SEMI ISS 2017 uncovers new growth, forecast upgrades

SEMI’s Industry Strategy Symposium (ISS) opened yesterday with a theme focused on new industry forces and new markets.  The annual three-day conference of C-level executives gives the year’s first strategic outlook of the global electronics manufacturing industry. Today’s keynote, economic trends, and market perspectives highlighted market and technology opportunities and marked the rising tide for 2017 investments in the semiconductor manufacturing supply chain. While Day 1 brought both insight and optimism to the more than 200 attendees, deeper discussions on technology, applications, regional opportunities, and an expert panel on mergers and acquisitions will be presented on Day 2 and Day 3 of SEMI’s business leader annual kick-off event.

Opening keynoter Gary Patton, CTO and senior VP of worldwide R&D at GLOBALFOUNDRIES, presented a wide-ranging overview of industry growth and opportunities. Referencing Thomas Friedman’s three disruptive trends:  globalization, climate change, and Moore’s Law, Patton showed 2016’s global semiconductor merger and acquisition activity exceeding a staggering $130 billion and China’s rapidly growing IC production which is forecast to reach more than 20 percent of global output in 2020.

Patton identified five areas of semiconductor growth: IoT (Internet of Things), Automotive, 5G (mobile network), AR & VR (Augmented & Virtual Reality), and Artificial Intelligence.  From 2016 to 2025, Patton forecasted that semiconductor IoT content will grow from $15 billion to $62 billion, Automotive will grow from $32 billion to $51 billion, 5G will grow from $0 to $20 billion, AR/VR will grow from $4 billion to $131 billion, and Artificial Intelligence will grow from $5 billion to $50 billion.

For these different growth areas, Patton and GLOBALFOUNDRIES see a variety of solutions, what they’re calling “the right technology for the right application.”  This includes FinFET, FD-SOI, and different technology nodes selected for specific applications.  DTCO (Design-Technology Co-Optimization), and collaboration with not just suppliers, but sub-suppliers, raw materials and components manufacturers were key tools for success with Patton calling for greater cooperation in working within SEMI’s Semiconductor Components, Instruments, and Subsystems (SCIS) Special Interest Group.

In the Economic Trends session, presenters took on macroeconomic trends and detailed industry-specific forecasts:

  • Paul Thomas, Economic Stories, long-time former chief economist at Intel, drilled down on the topic of innovation, productivity, and economic stagnation.  Thomas presented data that showed productivity growth rates are not showing the expected benefits of digitization (computers, etc.).  He discussed possible causes for the discrepancies and gave food for thought on the gaps between perceived and measured productivity gains due to digital innovations.
  • Jim Hines, Gartner, provided a recently upgraded semiconductor and electronics market.  With recent improvements in chip prices, increasing semiconductor content, and inventory replenishment 2016 IC revenue was upgraded from 0.9 percent to 1.5 percent for 2016.  2016 is now forecast to come in at $340 billion.  2017 forecasts were adjusted from 5.5 percent to 7.7 percent.  Areas for strong growth are seen to be non-optical sensors (NOS), memory, opto-electronics and automotive growth (driven by connected vehicles, automated driving, and powertrain electrification).
  • G. Dan Hutcheson, VLSI Research, forecasted semiconductor equipment revenue at $54 billion, up 10 percent in 2016 and an outlook for $58 billion, up 8 percent, in 2017. Hutcheson showed data that the industry bottomed in April 2016 and in July 2016 demand pressure shifted the industry into an upturn.  Shortages in semiconductor supply will continue to drive growth in 2017.  Cloud computing and automotive are hot spots with smartphones in China, PC replacement cycles, DRAM pricing and Flash for SSD providing further positive support.
  • Michael Corbett, Linx Consulting provided an overview of the dynamics for wafer fab materials in the semiconductor industry. Corbett noted that the market for semiconductor materials was $18.5 billion in 2015 with the top 50 suppliers accounting for $17.2 billion or 93 percent of the materials sold.  M&A has been active in materials with recent combination of Dow & DuPont (proposed), Linde and Praxair, and Air Liquide and Airgas.  Corbett identified key trends impacting WFM suppliers including a consolidating customer base while at the same time the industry finds new entrants from China.
  • Matt Gertken, BCA Research provided a more academic geopolitical outlook for 2017.  Looking through the lenses of multipolarity, mercantilism, and dirigisme, Gertken provided context for the changes in progressive and protectionist forces over time.  Showing that globalization increased almost monotonically from 1950 through 2010, it appears to have hit a trade globalization peak where globalization plateaued and, in part, set the stage for Brexit and the unexpected Trump win and related more protectionist sentiment.

