July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Few things show the turning of the technological tide more than Gartner’s global semiconductor report, released today. Together, mobile device giants Samsung and Apple bought 15.2 percent of CPUs and other chips sold in 2012.

Both grew spectacularly, with Samsung up 28.9 percent, and Apple up 13.6 percent, while HP and Dell dropped 12.7 and 13.4 percent, respectively. Samsung’s purchases topped out at $23.9 billion, and Apple bought $21.4 billion worth of chips for phones, tablets, and other devices.

“Although Samsung and Apple continue to go from strength to strength, other leading electronic equipment makers fared less well,” Gartner research analyst Masatsune Yamaji said in a statement, adding that six of the previous top 10 reduced their demand in 2012. That top 10, who together consume $106.4 billion of the total $297.6 billion semiconductor market, includes Toshiba, LG, Cisco, and Nokia.

Speaking of which, Nokia was spectacular as well — if you count flameouts. The fading Finnish phone company dropped its purchase of semiconductors by a staggering 42.6 percent, representing $3.6 billion in chips. Overall, the market was down 3 percent, Gartner said.

But not only is the guard changing, the product mix is changing.

“The PC market still represented the largest sector for chip demand, but desktop and mobile PCs did not sell well, as consumers’ interest shifted to new mobile computing devices like smartphones and media tablets,” Yamaji added.

That has implications for overall profitability, as chips that go in phone and tablets cost lest than the latest and greatest chips for desktops and laptops.

Source: Gartner

Top 10 semiconductor buyers

photo credit: samsungtomorrow via photopin cc

When Bravo takes something you love and makes it into a spectacle, leave it to PBS to create something with real potential to be great.

The Public Broadcasting Service is airing a show called “Silicon Valley” (the same title as the Bravo reality show) for its American Experience series, as spotted by TechCrunch. PBS describes the show as one of the “longest-running, most-watched history series” and will feature those who “turned rural Santa Clara County into the hub of technological ingenuity we now know as Silicon Valley.”

The promo for the video, which you can see below, highlights those at the beginning of chip development in Silicon Valley. Specifically, it looks at the founders of Fairchild Semiconductor in 1957, who were then called the “traitorous eight” for leaving the Shockley Semiconductor Company. PBS instead heralds them as people who would change the world and make America a technology leader. It will further focus on Robert Noyce, who is known as one of the create of the circuit that would lead into the age of personal computing.

The traitorous eight started their company at a good time for technology, soon after Eisenhower created NASA to compete with the Russians in the space race, as PBS notes.

Those involved in the show include former Intel chief executive Andy Grove, famed investor Arthur Rock, and former AMD CEO Jerry Sanders.

Silicon Valley is set to air on Feb. 19 at 8 p.m. Eastern time. It’s 90 minutes long.

Silicon Valley image via PBS

Behind everything electronic is a chip. And while many manufacturing jobs have gone overseas, the chip industry is still an economic juggernaut in the U.S.

The semiconductor chip industry now employs about 244,800 people in the U.S., according to the Semiconductor Industry Association. The industry added jobs three times faster than the rest of the U.S. economy (3.7 percent versus 1.2 percent for the overall U.S. economy, according to recently released 2011 data from the U.S. Bureau of Labor Statistics.

The job count is based on direct jobs created by semiconductor companies. Indirect jobs are even more. The $300 billion chip industry is a bellwether for the tech economy, and semiconductor chips are the foundation for the $1.1 trillion high-tech industry that employs nearly 6 million U.S. workers.

“Semiconductor workers – a quarter of a million strong and growing – are creating the technology breakthroughs that improve our lives, strengthen our country and build our future,” said Brian Toohey, SIA president and CEO. “Through their hard work, the U.S. semiconductor industry continues to create jobs and spur growth despite a challenging national economy.”

The data is based on the actual count by the BLS, plus an estimate for the number of jobs created by fabless semiconductor firms, or those that design but do not manufacture their own chips.

“Semiconductor job growth is an encouraging sign for our industry and the U.S. economy,” said Toohey. “With effective government policies that encourage growth and remove barriers to innovation, the semiconductor industry will continue to drive America’s economic strength, national security and global competitiveness.”

[Image credit: Joseph Rupp]

Carbon nanotubes are tiny wires that can conduct digital computer signals at five or 10 times the speed of traditional silicon chips. They have been around since the 1990s, but researchers have had a tough time getting them to behave. When they try to line these wires together in a useful grid as part of a computer design, the wires have a tendency to behave like wet spaghetti noodles.

But IBM is announcing today that it has taken the first real steps toward commercial fabrication of carbon nanotubes on top of a silicon chip. The company has made transistors — the basic components of electronic computing — from nanometer-sized tubes of carbon and put 10,000 of them on top of a silicon chip using mainstream manufacturing processes.

“It’s like trying to line up spaghetti, and doing it where the lines are just six nanometers apart,” said Supratik Guha, director of physical sciences at IBM Research and a spokesman for the team that did the work, in an interview with VentureBeat. “The thickness is just one nanometer,” where a nanometer is a billionth of a meter.

