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Semiconductor outlook 2021 — navigating through turbulent times : Part 2

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Here is part two of the SEMI Silicon Valley Chapter and SEMI Northeast Chapter conference on semiconductor outlook for 2021.

Turbocharged digitization
Dan Hutcheson, CEO, VLSI Research, presented on how the pandemic has turbocharged digitization. There are macro factors driving the semiconductor industry. Covid-19 closed one door and opened another. We have since gone from rainy situation to a sunny situation. The semiconductor industry had prepared the world for Covid-19. This year has started really strong. IC market growth has been slowing because of Covid-19.

Dan Hutcheson.

This year, VLSI Research’s forecast for semiconductor equipment industry is about 20 percent. Zooming in on critical IC market segments, semiconductor sales growth should be +13 percent.

Focusing on IC market growth this week, the 13-week MA shows 2021 has kicked off on a strong growth path. Unlike the last 2 years, DRAM, NAND, auto, analog logic, and power are in a tight growth pattern – most recently ranging from +14 percent to +19 percent. In 2019, DRAM and NAND sung the blues after a hot 2018. 2020 was the year for auto ICs to be blue. With all the news of an auto IC shortage, this market is clearly hot. The auto IC sales are forecast to grow 21 percent. Seeds of auto IC shortage in 2020 were sown in poor supply chain management.

DRAM is very data-driven and forecast to grow 21 percent. NAND IC sales is forecast to grow 15 percent, as well. Analog IC and power discrete sales is forecast to grow 12 percent. Logic IC sales is forecast to grow 10 percent.

IC supply/demand trends
Looking at the IC supply/demand trends, IC wafer fab production levels continued to rise last week at ~20 percent above 2020 levels, with production levels above 2M 300mm equivalents per week. Supply/demand status held tight for the week. DRAM jumped, NAND and IDM tightened, while foundry, OSAT, and analog and power loosened. The 1Q nowcast is tight

In semiconductor utilization, all sectors are high. These include wafer fab, test, and packaging. Electronics’ prices are also declining. These include TVs, PCs, notebooks, tablets smartphones, cell phones, digital cameras, appliances, etc.

Looking at semiconductor inventory, the inventory-to-billings ratio is in an expansionary range, and ~0.25 below critical levels. Total IC inventories are in decline, suggesting high fear levels at the start of 2021.

Semiconductor/semiconductor capital equipment 2021 outlook
Harlan Sur, Executive Director, JP Morgan, presented semiconductor/semiconductor capital equipment 2021 outlook and long-term trends. Semiconductors/semicap stocks have outperformed the market over the last 1, 3, 5, 10 years.

Harlan Sur.

Drivers of the strong stock performance include the realization that semiconductors are the foundational building block for all innovation in the technology sector — applications/devices/appliances are getting more intelligent and requiring higher levels of semiconductor $ content. There is lower cyclicality in the industry driven by end-market diversification and disciplined supply growth. Lower cyclicality drives more focus on profitability and free cash flow expansion, leading to strong capital return to shareholders.

Industry consolidation (M&A) is expected to drive diversification, R&D scale, and enhanced profitability and capital returns. Near-term, there is positive Y/Y inflection in semiconductor company revenues in 2H20, and expectations of industry growth through 2021. We expect long-term positive fundamental trends to continue going forward. Semiconductors have been in more stable growth phase. There is focus on market leadership, strong product cycles, margin/free cash flow expansion, and capital allocation.

End-market diversification and lower industry cyclicality drives more focus on profitability and cash flow. As operating margins and free cash flow margins have expanded, companies put in place strong capital return programs, driving higher valuation multiples. Industry consolidation has driven valuation multiples higher over time.

Cyclical trends
Semiconductors/semicaps growth and cyclical trends remain positive entering 2021 and beyond. We believe the semiconductor industry has entered a more stable and less cyclical growth phase characterized by low- to mid-single-digit annual revenue growth and high-single-digit unit growth. With the industry generally driving high-single-digit Y/Y unit growth, the entire value chain is able to better predict silicon consumption requirements, better respond to perturbations in supply/demand, and more efficiently plan manufacturing output. As a result, volatility in semiconductor supply/demand and semiconductor equipment spending has muted significantly.

Compare this to 15-20 years ago, when unit growth rates were +15 percent Y/Y – small perturbations in supply/demand would drive significant swings in inventory, shipments, capacity planning, and equipment spending. Bottom line: The current environment is likely more stable and less cyclical for semiconductor and semiconductor capital equipment suppliers. In a maturing industry, we believe the market will focus on market leadership/scale, operating margin and free cash flow margin expansion, and increasing payout ratios.

We see the semiconductor industry revenue up 10-12 percent Y/Y (bias upward) in 2021, following a 7 percent Y/Y growth in 2020. If you recall, the 2H20 demand picked up significantly and growth turned positive after 1H20’s weak demand environment and supply chain disruptions (Covid-19). In semiconductor equipment, we see spending up ~16 percent Y/Y in 2021 led by DRAM and foundry strength.

As for supply constraints across all end markets, we see multiple quarters of strength for the semiconductor suppliers. Channel/customer inventories are at/near historic lows, and lead times are continuing to get stretched out. Given the strong demand environment combined with supply tightness, we anticipate strong demand trends through 2021.

We expect continued industry consolidation (M&A). There is focus on scale, diversification, and margin and FCF expansion. There is promising outlook for foundry/memory in 2021, with demand and capex spending driving strong semiconductor equipment fundamentals. Potential investment in US domestic manufacturing capability is a positive, with innovation and assurance of the supply base.

Industry consolidation should also support valuations. We can expect more M&As to happen. Semiconductors are consolidating focus on building scale and driving profitability improvements, End-market diversification, etc. Consolidation should drive more stable revenue growth and improve margins. Less competition leads to less pricing pressure. There will be more market leadership and diversity. In 2015-2018 have seen $100 billion+ per year in M&A deal activity vs. the $20-30 billion run-rate prior to this time period.

M&As are characterized by big getting bigger. Going forward, we expect to start seeing a lot more M&A activity with the smaller/medium-sized companies, as there is pressure to drive scale to compete with much bigger competitors.

Data center fundamentals strong
Strong data center fundamentals, led by cloud service provider (CSP) spending are driving strong demand for compute, networking, and memory/storage semiconductors.

