Semiconductor Industry Pac-Man and the DMSMS Fallout

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Semiconductor Industry Pac-Man and the DMSMS Fallout

Inventory Distribution Product Manufacturing Manufacturing Services

Dan DeiszDirector of Design & Technology

December 2015


Table of Contents

• Semiconductor Market Segments

• Semiconductor Industry Consolidation

• Market Segment Focus of Mergers & Acquisitions

• Product Fallout – Winners & Losers

• Packaging Fallout

• Military Strategies for Semiconductor M&A Fallout

• Conclusions


Semiconductor Market Segments

2013 – The last year that government spending was uniquely tracked.


Semiconductor Market Segments


Semiconductor Industry Consolidation

• Altera – Intel

• Freescale – NXP

• Broadcom – Avago

• Atmel – Dialog

• International Rectifier – Infineon

• Micrel – MicroChip

• PMC-Sierra – Skyworks

• EZChip – Mellanox

• Pericom – Diodes

• IBM Micro – Global Foundries

• Fairchild – ON

• Maxim?

• Others?


Semiconductor Industry Consolidation


• Inexpensive Capital

• Cash on hand with larger companies

• Many chip stocks are historically undervalued

• Smaller companies struggling to compete; need scale– Heavy R&D required to keep profit margins up

• Moore’s Law slowing down and becoming expensive– Industry maturity

– Only 4 companies at 14nm (Intel, TSMC, Global, Samsung)

– SMIC not too far behind

• Focus on growth markets of Datacenters, Automotive, and Consumer

Semiconductor Industry Consolidation:Why now?


Chinese government-backed Tsinghua Holdings

– $100B over 5 years

Semiconductor Industry Consolidation:Why now?


Market Segment Focus of Mergers and Acquisitions

Merger or Acquisition Go-Forward Market FocusIntel - Altera Datacenter Silicon

NXP - Freescale Automotive & IoT

Avago - Broadcom Networking

Dialog - Atmel Industrial Sensors

Infineon – International Rectifier Larger scale in Power Semiconductor market

Microchip - Micrel Larger scale in industrial, automotive, and communications

Skyworks – PMC-Sierra Data storage & transport hyper-scale datacenter

Mellanox - EZChip Layers 1-7 connectivity for datacenters and carriers

Diodes - Pericom Larger size/scale of mixed-signal portfolio

IBM Micro - Global Foundries Larger scale for leading-edge foundry capability

Fairchild - ON Larger scale in Power Semiconductor market & Automotive

Datacenter, Automotive, Consumer/IoT, Larger Scale


Product Fallout :Market Segment Focus Major Areas

• Datacenter Silicon– Processors (Intel)

– SSD Disk Drives – New memory architectures (Intel/Micron 3D Xpointvs. HP/Sandisk – Memristor SCM technology)

– Spinning Disk Drives (Seagate, WD)

– Connectivity (Mellanox, Skyworks, Avago)

– Power Management (TI, Infineon, ON)

• Automotive– Sensors (Renesas, Infineon, NXP, ST, Infineon)

– Microcontrollers (NXP, Infineon, TI, Dialog)

– Power Management (TI, Infineon, ON)

• Consumer (IoT)– Sensors (Sony, ADI, NXP, Infineon)

– Processors & Microcontrollers (Nvidia, Qualcomm, Intel)

– Smart Cards (NXP, Infineon, Samsung, ST)

– Wireless (Avago, TI)


Product Fallout :Questions to Ask of Market Segment Focus

• Intel – Altera with a focus on Datacenter Silicon– Support for silicon not fabricated at Intel?

– Independent entity until?

– Management structure?

• NXP – Freescale with a focus on Automotive & IoT– Future of PowerPC and 68xxx at Freescale?

– Fab and product line consolidation likely?

– Management structure?

• Avago – Broadcom with focus on Networking– Avago aggressively drives cost/profit, culture differences, layoffs?

– Very large portfolio likely to be consolidated?

– Management Structure?


Product Fallout : Winners & Losers

• Winners– Automotive Market Segment

– ARM processor architecture

– SSD memory architectures (new)

– Power Management

– Xilinx, for now

• Losers– PowerPC processor architecture

– 68xxx product architecture

– Older products run on internal fabs

– Non-SSD memory architectures

– Military Segment

– Leaded package options

– Anything in higher pin-count DIP, PQFP, or PLCC packaging


Packaging Fallout

• Massive semiconductor market consolidation brings product-line consolidation and/or elimination

• Product lines can be discontinued because of revenue, silicon, packaging, and test platform reasons

• Packaging obsolescence:– DIP

• 40-pin first, followed by others

– PQFP

• Higher pin count (e.g. 240-pin) first, followed by others

– Flip-chip BGA substrates are unique for each design!

– Leaded options

Package Obsolescence is a Significant EOL Driver


Military Strategies for Semiconductor M&A Fallout

• Count on more redesign/refresh money

• Budget for dramatic increase in LTBs over next couple years

• Invest in custom silicon for long-term systems:– Control more of what is available and when

• Adopt Automotive product architectures:– Military will never again be a market segment focus for new semiconductors

– Industrial Controls may be another segment for applicable architectures

• Watch the IoT segment space for the establishment of long-term available semiconductor products

• Incorporate trends in package obsolescence


Military Strategies for Semiconductor M&A Fallout• Adopt the strategy of proactive continuing source management:

– Military should pay for the component-level BOM from the OEMs

• Letting the OEM, alone, decide mitigation strategy when there is also incentive for redesign dollars is a conflict of interest

– This is not just running the BOM through a parts search engine and reporting BOM health

– Check with ALL Authorized Sources

• Authorized sources while a part is active can be different than authorized sources when inactive

– Proactively divide BOMs into critical parts versus non-critical parts – push the OEMs to do this up front!

• Critical parts are anything software touches and are typically Processors, ASICs, FPGAs, Microcontrollers, and specialized memory

• Non-critical parts are less effort to design out or design around

• Partner with a long-term semiconductor supplier and the OCM BEFORE obsolescence occurs to ensure solutions for Critical Parts

Improvise, Adapt and Overcome


Conclusions

• Market segment focus and the need to scale are the primary

drivers for the 2015 semiconductor M&A activity.

• Semiconductor OCM consolidation in 2015 is massive and

will change product availability starting in 2016.

• Package obsolescence is part of the fallout of product line

and industry consolidation.

• Partner with a long-term semiconductor supplier BEFORE

obsolescence.

• Improvise, Adapt and Overcome!