That’s really, really, really, small. A human hair is 100 microns thick. So a hair is maybe 100,000 nanometers thick. For the first time since research began on these carbon nanotubes, IBM has succeeded in placing them with near-perfect accuracy on the surface of a silicon chip in order to make electronic circuits.

Guha said the accomplishment is big one, though there are several obstacles that still stand in the way of mass production.

If those challenges are met, then we will see a huge leap in computing performance, as microprocessors for everything from PCs to smartphones will be able to take advantage of the technological advance. They could have applications in integrated circuits, energy storage and conversion, biomedical sensing, and DNA sequencing.

At a time when increasing performance creates heat and power-consumption problems, carbon nanotubes could prove to be very important to the continuation of Moore’s Law, the prediction Intel chairman emeritus Gordon Moore  made in 1965 that the number of transistors on a chip will double every two years.

Moore’s Law has held up for decades, but it can’t be taken for granted. It takes advances like IBM’s to move the industry forward. There are other advances being made in parallel, like IBM’s project to create chips modeled on the design of the human brain.

Silicon chips, which serve as excellent semiconductors, have been continuously improved for decades and are now a $300 billion cornerstone of the trillion-dollar-plus electronics industry. The components on the chips have been made smaller every year, so that billions can now fit on a thumbnail-size piece of silicon. But they are approaching a point of physical limits, IBM says. The layers between components are now sometimes just a few atoms thick. The laws of physics could present a brick wall to progress, unless something is done.

Carbon nanotubes represent such an opportunity. Electrons in carbon transistors can move easier in silicon-based devices, allowing for much faster transport of data. The nanotubes (pictured at right under a microscope and graphically shown at left) are also ideally shaped for transistors at the atomic scale. That’s an advantage over silicon. That’s why they might one day replace the traditional silicon transistor.

Carbon is a readily available basic element from which crystals as hard as diamonds and as soft as the “lead” in a pencil are made. Carbon nanotubes are single atomic sheets of carbon rolled up in the shape of a tube.

“We have been interested in using them as transistors since the 1990s,” Guha said. “They have a geometry from an electrostatic view that is ideal for very small transistors with dimensions of 10 nanometers or less. We pursued it very seriously. Individually, we showed they can outperform any material, including silicon.”

He added, “We decided a couple of years ago to start building a device out of carbon nanotubes. Their natural inclination is to be bunched together. But we want to see if they would selectively place themselves on top of one material and not on another.”

IBM’s approach paves the way for fabricating chips with large numbers of carbon nanotube transistors at predetermined positions. The trick is to find chemicals that can be lined up in a way so that the carbon nanotubes will adhere to the silicon in exactly the right kind of detail needed by chip designers.

Guha said the manufacturing can be done right now with a precision of 99.8 percent accuracy. But to be made in the millions in large numbers, the accuracy has to be improved beyond 99.999 percent.

At some point, IBM has to move from fabricating 10,000 carbon nanotube transistors on a chip to more than 1 billion. Even in those numbers, the nanotubes will take up only a small part of a silicon chip, serving as a data pathway within the chip. But while that is a daunting as a task, IBM is encouraged since, until now, scientists have only been able to put hundreds of carbon devices on a chip. Today’s silicon chips are manufactured with a circuit width of 32 nanometers, and that will move to 22 nanometers soon. But the miniaturization scaling may last for only a few more generations.

The benefit of using IBM’s method is that it will leverage the manufacturing equipment used in today’s chip factories. That equipment is the result of billions of dollars in investment and research that happens every year.

“It has to be compatible with silicon processing because you won’t throw all of that investment away,” Guha said.

Still, the carbon nanotubes have been the stuff of chemistry labs, created in small liquid vials (like those pictured at top), Guha said. IBM published its work in the peer-reviewed journal Nature Nanotechnology. Practical challenges include placing the nanotubes perfectly on the surface of water. And the semiconductor nanotubes have to be removed from a mixture that includes metallic nanotubes to prevent errors in circuits.

IBM addressed these problems with a method based on ion-exchange chemistry that allows for precise and controlled placement of nanotubes on a substrate. The process starts by mixing nanotubes with a surfactant, a kind of soap that makes them soluble in water. A substrate made of hafnium oxide and silicon oxide is immersed in the nanotube solution. The nanotubes attach via a chemical bond to the hafnium oxide regions while the rest of the surface stays clean. IBM has found ways to rapidly test the accuracy of the placement.

The researchers from IBM’s research center in Yorktown Heights, N.Y., include Hongsik Park (pictured at top), Ali Afzali, Shu-Jen Han, George Tulevski, Aaron Franklin, Jerry Tersoff, James Hannon, and Wilfried Haensch. Hopefully, one of these days, these folks will make the perfect spaghetti.

[Image credits: IBM]

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AMD just released some dismal numbers, along with announcement of substantial impending layoffs. Some have rightly asked — is this the end for AMD? I don’t think AMD is in imminent threat of going under, but clearly they have to do something and do it soon to remain relevant.