Look for companies levered to data center trends to outperform in 2021 across compute, networking, and storage/memory after digestion cycle in 2H20. CSP spending (top 4) grew by 10 percent in 2020 and was up 6 percent in 2019. We expect cloud spending to reaccelerate in 1H21 and grow 25percent+ in 2021, and at 10-15 percent CAGR over the next few years.

Cloud services revenues continue growing >40 percent + Y/Y. Over the next 5 years, CIOs should grow spending on public cloud by 4x. Early ramp of new processors by Intel, AMD, Nvidia, and ARM will see adopters. Silicon switch ports (>25Gbps) should grow 23 percent CAGR. DRAM memory content in a cloud server is 50 percent higher than traditional enterprise server – OW MU. Data center compute acceleration is growing >25 percent CAGR, driven by higher complexity workloads (AI/Deep Learning, analytics, etc.).

Resurgent custom chips
Custom chip (ASIC) market is experiencing a resurgence in activity as large OEMS, cloud, and hyperscalers look to differentiate at the silicon level — $10-$12 billion silicon market opportunity. Demand is rising for custom ASICs as many large OEMs/CSPs/hyperscalers are looking for more differentiation, better performance, lower power consumption and overall lower cost of ownership versus off-the-shelf chip solutions (or ASSPs).

These same customers do not have the capabilities to do large complex SoC) designs, nor do they have the broad IP portfolio of on-chip design blocks, like high-speed SERDES capabilities or high-speed memory interface technology. They need to engage with semiconductor companies (ASIC companies) that have the IP and chip design expertise (Broadcom, Marvell, Intel, MediaTek as examples).

The digital custom ASIC chip market is a ~$10-$12 billion per year market opportunity. These include cloud/hyperscale ASICS (AI processors, smartNICs, security/video processors, networking/storage acceleration). Telco/service provider equipment OEMs also see growth, for 5G base station modems, 5G digital front ends, 5G MIMO/beamforming DSPs, and coherent DSPs for long haul/metro.

There are 5G opportunities too. These benefit wireless infrastructure and wireless RF smartphone market leaders. 5G base station deployments are growing by more than 22 percent CAGR (2020-2023E). 5G base station estimates are growing from 2020’s ~800k to 2023’s ~1400k. We expect North America activity to pick up in second half of the year followed by Europe in 2022.

Digital semiconductors are growing from ~$3 billion in 2020 to ~$4 billion in 2023. Analog semiconductors will grow from $0.8 billion in 2020 to $1.1-$1.2 billion in 2023. This is a positive for players like Broadcom, Marvell, Intel, Analog Devices, Xilinx, Qorvo, NXP, etc. Massive MIMO/Beamforming are key enablers of 5G sub-6 GHz and mmWave to increase network capacity, data rates with better energy efficiency and TCO. GaN opportunity scales with number of antenna elements. GaN market will grow from ~$350 million in 2020E to ~$550 million in 2023E (15-20 percent CAGR).

5G smartphone complexity benefits the RF market leaders such as Qorvo, Skyworks, Broadcom, etc. The market is growing at 10-12 percent CAGR (2019-2022E). 5G smartphone estimates are growing from 2020’s 225 million to 2022’s 725 million. Ramp of 5G to meaningfully increase RF market opportunity primarily on new sub-6 GHz content, millimeter wave, are also additive over the next few years. There will be ~$5-$7 of incremental 5G sub-6 GHz content. This is positive for Qorvo, Skyworks, Broadcom, etc. Core base component expertise will grow, across PAs, switches, premium filters, etc. It is difficult to insource with lack of foundry model/merchant filter vendors.

Memory growth
Demand growth has been accelerating in memory. Pricing should improve meaningfully in DRAM in early 2021, while price declines in NAND are still moderate. Bit demand in DRAM and NAND should accelerate in 2021. DRAM bit demand should increase to >20 percent with strong demand for server and mobile DRAM. The NAND bit demand should increase to ~40 percent led by SSDs and mobile devices.

There is supply tightness in DRAM, as a result of lower DRAM capex in past two years. It should lead to improved pricing and ASP increases in 2021. NAND market is still in oversupply. ASP declines are set to decelerate later in 2021.

Capital intensity has been increasing across the device types. This is a positive for semiconductor equipment. Increasing capex should drive bit growth for DRAM and NAND. NAND capital intensity for 12X layer should be >50 percent higher than 4X layer NAND. This will require increasing the capex to drive bit growth for DRAM and NAND. Capital intensity is also increasing for foundry/logic, even as EUV has begun ramping. There is 5nm capital intensity that is >50 percent higher than 14nm/16nm. Increasing capital intensity is positive for semiconductor equipment companies, as spending on equipment will likely have a higher floor and be less cyclical over the next several years.

Looking at the wafer fab equipment (WFE) forecast and key programs for semiconductor manufacturers in 2021, we estimate WFE spending is on track to increase by ~16 percent in 2021 to nearly $70 billion.

We expect memory to recover in 2021 led by DRAM on improving supply/demand fundamentals with foundry/logic spending sustainable. Key drivers include following muted memory WFE in 2020 that was held back on supply discipline, we expect memory spending to accelerate to double-digit percent in 2021 led by DRAM. We expect continued foundry/logic spending strength in 2021. This will be broad-based across leading and lagging edge technologies. China spending should remain strong in 2021 as local manufacturers come up the learning curve.

Semiconductor industry could be worth trillion dollars by 2036

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Semiconductor Industry Association (SIA) held a conference to make sense of the trends that shaped the global semiconductor market in 2020, and look ahead to what is in store for 2021.

The participants were Andrea Lati, VP, Market Research, VLSI Research, Dale Ford, Chief Analyst, Electronic Components Industry Association (ECIA), and CJ Muse, Senior MD, Head of Global Semiconductor Research, Evercore ISI. Falan Yinug, Director, Industry Statistics and Economic Policy, Semiconductor Industry Association, was the moderator.

Falan Yinug and Dale Ford (T). CJ Muse and Andrea Lati (B).

Tough 2020!
Andrea Lati, VLSI Research, said that for the IC trend, the growth has accelerated since November 2020 as component shortages had strengthened prices. DRAM and NAND started 2020 very strong. They dropped during the middle of the year. The rebound happened during H2-2020.

IC recovery has since been sustainable, including for analog, power, etc. IC inventories have also been improving. They were running 8 percent above a year ago, in December 2020. The chip price performance index (CPPI) was relatively flat in 2020 despite high inventories in memory. Steady increase in Q4-2020 bodes well for 2021 prospects.

