this merger the new company would be the leader in automotive semiconductors and second in MCUs.  But does bigger mean better?

According to the NXP press release “Freescale shareholders will receive $6.25 in cash and 0.3521 of an NXP ordinary share for each Freescale common share held at the close of the transaction. The purchase price implies a total equity value for Freescale of approximately $11.8 billion.” If one were to include Freescale’s net debt, the total enterprise value is $16.7 billion. The transaction is expected to be completed by 2H 2015.

Both companies have comparable revenues. NXP’s gross revenues in 2014 were $5.6 billion while Freescale had $4.6 billion. The combined revenues are $10.2 billion.

Graphene: Wonder Material?

The fact that new materials continue to be discovered and introduced into innovative electronic devices is a major feat. Semico is analyzing the challenges of new product discovery, development and commercialization. Graphene is just one of the products under investigation. This write-up is taken from a full essay in this month’s Semico IPI report.

Since 2004, when two scientists at Manchester University, Andre Geim and Konstantin Novoselov, isolated a single sheet of graphene and then performed electrical measurements and characterizations on the material, graphene has become the superstar of the material world. Today, I Googled graphene, and got 11,500,000 results, including definitions, companies, recent research findings, images and in-depth articles. And the patents are piling up. Samsung was reported as one of the leaders in this area with more than 200 patents.

Freescale Acquires Zenverge, Addresses the Video Internet of Things

On December 2, 2014 Freescale announced it had acquired Zenverge, a fabless chip vendor of advanced HD content processing.

Zenverge has transcoding technology that enables one media stream to be converted into multiple streams with different formats. This is optimized for specific internet connected devices or platforms.

Freescale has several technologies for IoT covering a broad range of applications in consumer, automotive, industrial and wearables. What has not been addressed is how the visual experience will play in IoT.

Zenverge’s technology offers a very efficient encoding and decoding scheme which offers fast response, reduced amount of memory required and power savings.  Additionally, Zenverge has proprietary security for sharing HD video content and other rich digital content.  The company has proprietary encryption/decryption technology and watermarking of data. Thus, it can validate the user, validate the data in another location and maintain this validation throughout the delivery system.

Are We Going to Kiss our Cables Goodbye?

Keyssa recently announced a new wireless technology:  Kiss Connectivity.  Kiss is a point-to-point technology (as in one centimeter apart) that enables devices to transfer or stream data at 6Gb/sec, which is faster than USB 3.0 5Gb/sec speed.  Keyssa promises the transfer of entire movies in seconds.  Picture NFC on some serious steroids and you’ve got it.  The table below shows where Kiss sits on the speed spectrum compared to some other popular connectivity technologies.

Connectivity comparison.png

Some big names in the electronics industries are behind this company.  The Chairman of the Board of Keyssa is Nest’s CEO Tony Fadell.  Keyssa is backed by Intel and Samsung, among other companies. 

If Kiss takes off, it will squash TransferJet’s chances of making much of a splash in the market; it has been struggling to make headway already.  Depending on how much it costs, and the security level it brings, it may make a dent in NFC’s market as well, but NFC is really suited for enabling things like smart cards, tickets, and hotel keys where small bits of data is being transferred, so the overlap there is not as great.  Pricing has not been announced yet for Kiss.

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