But it won’t be that easy.

First, AMD has virtually no mobile strategy (I kid that AMD stands for Absent from Mobile Devices)! Yes, the company just released Hondo, which is a chip targeted at tablets. But it only works with Windows. Where is AMD’s solution for other platforms? (I haven’t seen an Android implementation for the chip yet.)

Next, AMD’s strategy against Intel in the PC space has been to sell at a lower price. But its CPU performance has not kept pace with Intel’s (although AMD’s GPU is better). This is impeding AMD’s ability to sell, even with a lower cost, and Intel is getting more price aggressive blunting their price advantage. And Intel’s marketing advantage often negates any price advantage AMD has at point of sale.

Third, AMD is at the mercy of third party foundries. This means it’s unable to keep up with Intel around process technologies, so it remains one to two generations behind Intel in fabrication processes. This affects chip power/performance/size/cost, and it’s a big deal in an ultra competitive marketplace.

Finally, and perhaps most importantly, the stand alone graphics market, on which AMD generate lots of revenue, is shrinking quickly as more capable graphics make it to the combined CPU/GPU chips. This means AMD can’t command the higher prices it once did for superior graphics, when on board graphics is good enough for most users. That puts AMD in a bind.

Source: Dean Takahashi

AMD CEO Rory Read

I suspect that, if push comes to shove, someone will throw the company a lifeline (though it likely won’t be Intel). It would probably be a foreign investor who wants to own (or invest in) a semiconductor company. I don’t see any of the US-based chip companies (e.g., Qualcomm, Broadcom, NVidia) wanting the remains of AMD, even with some substantial IP assets. In fact Qualcomm bought AMD’s mobile graphics IP years ago and now constitutes its graphics subsystems integrated into its mobile chips — its hard to see what else it could gain with an acquisition.

It would be a bad thing for the market if AMD went away, since it would only be Intel left standing in x86. And, of course, competition is a good thing. Can AMD recover from this?

Perhaps, but it needs to find a reason why it’s relevant in the market (and not just compete on price). AMD did that several years ago when Intel got complacent. It hasn’t happened since. Some have suggested that AMD invest in ARM technology to hit the mobile market. I don’t think that’s a good idea, as I don’t think it has the resources to concentrate on both ARM and x86.

But AMD clearly needs to do something to get mobile. AMD bought Sea Micro because it would be a good vehicle for it to expand business in a new growth area. But that could take years. And the hardware business is different than the chip business (although AMD did get some interesting technology along with the acquisition).

So, my bottom line: AMD has a tough road ahead, especially given current market conditions of reduced PC shipments, including lower number of graphics cards, and a market shifting to mobile devices. The company doesn’t have forever to get its act together if it wants to become relevant again.

If AMD continues to move on this trajectory, Intel will clean its clock in the x86 world, and ARM will do the same the mobile world. That’s a lot of clock cleaning AMD has to look forward to.

One final thought: since the new management team has not yet been able to turn things around, how long will the investors let them go before demanding change?

Jack Gold is the founder and principal analyst at J.Gold Associates, based in Northborough, Mass. He covers the many aspects of business and consumer computing and emerging technologies.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Apple and Samsung have many beefs with each other. But for now, it appears, Samsung is still manufacturing the A6 processor inside Apple’s flagship iPhone 5.

That’s the conclusion reached by UBM TechInsights, whose engineers have been carefully disassembling the iPhone 5 since it launched Friday. Unlike other teardown teams, TechInsight’s engineers don’t stop when they expose the circuit boards and chip packages inside the phone. These guys pried the A6 chip out, stripped off its cover, and have been carefully shaving it down, layer by layer, and examining it with electron microscopes.

“All signs point to Samsung doing the manufacturing,” TechInsights technical research manager Allan Yogasingam said in an email to VentureBeat. “Manufacturing semiconductors is like a fingerprint, as each process is unique to the fabrication facility, in this case Samsung’s 32nm process technology.”

Yogasingam also provided the images below, from his team’s research into the A6 chip. Among other revelations, the A6 has a triple-core GPU (the graphics engine of the chip).

The “32nm process” in Yogasingam’s comment refers to the average size of the components, such as transistors, in the chip. One of the ways semiconductor makers increase the speed and power of chips is by developing equipment that can make smaller and smaller components, enabling them to keep pace with Moore’s Law — the market imperative to double chip performance without increasing price every 18 months.

Yogasingam adds more technical detail:

Our initial SEM cross-sections of the A6 processor show metal and dielectric layering that is almost identical to that used in the previous A5 processor found in the Apple TV, which was, as well, likely manufactured by Samsung. The process node appears to be held constant at 32nm. Examination of the gate stack shows a Gate First-High K metal gate structure. The PMOS devices incorporate a Silicon Germanium layer in the active channel. More detailed analysis will confirm these results but that will take some more time.