Dale Ford, ECIA, said there was a whipsaw disaster in 2020 that required a nimble response. There was a supply chain impact in 2020 due to the government quarantine orders and directives on company’s workforce and operations. Things calmed down after a time. The index of concern was quite high by August 2020, but, it is now coming down. Q4-2020 data will see numbers improve.

CJ Muse, Evercore ISI, said the semiconductor industry had gone through a correction in 2019. We were set up very well during 2020. Things were not as bad as feared in 2020. TSMC revenues were flat in April. There was an over reaction in automotive production. By September, TSMC-Huawei embargo had happened.

What’s ahead in 2021?
Andrea Lati noted that there will be continued worldwide GDP growth in CY21 from 2H20. Cloud and hyperscale datacenter will be a key drivers for the semiconductor industry. Hyperscale capex is at an all-time high. Cloud investments are supported by strong financial performance. 5G proliferation will be another big driver. 5G smartphone shipments will double in 2021. There will be increasing deployments for 5G base stations.

VLSI Research has forecasted 12 percent growth in semiconductors for 2021. Memory will lead the way. There will be continued recovery in auto, industrial, etc. Capex remained top-heavy despite increased spending by Chinese manufacturers. TSMC will definitely increase the capex, along with Intel, among the top 10 spenders. Semiconductor and equipment recovery is on track. There is buildout of IT infrastructure, 5nm demand ramp, 5G growth, memory capacity buildout, etc.

Trillion-dollar industry by 2036?
Dale Ford felt that the annual revenue cycle trends are up, starting from Sept. 2019. Annual revenue growth profile continued steady through 2020. It broke positive in August 2020. There are now strong demand and technology drivers. Semiconductors sit right at the top of the profile. Average lead times have also improved, especially, for controllers and processors. There was an upward trend in analog and logic components. The demand for discrete components and automotive components are also in the news.

There has been solid start to the current cycle. Most cycles last about four years. The technology/market forces are aligning to support growth in 2020+. Semiconductor industry has become much more responsive to the market indicators. We have an opportunity to see the ‘swoosh’ scenario. There are concerns about the global economy. However, electronics and semiconductors have been the biggest beneficiaries of the free trade.

The long-term semiconductor growth trends are moving toward $439-$472 billion by January 2021. It can easily move to $750 billion by 2030, and perhaps, a trillion dollars by 2036. Some positives include medical equipment, data centers, telecom infrastructure and 5G, solid-state drives, touchless solutions, memory, and sensors. The triumvirate of cloud, 5G and IoT, will make the long-term future looks very bright.

CJ Muse said there was higher OSAT pricing throughout the year. PCs grew 13 percent in 2020. It will probably be flat in 2021. Semiconductors are benefitting from being the component for the new economy. There will be 30 percent growth in DRAM and 12 percent growth in NAND. Industrial is just beginning to recover. IoT and smartphone are going to see huge growth. The party is just getting started. 2021 will be a great year, followed by 2022. There will be more supply, leading to some buffer stocks.

The world economy is depending on semiconductors, as the last year has shown. The impact going forward, will be on the supply chain. There are applications of AI for supply chain management, and key performance indicators and predictors. We need to deal better with the Black Swan events in the future. The SIA is also looking at a study on the supply chain, which will be coming out soon.

Automotive issues
Ford added that the Covid-19 crisis needed agile and nimble response. We are dealing with an industry that deals with how long it takes to produce a chip. Automotive lines were being shut down. Demand came back stronger, than expected. They need products built on 200mm. Investments have been more on the leading-edge technologies.

For lack of a low-cost component, other things can get held up. TSMC, UMC, etc., are taking some steps, but that won’t solve matters that easily. There are challenging questions regarding chips that automotives need. Muse remarked that semiconductor contracts with automotive manufacturers are long lasting. These chips are built for the different vehicles. Chip makers may want to cut supply.

Semicon spends healthy
Andrea Lati noted that spending levels have been healthy. China has also come up strong. TSMC, Samsung, etc., are seeing sectoral trends. They anticipate greater demand ahead. We are looking at tight market conditions. We may end up looking good in 2021. That should drive more capacity increases.

Long-term growth factors for the global semiconductor industry are there. Dale Ford felt that the future is bright. There have been many products that have shaped the world. The markets won’t fail in the future for the lack of innovation and technology.

Lati felt there could be some geopolitical risks in some parts of the world. Muse added that rising prices will occur in 2021. Ford added that there can be a policy of bifurcation with China. There could be changes in supply chain, and that could be a concern.

TSMC, UMC in green for March! Global semicon growth down!!

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In what may be termed as some good news, two leading semiconductor wafer fab companies, based in Taiwan, have recorded positive increases for March 2020.

menlo-waferTSMC announced net revenues for March 2020 on April 10. On a consolidated basis, revenues for March 2020 were approximately NT$113.52 billion, an increase of 21.5 percent from February 2020 and an increase of 42.4 percent from March 2019. Revenues for January through March 2020 totalled NT$310.60 billion, an increase of 42 percent compared to same period in 2019.

UMC, another leading global semiconductor foundry from Taiwan, recorded net sales of NT$ 14,570,408 in March 2020, as against NT$ 10,325,739 in March 2019, and NT$ 13,606,421 in March 2021.

TSMC’s Q1 2020 earnings release conference will be held on April 16, 2020, at 2 pm Taiwan time. UMC will hold its Q1 2020 earnings release and investor conference call on April 27, 2020. TSMC also has plans to build beyond-5nm logic technology platform and applications, for 6th generation FinFET CMOS technology platform for SoC, in 2021.

Global semicon growth hit
VLSI Research’s projection expects a big hit to the semiconductor industry in 1H20, followed by recovery in H2. In case the recovery is delayed, declines in electronics, ICs and equipment will be far greater. The falling end demand will see half the IC recovery, and keep the IC market in the red, in the near term. VLSI Research puts mild-Covid 19, with delayed recovery in 4Q20. But, it also puts severe Covid-19 impact and recovery in 1Q21.

As per the latest data from Statista, the forecast predicts a worst case scenario of a 12 percent or more decline to global semiconductor industry revenues, as impacted by Covid-19 outbreak. It will bring serious implications for the wider technology industry. The technology supply chain would take approximately 3 months to recover, while the global disruption to the economy and technology demand would likely last for at least 12 months.

