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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?

One of the more amazing aspects of the increasing pervasion of semiconductors into new applications is the significant growth in revenue of existing applications as the cost per unit decreases. Consider the digital camera. Most of the semiconductor content of a digital camera consists of non-volatile flash memory and the image sensor. In the early 1990s, solid state image sensors sold for $20-25. Image sensors were a negligible portion of the semiconductor total available market (TAM) until the current decade. During the 1990s the price per sensor fell dramatically from the $20-25 range to about $5. At this price point, unit volume soared, making image sensors more than 3 percent of the semiconductor TAM in the last few years. At the same time, NAND flash memory prices fell nearly 65 percent per year, propelled by the growing unit demand. The result was a substantial net growth in the market for digital cameras and the semiconductors required to make them.

This model is repeated again and again in the semiconductor industry. Unit volume growth drives reduction in the cost per unit of semiconductors, fueling market growth and new applications. The revenue generated by this growth provides funds for development of new technologies and further cost reductions, enabling additional applications. In the case of the digital camera, the cost reductions are only the beginning. Low cost solid state imaging and storage have enabled a host of high-volume applications of digital photography such as security, medical imaging, automotive applications and many more areas. The total semiconductor TAM grows because ofnot in spite ofthe 35 percent per year reduction in the unit price of transistors.

Reduced memory cost drives new architecture and applications (Click on image to enlarge.)

Falling prices ignite volume sales (Click on image to enlarge.)

When we have an application that is extremely high volume, the cost reduction activity drives changes that enable increased semiconductor consumption globally. The handheld wireless phenomenon is a good example. New subscriptions for wireless communications in India alone in the fourth quarter of 2009 were more than 50 million. That volume has driven down costs for application specific chip designs so that a $15 cell phone is now a reality. That's a along way from the $3,995 price tag in 1983 for the early commercial handheld cellular phones (Motorola's DynaTAC 8000X).

Drives for new semiconductor applications (Click on image to enlarge.)

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