Neither Apple nor Samsung have disclosed the manufacturing relationship for the A6. Since Samsung manufactured previous versions of the Apple-designed CPU, it makes sense for the company to continue doing so. However, manufacturers are often replaceable, and the two companies have had a nasty public feud in multiple countries’ courts over the past year. Most significantly, Apple accused Samsung of ripping off its patented designs for the iPhone and iPad — and recently won a resounding court victory in the U.S. For its part, Samsung has accused Apple of violating communications patents it holds. In light of the disputes between the two companies, Apple recently replaced Samsung as the maker of its iPhone displays, preferring to use the services of Sharp instead.

But such switches aren’t so easy to do with semiconductor technology, which depends on extremely advanced fabrication techniques and multimillion-dollar equipment. It’s likely that there are no manufacturers outside of Samsung capable of making A6 chips at this point.

So, for now, the relationship continues — in this domain, at least.

Meanwhile, Apple has asked a Korean court to forbid Samsung from selling its iPhone-infringing devices in the U.S., and is asking the Korean company to cough up another billion dollars.

Read more about what’s new with Apple’s A6 chip.

Hat tip: Ars Technica

All images courtesy UBM TechInsights.

Sept. 9 - 10, 2013
San Francisco, CA

Early Bird Tickets on Sale

The ‘surround computing’ era is coming soon, according to Mark Papermaster, the chief technology officer of chipmaker Advanced Micro Devices.

In a talk at the Hot Chips semiconductor design conference in Cupertino, Calif., Papermaster said that the enormous growth of sensors and mobile computing devices will produce a huge explosion of data that will overwhelm traditional data centers. We’ll be surrounded by computing everywhere, which explains why Papermaster calls the time ahead the surround computing era.

To deal with this surge of data, Papermaster said chip designers will have to create server chips with “heterogenouus” capabilities, acting as both microprocessor or graphics processor from one moment to the next. Sometimes you need a single processor (microprocessor computing) to work on a chunky piece of data, and sometimes you need a lot of processors working in parallel (graphics computing). AMD specializes in microprocessor-graphics combo chips dubbed accelerating processing units, or APUs.

“Of course, there is change in the industry and you can integrate more things together on a chip,” said Papermaster in an interview with VentureBeat before his talk. “But how you integrate things together matters. We’re going to have a data overload and an interface overload.”

Surround computing will put a lot of pressure on existing infrastructure. Unstrutured data such as video is expected to grow from 245 exabytes of data in 2010 to 1,000 exabytes by 2015, according to Cisco. Some 10 million new servers will likely be needed in data centers to deal with the change.

The technologies making the demands include natural user interface gesture recognition, fingerprint,or face recognition, augmented reality, content accessible anywhere, video game experiences, and audio-visual content management, he said. All of that computing will be done not at the point where the sensors are but in the mobile device clients and the centralized data centers, Papermaster said. Both clients and servers have to be smarter and far more power efficient.

“It’s just a phenomenal explosion, and how we access that data is changing,” Papermaster said. “There’s change in computing, change in the industry, and change in the infrastructure.”

Papermaster has worked at AMD for years and has also been a top engineering executive positions at Apple, Cisco, and IBM.

He said the change in computing will be driven by data produced by things such as our voice (like Apple’s Siri voice recognition technology in the iPhone) and face or gesture recognition. AMD is creating a flexible computing technology for everything from mobile devices to servers.

“You see experimental devices out there today like eyeglasses” with computing, as with Google’s Google Glass project, he said. “There’s much more fluid processing that has to happen to give you answers immediately.”

Consumers may not notice the changes themselves, except that their devices are much more capable. The advanced technology itself will be invisible, hidden in distant data centers, or the web-connected cloud, that handles a lot of the processing tasks.

“The amount of information around you that you can access is exciting, and scary,” Papermaster said.

And of course, the “APU will be the platform of choice in computing,” he said.

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Intel in 2011 increased its market share in the $300 billion semiconductor chip market to 15.6 percent, up 2.5 percentage points from 13.1 percent in 2010. This represents the highest market share for Intel since 2001, when it reached 14.9 percent. Over the last five years, Intel’s share of the market ranged from 11.9 to 13.9 percent.

“Intel in 2011 captured the headlines with its major surge in growth,” said Dale Ford, head of electronics and semiconductor research for IHS. “The company’s rise was spurred by soaring demand for its PC-oriented microprocessors, and for its NAND flash memory used in consumer and wireless products.”

(Intel sold the flash through a joint venture with Micron). Intel’s market share was also boosted by its acquisition of Infineon’s wireless chips business. That helped it stave off No. 2-ranked Samsung Electronics, which had a market share of 9.2 percent, unchanged from 2010.

Intel’s revenue jumped 20.6 percent in 2011, outpacing the growth rate of every other supplier in the top 20 except Qualcomm (which grew 41.6 percent) and ON Semiconductor. Intel’s previous market share was 13.1 percent in 2011. Another fast-growing chip maker was Nichia, a maker of light-emitting diodes, which grew 34.1 percent.