Industry should stay up and running
The Semiconductor Industry Association (SIA) released a statement from president and penn2CEO John Neuffer commending congressional approval and enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act recovery package. SIA represents U.S. leadership in semiconductor manufacturing, design, and research, with members accounting for approximately 95 percent of US semiconductor company sales.

In a paper titled: Why the Semiconductor Industry Must Stay Up and Running as We Confront COVID-19, the SIA has called on all governments around the world, at all levels – central, states/provinces, and localities – to prioritize continued operations for their domestic semiconductor companies and their suppliers by defining the semiconductor industry and its supply chain as “essential infrastructure” and/or “essential business.

AMCHAM, CSIA, ESIA, JSIA, KSIA, SEIPI, SEMI, SIA, SSIA, and TSIA have together called on nations to prioritize essential supply chain operations during Covid-19.

A release said: “We call on all governments to specify semiconductor industry operations as “essential infrastructure” and/or “essential business” to allow continuity in operations of an industry that powers our global digital infrastructure and underpins vital sectors of the economy.”

Yole Développement, in a report, says that the NAND and DRAM outlook appears favorable in 2020. Let’s see!

Robot disinfects large areas
In another development, a robot capable of rapidly disinfecting large areas has been invented by Forth Engineering in Cumbria, a world-first solutions business, to speed-up the fight against coronavirus.

Forth Engineering is known for its innovations to solve complex industry challenges in the nuclear, oil and gas, renewables and other sectors all over the world. Forth MD, Mark Telford, and his team have responded to the fight against COVID-19 by inventing a remotely-operated disinfecting robot.

Perhaps, the world has forgotten one simple line: everything runs on chips, or ICs, or semiconductors. If no semiconductors, then, nothing remains! And, that definitely will never happen!! Here’s how!

Steep rise in memory, RPA, Industry 4.0
Folks, expect a steep rise in memory and memory-related products. Especially, DRAM and NAND! There will probably be a huge demand for products and computers that are high on memory.

We may see a rise in RPA-related products. Industry 4.0 may gather steam as companies will now look to automate several or all processes across industries. Same for blockchain and delivery drones, and probably, self-driving cars. Perhaps, there may be more focus on smart cities as well.

There could be a rising demand for cloud-based application security solutions. As would high-performance computing. With it, servers, with even more storage. We may also see more connected enterprises in the future. Life sciences will probably go full speed, as could electric vehicles and hybrid electric vehicles.

Automotive, consumer goods, electronic components electronics, medical equipment and supplies, pharmaceuticals, may undergo a sea change as companies may look at other avenues, besides China. There may be, and should be, even more innovations happening, once Covid-19 has been tackled properly. Needless to add, remote working and online entertainment are bound to grow.

Expect, China to be at a receiving end in Asia as several companies will look for alternative bases, besides China. There could be lot of office space, now that social distancing is a norm.

One hopes to hear some more good news from the global semiconductor industry, despite these tough times.

Global semicon chip sales plunges 13.9pc in H1 2019; 5.5pc growth forecast for 2020

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Global semiconductor chip sales plunged by 13.9 percent during the initial six months of 2019, compared to a year earlier, the biggest drop in a half since the first half of 2009 — exactly a decade ago, according to IHS Markit.

Major chip suppliers suffered their worst revenue declines in years—10 years in some cases. Major semiconductor product areas also experienced the largest drops in demand since 2009.

Global semiconductor revenue in the first half totaled $203.7 billion, down from $236.6 billion in the first half of 2018. This represents the worst performance since the market declined by 26.5 percent in H1 of 2009.

Chip debacle?
First, wasn’t the chip debacle expected? Yes, said Ron Ellwanger, senior Research analyst, IHS Markit, USA. “In late 2018, IHS Markit had forecasted a significant decline in semiconductor revenue in 2019. Semiconductor inventory was high and demand was weak. We didn’t foresee any compelling new product to stimulate consumer demand and growth.”

So, what is the main reason for the precipitous drop in memory segment? And, is there a way out? According to Ron Ellwanger, they are overcapacity and weakend market demands. As the datacenter and handset markets recover, the existing capacity will be in utilized.

Again, what are the reasons for the drop in data processing? He said that data processing tends to refer to the PC market. The PC market continues to be negatively affected by smartphones. Servers and data centers were simply overbuilt. “As capacity is utilized, the next wave of build out will occur. We expect that to start in early 2020.”

Next, what are the reasons for the revenue declines in logic, sensors and actuators? Ellwanger said that there was a lack of new products that captured consumer interest, which increases demand. This caused the chip companies to see a decline in their orders. The market needs new compelling products for consumers to re-enter the market.

Is there any advice for the application markets that purchase semiconductors? He noted that application markets must develop new products that stimulate consumer’s desire to acquire the new device. Evolutionary products are not causing consumers to purchase the next generation gadget.

Forecast 2020
Finally, what is IHS Markit’s forecast for the global semicon industry for the end 2019, and full 2020? Ellwanger said: “The current IHS Markit forecast will be updated by the end of September 2019. Our existing forecast for 2019 is -12.5 percent, and we anticipate that this may further degrade.

“The current forecast for the global semiconductor industry for 2020 is 5.5 percent. We believe that this will be in the range of our new forecast.”

MEMS market likely to increase 8.3 percent CAGR in 2019-2024: Yole

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2018 was a good year for MEMS foundries offering manufacturing services. In 2019, piezoelectric technology is seen to be increasing its momentum. Edge computing and big data are other trends favoring the MEMS industry.

Performance in 2018
First, let’s go back to the past and see how was the MEMS manufacturing market performance in 2018. Eric Mounier, fellow analyst, Photonics, Sensing & Display, Yole Développement (Yole), said: “Competition was fierce for companies manufacturing the same devices. Broadcom led the race with its RF BAW filters in the consumer market. Two battlegrounds formed around inertial and pressure MEMS for consumer and automotive applications: NXP and Bosch competing in the automotive segment, while Bosch and STMicroelectronics clashing in the consumer market.

Eric Mounier, Yole

“Regarding MEMS foundries offering manufacturing services, 2018 has been a very good year for them in general. All foundries saw their revenues increase, some slightly others by a lot. ST is still profiting from its exclusive contract with HP for IJ printheads manufacturing. EU MEMS foundries were more focused on added value than volume, while Asian foundries were mostly interested by high volumes. Further, several MEMS foundries have already added, or plan to add, PZT and/or AlN capabilities to address the upcoming piezoelectric MEMS manufacturing trend.”