The afternoon session focused on Market Perspectives, including consumer, artificial intelligence (AI), Internet of Things (IoT), and automotive.

  • Shawn DuBravac, Consumer Tech Association, gave a summary of CES 2017 which just ended the day before.  DuBravac found three unifying trends at this year’s event:  voice, AI, and connections and computations.  It is anticipated that we are entering the era of faceless computing. The next computer interface is voice – with vocal computing replacing the traditional GUIs for robots and other emerging computing devices.
  • Prasad Sabada, Google, in his presentation on “Cloud and Moore: Disruptors for Semiconductors,” discussed two inflection points.  Tectonics shift #1:  Cloud. Tectonic Shift #2:  No more Moore’s Law.  Sabada sees the industry entering an era of accelerators – application specific devices that may leapfrog up to three Moore’s Law node generations.  Sabada called upon the semiconductor manufacturing industry for the need for speed (launch changes at the speed of software), the need for balanced system integration (innovation across the system), and the need for open innovation and collaboration.
  • Dario Gill, IBM Research, focused on “the new frontiers” of computing.  Gill talked about “Beautiful Ideas.”  He presented two:  Artificial intelligence, a beautiful idea with consensus; and Quantum Computing a beautiful idea (currently) without consensus.  He went on to show the value of artificial intelligence and the complicated and extraordinary potential for Quantum Computing.
  • Mark Bünger, Lux Research, believes the industry needs to rethink sensors, networks, and autonomy in automotive. Bünger forecast that autonomy could proceed much faster than diffusion of other car features because of its massive potential for improving utilization. It is not without disruption, though, as carmakers are worried about “losing the dashboard.”  Bünger provided several visceral examples of autonomous driving scenarios to make the case for AI moving to the IoT edge – and not relying on the Cloud.
  • Andrew Macleod, Mentor Graphics, discussed how automotive electronics are “a non-linear system of systems.”  Macleod pointed out that there have been three waves of recent progress in automotive electronics.  The first wave was globalization in 1984 when VW (and others) moved into the China market and pioneered automotive R&D decentralization and regional customization.  In the second wave came automotive drive electrification with the Toyota Prius in 1997.  The third wave was digitalization and the democratization of automotive.  The car is now becoming a consumer device and needs new design tools to manage the enormous amount of electronics complexity and permutations.

Days 2 and 3 at ISS will delve deeper into the industry ─ technology, manufacturing, public policy, and global forces, including China’s new focus on semiconductor manufacturing ─ with presentations from: AMEC, Applied Materials, Cadence Design Systems, imec, JSR, McKinsey & Company, Shanghai Huali Microelectronics (HLMC), IC Knowledge, International Business Strategies, Nikon, SanDisk, and SEMI. The Tuesday morning keynote is presented by Diane M. Bryant of Intel. Diego Olego of Philips Healthcare will offer the closing keynote on Wednesday, immediately before the ISS Panel on “The Future of M&A in the Semiconductor Industry,” with panelists from DCG Systems, FormFactor, MKS Instruments, and Stifel Nicolaus; moderated by Robert Maire, Semiconductor Advisors.

The SEMI Industry Strategy Symposium (ISS) examines global economic, technology, market, business and geo-political developments influencing the global electronics manufacturing industry along with their implications for your strategic business decisions. For more than 35 years, ISS has been the premier semiconductor conference for senior executives to acquire the latest trend data, technology highlights and industry perspective to support business decisions, customer strategies and the pursuit of greater profitability.


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