Overall market growth for chips was 1.3 percent in 2011. That was due to a weak 5.9 percent drop in the fourth quarter of 2011. Of 302 chip suppliers, about 52.6 percent grew sales in the year.

[Photo credit: Dean Takahashi; pictured is Intel CEO Paul Otellini]

Durcan was previously Micron’s president and chief operating officer. While the loss of Appleton, the long time CEO, is devastating, the largest American manufacturer of memory chips has had the advantage of having stable management for a long time. Part of the reason is that its Boise, Idaho-based location is far removed from other chip companies that might poach employees. But Micron has also been an exceedingly well-run company in a volatile price-sensitive industry.

Durcan, 51, will be joined by Robert Switz, who will succeed Appleton as chairman of the board. And Mark W. Adams will serve as president. Switz has been a director since 2006 and is the former CEO of ADC Telecommunications.

Adams joined the company in 2006 and was most recently vice president of worldwide sales.

Appleton’s shoes will be hard to fill. He was a popular executive who was awarded the chip industry’s highest honor, the Robert N. Noyce award, by the Semiconductor Industry Association last fall. Appleton helped galvanize industry and government action against foreign memory chip makers that were

During that award ceremony, Analog Devices chairman Ray Stata said that Appleton was a “daredevil at heart.” Appleton flew stunt planes, raced motorcycles, wakeboarding, scuba diving and offroad racing. He was a black belt in taekwondo. In the Tecate Score Baja 1000 offroad race, Appleton finished first in the dune buggy race.

But that daredevil life took its toll in the end. On Friday, Appleton was killed while attempting an emergency landing in a Lancair IV-PT turboprop plane.

“We are deeply saddened by Steve’s loss and will miss his hand at the helm,” Mr. Durcan said in the company’s statement. “I have provided the board my ongoing commitment to work with the management team and continue to move the company forward.”

Durcan has been president and COO since 2007 and was previously Micron’s chief technology officer. He joined the company in 1984. In past interviews, Durcan explained that Micron has been able to stay ahead in the memory chip business not because it spent the most money on manufacturing. Rather, it has honed its design skills so that its chips could be built with fewer steps and therefore had lower production costs.

“We are fortunate to be able to appoint someone with Mark’s operations and technical leadership experience to serve as the company’s CEO,” said Switz. “Mark has been instrumental in Micron’s success in his role as President and COO and has garnered the respect of the company, his team members and the industry at large.”

That’s not particularly encouraging, as the semiconductor industry — the source of chips that go into everything electronic — is the backbone of the tech economy. About 41 percent of chip industry executives say they expect revenue will grow more than 5 percent in 2012, compared with 78 percent a year ago and 87 percent in 2009. About 30 percent expect profits to increase by more than 5 percent in the next 12 months, compared with 37 percent last year, according to a survey by accounting firm KPMG.

The Semiconductor Business Confidence Index, a metric based on survey data, measured 46, compared to 60 in 2010 and 61 in 2009. The higher the number, the higher the confidence. This index has risen from 36 in 2008, the year the global economy imploded. That means that the forecasted conditions for the chip industry won’t be as severe as the beginning of 2009.

“It is not unexpected to see the industry take a breath after two strong years following the economic and industry downturn,” said Gary Matuszak, KPMG Global Chair for the Technology, Media and Telecommunications practice. “Executives continue to pursue their growth agendas, and will be acquisitive, but remain very apprehensive about the direction of the economy.”

During the first 11 months of 2011, 98 semiconductor merger and acquisition deals were announced, down 8.4 percent compared to a year ago, according to a separate report by the Global Semiconductor Alliance, a trade group.

In the KPMG survey, capital spending, R&D spending, and hiring are lower than in the past. Only 27 percent of executives expect capital spending to increase more than 5 percent, compared to 46 percent a year ago. About 33 percent expect more than 5 percent growth in research and development, compared with 47 percent a year ago. And 19 percent predict work force growth of more than 5 percent, compared with 29 percent in 2010.

In other data from the survey, semiconductor executives believe in the increasing importance of the U.S. market. In 2008, 38 percent of the executives said the U.S. was an important market for revenue growth, behind China (79 percent), Taiwan (44 percent) and Japan (40 percent). But now 50 percent believe the U.S. is an important market — second to China at 60 percent and Japan at 37 percent. A year ago, 47 percent believed the U.S. was important. Wireless communications, computing, and consumer applications are providing the strongest demand for chips.

“China’s decrease in importance might be the result of the Chinese government’s tightening in lending, but it is clear that the industry sees the China and U.S. markets as the two most significant global end markets for growth,” said Ron Steger, partner in charge, KPMG Global Semiconductor Practice.

Increasingly important are the alternative energy and medical application markets for chip makers. That suggests that the trough in renewable energy may be bottoming out.

KPMG surveyed 155 business leaders in October and November for the survey. Half the companies in the survey have revenues of $1 billion or more. About 64 percent of chip executives say revenue will be hurt 3 percent or more by counterfeit products. A third said the impact was 5 percent or more. A third of the respondents said there will be an increase in the number of intellectual property infringement cases.