MEMS industry in 2019
Now, let’s see how 2019 has been panning out, so far. According to Mounier, in 2019, piezoelectric technology has been increasing its momentum. A revolution in MEMS technology is underway: piezoelectric MEMS.

More and more gyroscopes, BAW filters, and inkjet heads are being created with piezoelectric MEMS. Now, microphones, microspeakers, autofocus, and pMUT for fingerprint sensors, ultrasound, and gesture recognition, are underway too.

Source: Yole Développement, France.

Public/mainstream interest in this technology is also reflected by the increasing amount of funding in piezo tech. Another trend is edge computing, with sensors and MEMS driving a new age of technology. Big data is an industry born of recent advancements in AI and ML, built upon and fueled by a wealth of new data from ever-expanding sensor applications.

Sensors are digitizing the human experience, and as the real and virtual worlds move closer together, it will be sensors that bind them, enabling new experiences for users everywhere. Running AI at the edge, coupled with sensor fusion, will open new applications for MEMS in audio, motion, olfactometry, and imaging.

Difference in revenue
Now, there seems to be some difference in the revenue numbers for 2018. For example, after ST, others drop off, from 516, down to 66? Are the others not doing adequate development, or bagging orders?

Mounier said that the revenues of the top 30 players seem to have a big dynamic range, from $1.5B for the first (Broadcom) down to $66M for the last (Sony). The reasons stem from their various business models, in conjunction with the capacity of each MEMS device penetration in various applications:

  • Players with high revenues (>$400M) established in a specific market and are the market leaders by making a specific MEMS device, i.e. Broadcom with its RF filters in the RF communications market; TI with its DLP (optical MEMS) in the consumer projector market; HP with its IJ printheads in the consumer printer market, Knowles with its MEMS microphones in the mobile/hearables market, etc.
  • Players with high revenues (>$400M) that have a diversified product portfolio and that are present across many markets, i.e., Bosch and ST present in consumer/automotive markets, offering pressure, inertial MEMS; NXP in automotive offering pressure/inertial MEMS and magnetometers; TDK in consumer/automotive/industrial offering pressure, inertial, ultrasound and gas sensor MEMS, etc.

Then, why did the revenues of inkjet head players like Canon and HP rose, while that of Epson and the others shrank?

He clarified: “On one side, HP and Canon traditionally compete in the consumer and office printhead market, and typically, contest for the increased sales. HP recorded slightly positive year-over-year growth due to the increased demand for consumer printers and also because of strong adherence to its cartridge loyalty program. This recovery in the disposable printhead market is a mix of shipment increase from last year and ASP increase. Canon’s revenues decreased due to its loss of some market share to HP in the same consumer and office printer market.

“On the other side, industrial printing is still structuring, therefore the players in this market didn’t exhibit any positive growth. However, the major news from the industrial inkjet printhead manufacturer is the acquisition of Panasonic Inkjet business by Konica Minolta. Konica Minolta announced in June 2018 the acquisition of the Panasonic MEMS printhead fab. Now, it has its own MEMS manufacturing facility. Panasonic MEMS printhead will be continuously produced and Konical Minolta will ramp-up its new MEMS printhead in the next 2-3 years.

“Furthermore, Epson PrecisionCore chip factory will start production in 2019, which we think will strengthen its presence among the MEMS printhead manufacturers.”

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Global semiconductor market in worst-in-a-decade downturn in 2019: IHS Markit

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Conditions in the global semiconductor market have deteriorated rapidly since the start of the year. In fact, IHS Markit, USA, is slashing its 2019 growth outlook for global semiconductor market by more than 10 percentage points.

Myson Robles Bruce

The worldwide microchip industry is set to suffer a 7.4 percent drop in revenue this year, according to the latest figures from the IHS Markit Application Market Forecast Tool (AMFT). Revenue will very likely fall to $446.2 billion in 2019, down from $482.0 billion in 2018.

So, why has IHS Markit predicted that semiconductor market is lurching into downturn in 2019? Didn’t it have some good years recently?

Myson Robles Bruce, semiconductor value chain research manager, at IHS Markit, said: “Yes, 2017 and 2018 were high growth years in the industry due mostly to revenue generated by higher Memory IC pricing. In 2018, more than a third of all semiconductors revenue came from memory ICs, so when pricing on these components fell late last year and early this year, due to oversupply, the effect was a highly negative impact on the overall market.

“However, the downturn in 2019 might not last very long, depending upon how much recovery later in the year and the effect of macro factors next year like the global economy.”

Segments affected
Which are the segments, specifically, that will be affected? According to him, the IHS Markit Q1 2019 AMFT had memory ICs down -14.5 percent sequentially for the first quarter, and it now seems that actual results were much worse. For total semiconductor revenue, the first quarter was expected to be at -9.6 percent, but it was likely 3-6 percent lower. IHS Markit CLT will confirm this by end of May publication. If first quarter of 2019 was that much lower than expected, then the year overall could fall to a double-digit decline.

“For different macro and micro reasons, automotive electronics, industrial electronics, consumer, computing (including data center) and wireless (smartphones) all found growth in Q1 2019 difficult, even taking into account the usual seasonal patterns. The most significant problem is too much memory IC inventory and not enough current applications demand, and most of the other semiconductor categories are affected as well at least to some extent,” he added.

Recovery in sight?
In that case, when will there be some recovery? He said: “Recovery could happen in the second half of the year starting in Q3, and it would be led by memory ICs. If this is the trend, then there will be signs of memory growth appearing in Q2. NAND inventory is expected to be reduced enough by Q3 that the currently very aggressive pricing will be returned to normal levels.

“The increased demand from high-tier smartphones is a factor in both DRAM and NAND growth, but in NAND, the amount of bit growth will be higher than for DRAM and that should produce greater revenue growth. The largest application for NAND memory is solid-state drives, which is expected to contribute strongly later this year and in 2020. These devices are used in both data centers and notebook PCs.”

And, what are the segments that will be responsible for the recovery? While it is challenging to find significant applications demand that would help semiconductor revenue for this year overall, but it could happen to some extent with 5G network implementations, and by way of high-tier smartphone sales outside the US market.

