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Comment: Is IC industry poised for consolidation?

Posted: 07 Apr 2010 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM? semiconductor industry? IC consolidation? NAND flash?

So what's going on? Why isn't the semiconductor industry consolidating like most maturing industries? The answer seems to lie in the way the semiconductor industry regularly reinvents itself. Turnover of names of the top ten semiconductor companies is high, with more than 50 percent disappearing from the top ten since the 1950s.

Maintaining, or growing, market share in the semiconductor industry requires achieving a leading position in whatever new technology is driving growth. Few companies have been able to do that. To be in the top ten in the 1950s meant you were a leader in germanium or silicon transistors. In the 1960s, sustained growth required leadership in bipolar integrated circuits, eliminating 40 percent of the original top ten in a single decade and 80 percent of the top ten by the 1970s. In that decade, continued growth was driven by MOS memory, bringing three Japanese companies, NEC, Hitachi and Toshiba, into the top ten. In the 1980s and 90s, leaders in microprocessors moved up the ranking, particularly Intel and Motorola. This changed in the 1990s, as SoC leaders like STMicroelectronics and TI gained momentum. In the most recent decade, fabless companies like Qualcomm, and the primary foundry, TSMC, moved into the top 10.

Why the semiconductor market is unique (Click on image to enlarge.)

Looking back across the past six decades, TI is the only company that has remained in the top 10 throughout semiconductor history. When consolidation does occur, it is mostly among those companies that fail to adapt to the next level of emerging technology.

What about the future of this turnover phenomenon? Will market shares of leading semiconductor companies continue to decrease? That, of course, remains uncertain. But the semiconductor industry does have an attribute that makes it different from other major industries. That characteristic is the phenomenal growth in unit volume. Nearly 15 percent more chips and 50 percent more transistors are shipped each year than the prior year. Compare that 50 percent compound average growth rate to a mere 0.1 percent for automobiles over the last ten years, 1 percent for crude oil, and 9.3 percent for computers.

Growing cumulative unit volume at such an aggressive rate drives costs down the learning curve, reducing the cost per transistor 35 percent per year over the last ten years. And that enables totally new applications to move into the mass consumer market on a regular basis. For instance, a 2001 MP3 audio player cost about the same as today's portable video player which has 10x the memory capacity with the same size and power as the 2001 version. If unit volume growth continues (and it shows every sign of doing so), new applications will emerge and semiconductor pervasion will continue to increase. The result? There will be new leaders, as those emerging applications become the growth drivers of the decades ahead.


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