IHS forecast in September that the world chip industry would grow 2.9 percent. The industry, which provides chips for all things electronic and is a bellwether for the tech economy, faces major economic headwinds this year thanks to uncertainty in Europe and the stock market.

In the third quarter, the chip market is expected to expand 3.5 percent compared to the previous quarter. That is down from the September forecast of 4.8 percent. While the third quarter was weaker than predicted, the growth was still positive in terms of the full-year forecast.

“Although the forecast of 1.2 percent revenue growth in 2011 is just barely positive, an expansion of any magnitude is significant from the standpoint of market psychology,” said Dale Ford, analyst at IHS. “Given the worsening economic environment and growing pessimism in the electronics supply chain, many market forecasters had projected third-quarter revenues would decline and pull down the results for the full year of 2011.”

In the fourth quarter, revenue is expected to decline 2 percent from the third quarter. If the industry actually fell 7 percent in the fourth quarter from the third, then overall chip revenue growth would be negative for 2011.

Even though the overall industry is slowing, a number of chip makers are expected to have solid growth in the fourth quarter. Those include Intel, Samsung, Renesas, Qualcomm and Advanced Micro Devices. Bright spots include microprocessors, image sensors and NAND flash memory. Each segment is growing more than 15 percent this year. Sensors and actuators will grow more than 5 percent, but the memory market is weighing down the whole chip sector, with declines of 15 percent or more for different types of memory.

The electronics industry took a big hit this year in the second and third quarters as a result of the disaster in Japan. That took out about 2.5 percentage points in the second quarter and resulted in a market decline in that period.

Meanwhile, flooding in Thailand is expected to reduce hard disk drive shipments by 30 percent in the fourth quarter. That will cause PC shipments to fall short of expectations, taking a further toll on chip sales. By the first quarter, hard drive inventories will be depleted and the lost production will take its toll in that quarter. Weak economic conditions are expected to last into 2012. For 2012, chip revenue growth is expected to be 3.2 percent, and real growth won’t return until 2013.

The deal shows that the communications chip market is still a high stakes battle, as Broadcom tries to fight with a variety of rivals from Intel to Qualcomm.

Under the deal, Santa Clara, Calif.-based NetLogic shareholders will get $50 per share. Irvine, Calif.-based Broadcom will pick up new product lines such as knowledge-based processors, multi-core embedded processors, and digital front-end processors.

The deal has been approved by the boards of both companies and is expected to close in the first half of 2012, subject to the usual closing conditions.

NetLogic’s share price was $31.91 on Friday, so the deal is a significant premium above the current valuation. NetLogic’s shares are up more than 50 percent this morning. Broadcom said the deal will add 10 cents a share to non-GAAP earnings in 2012, and Broadcom reaffirmed its revenue target for the third quarter at $1.9 billion to $2 billion.

Intel CEO Paul Otellini made the announcement today during Intel’s Q2 earnings call.

The hybrid technology will be the first product co-developed Intel has codeveloped with McAfee, which Intel acquired for $7.68 billion early in 2011, Otellini said. He said it will combine security software from McAfee with instructions coded into Intel’s chip hardware.

Otellini provided no details on the hybrid security technology and said more information would be forthcoming during the upcoming Intel Developer Forum, September 13-15 in San Francisco.

At the time of the acquisition, some analysts questioned how well McAfee, a software company, would fit into Intel’s overall, hardware-centric business strategy. The upcoming product might shed some light on how that integration would work. Intel recently replaced McAfee’s former CEO, David DeWalt, with a pair of co-presidents drawn from McAfee’s ranks.

In addition, McAfee and Intel’s other major recent acquisition, Infineon, have contributed $1 billion to the parent company’s top line in the most recent quarter.

“McAfee has been executing very well, and the importance of security has never been greater,” Otellini said during the earnings call.

Photo: Top of an Intel core i7 chip. Photo by pc_gamer.

The advance comes in a category of chip-making equipment called “rapid thermal processing,” or RTP. That involves heating a chip material to levels of heat similar to that of jet engine within a very short period of time. While it seems arcane, it could enable chip designers to continue creating chips that are faster, better, and smaller. And those chips are the building blocks of all future electronic devices, from smartphones to gaming consoles. To break that down further, without advances like this, you won’t have supercomputing power to deliver advanced 3D apps on your smartphone in the future.

“This represents multiple divisions in the company coming together to create a revolutionary technology,” said Sundar Ramamurthy (pictured at top), vice president and general manager in a division at Applied Materials. “This is about innovation at the transistor level.”

Applied has been making RTP machines for 15 years and nearly every chip manufacturer has one of its machines. But the new Applied Vantage Vulcan RTP system leapfrogs current equipment and brings a new level of precision and control to the process of annealing chip materials at high temperatures. This is important because tiny little defects are becoming a bigger and bigger problem as chip manufacturing enables the miniaturization of chip circuitry on a microscopic scale.