“IHS Markit considers high-tier smartphones to be priced at $400 or more, which includes handset models from Apple and Samsung for sure, along with units from other brands like Huawei. Also, a possibility that increased data center server shipments in H2 2019 will drive stronger revenue for memory ICs and MPUs especially,” he added.

Forecast for 2019 and 2020
What is the end year forecast for semicon? What is IHS Markit’s outlook for 2020? Bruce said: “As of March 2019, this year was predicted to end at -7.4 percent, with 2020 up by 3.5 percent. However, the forecast as of end of June for the IHS Markit Q2 2019 AMFT will likely indicate even lower growth this year followed by higher growth next year as compared to the previous update.

“The emerging 5G technology will be a growth driver next year (networks and smartphones), along with continued growth in data centers and automotive electronics. In automotive, though global car sales are declining, the electronics per vehicle (and therefore, semiconductor content) is increasing rapidly.”

Finally, a welcome back to a very good friend, Jonathan Cassell, to IHS Markit, USA.

— By Ms Aanchal Ghatak and Pradeep Chakraborty

Opportunities in Industry 4.0 for semicon companies: Krishnan Shrinivasan, Lam Research

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Lam Research is a global leader in wafer fab equipment and services since 1980. It is the world’s second largest semiconductor equipment manufacturer. Its main product lines are in deposition, etch and strip and wafer cleaning. In R&D, Lam Research spent US$1.2 billion last year.

Lam Research sees intelligent electronics as a market driver. It is addressing intelligent electronics challenges from a capital equipment perspective. It is now exploiting the learning from advanced 300mm applications to enable capability at 200mm. There are major trends in factory automation as well. More important, what does industry 4.0 mean for the semiconductor companies.

Lam Research’s equipment intelligence strategies for enhancing process performance, reproducibility and productivity are:

  • Solutions that deliver reduced defectivity.
  • Solutions that deliver improved installed base performance.
  • Extension to 200mm technology.
Krishnan Shrinivasan.

Krishnan Shrinivasan, MD, Lam Research India, during the recently held IESA Vision Summit 2019, said that typically, PCs and mobiles were driving the growth, followed closely by automotive electronics. Increasingly, it has been driven by diverse, connected applications, such as the IoT, cloud, AI/ML, VR/AR, robotics and medical. However, IoT, by itself, is not enough to drive the industry. It is the contribution of all the other stuff — that is necessary to support IoT, in the network, data centers, and ML, etc.

Lam Research estimates that by 2020, there will be 30 billion connected devices. That will likely continue to increase, and move up to 75 billion connected devices by 2025. There is a significant growth in devices that may only need less than or equal to 28nm process capability.

There are things with sensors. There are also leading-edge applications, such as data centers and analytics. The greater, leading-edge devices are used at data centers. There are smart homes, connected cars, and wearables, as well as MEMS/sensors, MCUs/MPUs, smarter devices and PMICs, integration and SoCs, and advanced packaging.

Adjacent markets and specialist technologies being used by Lam Research are MEMS, CIS, power, BCD, 3D TSV, and photonics. Traditional CMOS markets and applications include logic, DRAM, 2D flash and 3D NAND.

Lam Research now have updated machines and products that have improved repeatability, defect reduction, throughput improvement, and reduction in the abatement of greenhouse gases. It is also repurposing the machines for the sensors and IoT worlds.

Role of Industry 4.0
The world is changing with industry 4.0. The electronics industry is changing the world, and Lam Research’s technology powers the electronics industry. Technology today is progressing as a double exponential function of time. AI/ML has the ability to disrupt everything, including the semiconductor industry. It is driven by big data, deep learning algorithms, and specialized processors. Industry 4.0 will see the computerization and digitalization of all processes.

How can industry 4.0 enable semiconductors? Earlier, sensors and process control were looking backward. In the future, there would be equipment intelligence, to improve wafer-to-wafer (W2W) uniformity, load-to-load (L2L), and chamber-to-chamber (C2C) matchings, using sensors and control technologies, and the outcomes with ML, feed-forward process control and virtual fabrication.

Lam Research is building self-monitoring and self-tuning into its machines, as well as self-configuration. Predictive maintenance is a huge application as well. Automating the set-up of these machines and calibrating them are also something it can do via AI/ML technologies. Smart tool capabilities are going to be the accelerators in its fabs. Lam Research hopes that it can deliver even better results for customers.

Lam Research is likely to achieve larger process windows, lower costs for customers, higher yields, etc. It hopes to store the data and analyze it at the right time, for the right purpose. It is also doing advanced productivity solutions. It is building an ecosystem that allows Lam Research to drive the overall equipment efficiency and virtual processing. It is building all of this on top of a big data/ML platform with leading-edge automation, sensors and process control.

Data organization allows high-speed data collection and storage, and right data at the right time, in the right format, for ML. Advanced productivity solutions provide an ecosystem of software and services designed to drive improved overall equipment. In virtual processing, computational etch and virtual fabrication software enable fast learning and process development.

A big data ML platform enables an integrated platform, supporting fast algorithm development and customization. By automation, robotics and platform design increase productivity and enable lights out operation. Sensors and process control in situ and integrated sensors monitor system and wafer status during process at a high sensitivity and data rate.

— By Aanchal Ghatak & Pradeep Chakraborty

Semiconductor design activity accelerating: Dr. Wally Rhines, Mentor

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Dr. Walden C. Rhines, CEO Emeritus, Mentor, a Siemens Business, is in Bangalore, India, at Mentor U2U India, 2019. He delivered the keynote during the day-long conference.

Dr. Walden C. Rhines.

Why is the semiconductor industry design activity accelerating? Dr. Rhines said that the acceleration of semiconductor revenue growth, in terms of the annual growth of ICs has been 2.8 percent in a 5-year CAGR from 2011-2016. It was 22.2 percent in 2017 and 2018E (estimated) is 15.5 percent, according to VLSI Research, Jan. 2019. There has been an acceleration in R&D investment, with semiconductor R&D spending touching 7.5 percent in 2018.

Memory prime driver
Fabless semiconductor venture capital investment by year, all rounds, has been $3,118 million in 2018 YTD (year to date). Memory was the primary driver of semiconductor growth in 2017. Memory is now almost 40 percent of IC revenue vs. 27 percent in 2016.

