Menu
Tough times ahead for semiconductor business

Tough times ahead for semiconductor business

The number of companies building and designing microprocessors is likely to shrink by approximately 40 percent over the next 10 years, analysts from Gartner predicted at the research firm's Semiconductor Industry Summit conference here in San Francisco Tuesday.

"We're expecting far fewer chip vendors in the next 10 years or so," said Jim Tully, Gartner's vice president and chief of research, speaking to attendees at the conference.

The semiconductor industry was hit hard by a downturn in high-technology spending that began in 2001, before recovering late last year. However, this recovery is not expected to last. Gartner research predicts that there will be weakness in the semiconductor market through 2006, combined with consolidation in the industry, Tully said.

As chip makers begin integrating features like processing, networking and graphics onto single chips, many companies that today focus on a particular system function will have to change their ways. That will, in turn, lower the number of chip-makers in the industry, Gartner research predicts.

Pat Gelsinger, Intel's senior vice president and chief technology officer, agreed that consolidation is in store for the industry.

The move toward including a greater number of systems components on microprocessors will also put pressure on chip companies that do not own manufacturing facilities, called fabs, Gelsinger said, during a question-and-answer session with conference attendees.

"That's one of the reasons you're seeing design costs for some of the fab-less guys going up," Gelsinger said. "That will drive consolidation going forward."

Gelsinger predicted that Intel will maintain its historical pace of doubling processor performance every two years for at least another decade, at which point the company will be building chip components using a 20-nanometer (nm) process -- far smaller than the 90nm process that is just now becoming state of the art. A nanometer is one-billionth of a meter.

By the time it is using a 20nm process, Intel expects to be building processors in the "20 billion transistor range," Gelsinger said. Intel's current Itanium 2 processors contain approximately 500 million transistors.

However, more advanced process technologies, and the added complexity they introduce, will slow down the rate at which these "fab-less" companies can bring their own chips to market, Gelsinger said. "It's going to increase the separation of the haves and have nots"

And keeping pace with the technology required to maintain a state-of-the-art fab is not cheap, Gelsinger added. "If you're not investing at the rate of US$2 billion capital (per year), get out of the business," he said.

Though Intel experienced weaker than expected consumer PC sales during the recent back-to-school period in the U.S., the company sees potential in countries like China, India and Brazil, Gelsinger said. "We've not given up on the PC market...we think there's still a growing business there, especially when you consider it geographically," he said.

"Ultimately the semiconductor business can be five or 10 times the size it is today," he said. "There are a few turbulent years of cycles between now and then, but ultimately it's a growth business."

But the industry will not hit the high growth rates Wall Street analysts once expected, Gartner said. "We saw 16 percent growth up to 1996," said Tully, predicting that rate will drop to 10 percent through 2010.

Part of the problem is that the industry has simply gotten too large to continue to grow as rapidly as it once did, said conference attendee Roger Reak, general manager of Mitsubishi Electric Automation's semiconductor business group.

"The market has achieved a size where growth rates can't be at the levels they were in the 70s, 80s , and 90s," he said.


Follow Us

Join the newsletter!

Error: Please check your email address.
Show Comments