The variation in manufacturing, caused by a breakdown in the ability to create exactly uniform chips, makes it much harder for chip makers to create cheap semiconductors. One of the root causes is a lack of uniformity in heating within RTP machines. The result is that there are too many chips that are appropriate only for desktop computing functions, rather than low-power laptop or smartphone devices.

Applied’s solution is to heat the backside of a chip wafer (pictured at right; a wafer is a circular disk that is processed and then sliced into chips). That allows the variations in heating uniformity to go away, said Ramamurthy. The backside of the wafer absorbs the heat and then spreads it uniformly through the wafer.

The technology will be useful with circuitry at 28 nanometers or smaller. That means that the width between circuits is 20 nanometers, where a nanometer is a billionth of a meter. With this technology, Applied can heat a wafer at more than 200 degrees Celsius per second, up to 1,300 degrees Celsius.

But leading indicators suggest things won’t be that bad next year, according to a survey by the accounting and consulting firm KPMG. Based on a survey of 118 industry executives, overall confidence is flat at 60 points out of a possible 100 index for the 2011 outlook, compared to 61 a year ago. Having confidence that high in a year after a record year is remarkable, said Gary Matuszak (pictured above), a KPMG partner who presented the results at a breakfast event co-hosted by the Semiconductor Industry Association on Tuesday. By comparison, the confidence index was at a very pessimistic 36 in 2008 in the midst of the recession.

The chip industry is critical to the tech economy, as semiconductor chips are the building blocks of all things electronic. In the U.S., chip makers employ more than 185,000 people and chips are the country’s No. 1 export.

The confidence index measured factors such as expectations for revenue growth, hiring, capital spending, profit growth and research and development spending. In each of those categories, the executives offered positive responses when asked if the industry’s numbers would grow in 2011. This kind of measurement goes deeper than simple revenue growth forecasts offered by the SIA, the chip industry trade group, which expects growth to slow from 32.8 percent in 2010 to 6 percent in 2011.

About 39 percent of executives interviewed said that they expect revenue growth to be above 10 percent in 2011. Some 29 percent said they believed the work force would grow 5 percent or more. Some 37 percent said profits will grow 5 percent or more. About 45 percent said that R&D spending will increase more than 5 percent in 2011. And 63 percent said that capital spending will grow in 2011.

Of course, many of these numbers could be viewed as a glass half empty, or half full. On the half empty side, 53 percent of the executives said the chip industry cycle will hit its peak in the next 12 months.

In terms of categories, growth is expected in industrial and automotive semiconductor markets. Demand in Europe and the U.S. is also relatively strong. But expectations for solar power are down a third, from 32 percent of executives saying it would grow in 2009 to only 21 percent saying it would grow in 2010.

The most important drivers for growth will be wireless handsets, consumer electronics, computing, and industrial equipment. Interest in renewable energy products was relatively low, with 23 percent saying it was very important. The value of chip content in smartphones will go up 7.5 times in the coming years, according to Credit Suisse.

About 36 percent of respondents believe that their intellectual property litigation cases will increase in the next 12 months. Ron Steger (pictured right), a partner in charge of the chip industry practice at KPMG, said, “I think this is the No. 1 issue facing the industry.”

The executives also said they believe that the value of merger and acquisition deals in the chip industry will increase in 2011. Some 24 percent said that valuations will increase by 11 percent or more in 2011, while another 41 percent said valuations will increase by 1 percent to 10 percent in 2011.

John Pitzer, a managing director and chip analyst at Credit Suisse, said that chip stocks will likely have an upside of 40 to 50 percent from current stock valuations. Long-term growth is expected to accelerate for the chip industry, he said.

“On every cyclical metric, things are relatively healthy now,” Pitzer said. “Inventories are not yet back to October, 2008 (pre-recession) levels.”

Brian Toohey, president of the SIA (pictured right), said that the U.S. industry remains healthy with a 51 percent share of the global $226 billion chip market. But he said the industry remains concerned about various policy issues. He said the U.S. needs to create the right incentives for investment by revising its tax policy to be competitive with other nations such as Singapore.

He also said that chip makers are concerned about new rules for measuring greenhouse gas emissions from chip factories. The problem is the Environmental Protection Agency may be slow at issuing permits for new factories as it awaits data from the greenhouse gas measurements. Toohey also said other critical issues include streamlining export controls, investing in technology, and engaging with China on its intellectual property and market access policies.

Ross Seymore, director of semiconductor research at Deutsche Bank, said that chip stocks have likely hit a peak along with the industry’s great sales, which are up about 32.8 percent this year, since stocks typically trade ahead of the actual fortunes of chip companies. He gave the remarks at the annual dinner for the SIA, the chip industry’s trade group.

“Unfortunately, what you all call a great year, Wall Street calls a peak,” Seymore said.