Memory average selling prices (ASPs) increased dramatically in 2017, and in H1 of 2018. Memory prices peaked in Q1, but are expected to decline in 2019. Negative memory ASP year-to-year growth in Q418 and forecast for next four quarters, with MOS logic at 6 percent, MOS memory at 57 percent, and analog devices at -8 percent. Memory unit volume now needs to grow faster than logic!

Memory now dominates transistors manufactured. 3D NAND allows memory to scale faster than logic or SoCs. Despite 55 percent revenue growth in 2017, the memory unit volume growth is below the long-term trend line. Will non-memory growth remain strong when memory ASPs decline?

New companies in semicon design
New companies are now entering the world of semiconductor design. Amazon has just become a chip maker. Bosch has opened a billion-dollar wafer fab. Google has built its first chip for machine learning. Facebook plans to build its own chips as part of hardware push.

The Internet has greater than 22 billion connections today. Of these, 81 percent of the connections are things. Things are growing at 15 percent CAGR, wireless mobile at 11 percent CAGR, and stationary/desktop at 5 percent CAGR.

The Industrial Internet and connected cities are 79 percent of the market today. Connected vehicles are showing the fastest growth. Connected homes are growing at CAGR 18 percent, connected vehicles at CAGR 23 percent, wearables at CAGR 21 percent, Industrial Internet at CAGR 21 percent, and
connected cities at CAGR 7 percent, as of the end of 2018.

Chinese investment growing
Chinese investment is now moving from manufacturing to design. The Chinese government’s incentives for semiconductor investment have been rising. The government-backed China IC Investment Fund is worth US$ 47.4 billion (Yuan 300 billion).

The China semiconductor initiative has accelerated new startup formation. IC design enterprises have gone up from 715 in 2015, to 1,380 in 2017. China’s fabless companies have also become much larger, from 479 enterprises in 2006 to 715 in 2015. And, this number is only rising.

China fabless semiconductor companies by market segment has 935 unique companies – who can be in multiple sub-segments. There are 961 companies in power devices, 267 in analog devices, 266 in MEMS/sensors, 260 companies are fab owners, while 209 are in RF devices. Interface chips have 179 companies, memory devices have 135, full custom devices have 124. Video compression has 82 companies, while vision processing/AI/ML has 35 and there are 34 photonics suppliers. All other categories (semi and system) have 1,325 companies.

Neuromorphic computing
Neuromorphic computing is said to be for the next wave of automation. The
Evolution of non-von Neumann computer architectures will improve processing speed, reduce power and integrate more memory.

Traditional Von Neumann computer architectures are not efficient for pattern recognition. Computer architectures are a long way from human brain pattern recognition and power dissipation. Large number of computer cycles are required to perform the same level of pattern recognition as the human brain.

Neural networks are a fundamental building block for AI-related machine learning. Today’s artificial intelligence scenario looks like this: in 2017, more than 300 million smartphones shipped with some form of neural-networking capabilities. In 2018, 800,000 AI accelerators were shipped to data centers. Every day, 700 million people use some form of smart personal assistant like an Amazon Echo or Apple’s Siri.

India’s strengths in AI
TheIndian industrial companies are among the early adopters of AI. Early adopters are defined by BCG as businesses that have fully implemented more than one AI use case in multiple industrial operations areas. India ranks third, at 19 percent, behind the USA, at 25 percent, and China, at 23 percent, respectively.

India’s design activity is accelerated by investment activity. There is the Semiconductor Fabless Accelerator Lab (SFAL), which the IESA launched in December 2018. It has investment by the Government of Karnataka. SFAL plans to accelerate 20 startups in the next three years, and 50 in next five years. It will support the existing fabless companies with a goal of at least 2-3 products out of the accelerator over the next two years.

There is also the Fabless Chip Design Incubator (FabCI), launched in 2018 by IIT Hyderabad. It is an incubator for fabless chip design startups. Funded by the Ministry of Electronics and IT, technology partners are Cadence Design and Mentor. Its goal is to incubate at least 50 ‘Make-in-India’ chip design companies.

IITs are supporting the AI education. IIT Hyderabad offers a Master’s degree in AI. It is adding a Bachelor’s program in AI during the 2019-20 academic year. IIT Kharagpur has a six-month AI certificate course. IIT Madras has the Robert Bosch Center for Data Science and Artificial Intelligence. India has a strong AI skillset, and ranks third, behind the USA and China.

There are two key requirements for brain-like pattern recognition — memory improvements and processor architecture improvements. In memory improvements, there are increased capacity, hierarchical memory, memory cell connectivity, and invariant memory. Processor architecture improvements have parallelism, error tolerance, continuous feedback and integration with memory.

Major wave of new ‘domain-specific’ architectures
There is the end of the Moore’s Law and faster, general-purpose computing, and a new golden age. Software-centric, modern scripting languages are interpreted, dynamically typed and re-use is encouraged. Hardware-centric, the only path left is domain-specific architectures. Just do a few tasks, but extremely well. The combination of software and hardware gives domain-specific languages and architectures.

Startups dominated by application specific architectures in the worldwide fabless company VC funding show AI and ML topping at $1,834 million between 2012-18. AI is NOT a new technology. It is a technology that arrived before its time, in 1986. (Dr. Rhines is among the heavyweights involved).

Reasons for AI adoption delay in the 1980s were lack of big data to analyze, as there was no Internet or IoT to collect sizable data sets. There was limited computing power, and limitation of traditional computer chip architectures. There was a need for more advanced algorithms. Besides, there was lack of ‘killer’ applications to make money! What’s different today? All of these limitations are going away.

24 fabless AI companies received VC funding in 2018. Some are AIMotive Gmbh, Beijing Intengine Tech, Hailo Technologies, Mythic, Syntiant and Xanadu Quantum Tech. Also, the early round China fabless funding passes the USA.

If you look at the domain-specific AI/deep learning controllers, there are 39 for vision/facial recognition, 9 for voice/speech/sound/pattern recognition. 17 are for autonomous driving/ADAS, three each for disease diagnosis AI and optical computing AI, 2 for smell/odor recognition, 23 for data center/cloud AI/HPC, 6 for unknown/stealth mode, 3 for space/military apps, 2 for cryptocurrency, 21 for edge computing, 4 for robotics/motion control/collision avoidance, 8 for deep learning training, and 1 for intelligent wireless control. Pattern recognition dominates the new AI designs.

Microsoft has developed custom deep neural network chip for HoloLens. HoloLens is an untethered mixed-reality device. It has local compute for low-latency (fully battery powered). It includes custom holographic processing unit (HPU), custom AI coprocessor, custom time-of-flight depth camera, four gray-scale cameras, IMU, other sensors, and infrared camera.

EMOSHAPE has developed an emotion processor unit (EPU), which has the capacity to feel, perceive or experience subjectively. Emoshape has developed its own CPU optimized to handle emotional data. The technology has the potential to change computer games, virtual reality and augmented reality applications, said Roberta Cozza, research director, Gartner.

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Three trends for CIOs in 2019: Bob Gault, Extreme

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Extreme Networks is focused on customer-driven networking to improve transformation, innovation, and customer experience – from the enterprise edge to the cloud – with software driven-solutions that are agile, adaptive, and secure. Now, it has announced the path to the new, agile data center. How is it different from the biggies?

Bob Gault.

Bob Gault, Chief Revenue and Services Officer, Extreme Networks, said: “Most vendors today sell closed technology stacks with domain-level visibility. This makes it difficult for customers to adopt new, software-driven approaches that drive the business forward, or to test new technologies that aren’t driven by the vendor they have aligned with.

“In contrast, Extreme provides technology that works in a multi-vendor heterogeneous environment, eliminating vendor lock-in. We deliver real, multi-vendor capabilities that meet the needs of the modern enterprise. For example, the Extreme Management Center allows for full visibility and management of multi-vendor networks, and Extreme Workflow Composer enables cross-domain, multi-vendor IT automation that allows organizations to automate at their pace—from automating simple tasks to deploying sophisticated workflows.

“Further, our standards-based, multi-vendor interoperable and adaptable data enter fabric gives customers the ability to build once and re-use it many times. All of this gives organizations the ability to accelerate their digital transformation initiatives, and to adapt and respond to new service demands with cloud speed.”

Enabling digital transformation
In that case, how does Extreme Networks enable digital transformation? He added: “According to a recent study, 89 percent of enterprises worldwide either plan to adopt, or have already adopted, a digital-first business strategy. The key enabler of digital transformation is an organization’s network infrastructure.

“With the advent of IoT, pervasive mobility and growing cloud service adoption, the network has become increasingly distributed. As such, Extreme collaborates with our customers to build open, software-driven networking solutions from the enterprise edge to the cloud that are agile, adaptive, and secure to enable digital transformation.

“We are a group of dedicated professionals who are passionate about helping our customers – and each other – succeed. Our 100% in-sourced services and support are #1 in the industry and even with 30,000 customers globally, including half of the Fortune 50, we remain nimble and responsive to ensure customer and partner success. We call this Customer-Driven Networking.”

There are three core drivers are: user experience, data, and insights, and the foundation to keep all that data secure. I requested Gault to elaborate.

He said: “On top of providing the network building blocks for wired and wireless LAN access (routers, switches, access points, etc.), Extreme offers an array of software capabilities including analytics, artificial intelligence and machine learning to help customers gather granular insights into who is using what application, when, and where.

“With that data, customers can understand usage patterns to optimize applications, do capacity planning and fine-tune the infrastructure for optimal performance. By applying machine learning to the data, Extreme’s analytics can detect anomalies from devices and applications, and block potentially malicious access. Collectively, these capabilities allow organizations to deliver a better customer experience via personalized offers and engagement based on user behavior and with maximum security, network uptime and greater throughput.

“Extreme offers the industry’s only end-to-end, single pane of glass solution that enables customers to accelerate digitization while saving IT operations cost with automation, visibility, analytics, and control. Our solution helps secure our customers’ networks and ensure exceptional user experiences with fast Mean Time to Innocence, application performance insights, security and forensics, and automated roll-out of consistent policies.”

Disruptive innovation with Xilinx Versal ACAP super FPGA

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Xilinx Inc. recently announced Versal – the super FPGA. Versal is said to be the first adaptive compute acceleration platform (ACAP), a fully software-programmable, heterogeneous, compute platform.

Built on TSMC’s 7-nanometer FinFET process technology,, Versal ACAP combines scalar engines, adaptable engines, and intelligent engines to achieve dramatic performance improvements of up to 20X over today’s fastest FPGA implementations, and over 100X over today’s fastest CPU implementations—for data center, wired network, 5G wireless, and automotive driver-assist applications.

Versal ACAP
Versal is the first ACAP by Xilinx. What exactly is an ACAP? For which applications does it work best?

Victor Peng

Victor Peng, president and CEO, Xilinx, said: “An ACAP is a heterogeneous, hardware adaptable platform that is built from the ground up to be fully software programmable. An ACAP is fundamentally different from any multi-core architecture as it provides hardware programmability, but, the developer does not have to understand any of the hardware detail.

“From a software standpoint, it includes tools, libraries, run-time stacks and everything that you’d expect from a modern software-driven product. The tool chain, however, takes into account every type of developer—from the hardware developer, to embedded developer, to data scientist, and to framework developer.

Differences from classic FPGA and SoC
Now, that means there are technical differences in the Versal from a classic FPGA and to an SoC.

He said: “A Versal ACAP is significantly different than a regular FPGA or SoC. Zero hardware expertise is required to boot the device. Developers can connect to a host via CCIX or PCIe and get memory-mapped access to all peripherals (e.g., AI engines, DDR memory controllers).

“The Network-on-Chip is at the heart of what makes this possible. It provides ease-of-use, and makes the ACAP inherently SW programmable—available at boot and without any traditional FPGA place-and-route or bit stream. No programmable logic experience is required to get started, but designers can design their own IP or add from the large Xilinx ecosystem.

“With regard to Xilinx’s hardware programmable SoCs (Zynq-7000 and Zynq UltraScale+ SoCs), the Zynq platform partially integrated two out of the three engine types (Scalar Engines and Adaptable Hardware Engines).

“Versal devices add a third engine type (intelligent engines). More importantly, the ACAP architecture tightly couples them together, via the Network on Chip (NOC) to enable each engine type to deliver 2-3x the computational efficiency of a single engine architecture, such as a SIMT GPU.”

Does this mean that Xilinx will address, besides the classic hardware designers, the application engineers in the future?

He noted: “Xilinx has been addressing software developers with design abstraction tools as well as its hardware programmable SoC devices (Zynq-7000 and Zynq UltraScale+) for multiple generations. However, with ACAP, software programmability is inherently designed into the architecture itself for the entire platform, including its hardware adaptable engines and peripherals.”