The third quarter was definitely weaker than expected, and the fourth quarter will probably be so as well. Bears started calling the peak of the current chip cycle as much as a year ago — way too early from Seymore’s view. The industry typically goes through a few years of growth followed by a year or so of contraction. But Seymore said he is optimistic that the coming downturn will be a light one. That means Wall Street will eventually bid the stocks upward.

“It will probably be more of a pause than a correction,” Seymore said.

Toohey warned that the economy is weak and faltering and could create a negative environment for investing in the semiconductor industry, the backbone of Silicon Valley. His voice will be one among many lobbyists in Washington, D.C., but the SIA has had a three-decade long history of being influential, loud and relevant in political circles.

John Daane (right), chief executive of Altera and outgoing chairman of the SIA, spoke just before Toohey. Daane warned that, in a time of economic malaise, it might be easy for politicians to view spending on research and development as an expense. But he said that the industry will try hard to convince Washington that R&D is an investment. He warned that the U.S. stands to lose its leadership in technology if it doesn’t continue to invest in basic science.

Daane also warned that the U.S. has the second-highest corporate tax rate in the world. The Republicans are likely to beat back attempts to expand corporate taxes, but Daane said the chip industry believes that it can create jobs in the U.S., given the right tax incentives and tax relief. If the U.S. doesn’t make its tax policies more corporate-friendly, it risks losing investments in multibillion-dollar chip factories to other countries. (Intel is spending $6 – $8 billion on U.S. factories in the coming years, but it also just opened a $2.5 billion chip factory in China).

Chip makers are also worried that the Environmental Protection Agency’s new rules on monitoring greenhouse gas emissions could cost the industry millions of dollars in new equipment purchases at each factory in the U.S. Even worse, the permits for new chip factories could take 12 – 18 months to complete, an incredibly long time when the construction time is a year or two and industry economic cycles fluctuate on a yearly basis.

Toohey echoed a lot of Daane’s concerns and said he held out hope that the U.S. would find the resources to invest in R&D, attract capital spending on chip factories, improve its university and K-12 education, and tread lightly on taxation. The chip industry has 185,000 employees in the country and enables a $1.1 trillion electronics industry that employs 6 million people. But to keep creating jobs in the U.S., the federal government will have to out-compete foreign governments that are trying to foster their own Silicon Valleys around the world.

It will be interesting to see the reaction in Washington, D.C., to the chip industry’s wish list, given the economy’s woes and record deficits.

Toohey, former head of the pharmaceutical industry’s lobbying group, replaced retiring SIA president George Scalise (right; his video speech is also below). Scalise was honored with the industry’s highest honor, the Robert N. Noyce award before the crowd at the Fairmont Hotel in San Jose, Calif. In hopes of gaining more political clout, the SIA has moved its headquarters to the nation’s capital.

Chip makers are coming off a great year, with revenues of $300 billion, up 32.8 percent from a year ago. But sales are expected to slow down to 6 percent growth in 2011 and 3.4 percent in 2012.

Check out our video of Toohey’s talk below as well as Scalise’s farewell speech.

But next year and the year after will see more moderate growth, the Semiconductor Industry Asscociation, the chip industry’s trade group, predicted today. It forecasted sales growing just 6 percent to $318.7 billion in 2011 and 3.4 percent in 2012 to $329.7 billion. Overall, from 2009 through 2012, the compound annual growth rate is estimated to be 13.4 percent.

Chip sales are closely watched as a barometer for the health of the tech industry, since chips are used in all things electronic.

The Washington, D.C.-based trade group will hold its annual dinner in San Jose, Calif. this evening, where it will honor George Scalise, its longtime president who retired earlier this year. He was replaced by Brian Toohey. Toohey said that the industry had strong demand across a broad range of markets in 2010, but sales are expected to slow down as the economy recovers and consumer confidence comes back over a longer period than previously expected.

The chip industry employs about 185,000 people in the U.S. and is the backbone for the $1.1 trillion electronics industry.

Intel

The Wall Street Journal reported that Intel will formally ally itself with Achronix, which designs a variety of high-performance programmable chips used in high-speed communications. Normally, Achronix would have to go to a contract chip manufacturer known as a foundry, such as Taiwan Semiconductor Manufacturing, to have its chips made.

Achronix says the deal with Intel will allow its chips to have 300 percent better performance, 50 percent lower power, and 40 percent lower cost than its previous generation of products. Achronix’s Speedster chips are used in high-speed networking, broadband communications, encryption, high-performance computing, video and imaging, and military and aerospace.

Intel’s manufacturing process is usually a couple of years ahead of manufacturing rivals. Intel spends billions of dollars per year to stay ahead of rivals and build factories that are so advanced that they help Intel differentiate its chips. The company usually dedicates all of its advanced factory capacity to making its own microprocessors, which are the brains of PCs.

Sometimes Intel farms out older manufacturing lines to other companies. But the Journal says that Achronix will get access to the top of the line at Intel, including a new 22-nanometer production process to be used in factories that won’t start pumping out chips until late 2011.

John Lofton Holt, chief executive of Achronix in San Jose, Calif., said the new development will let Achronix grab a bigger share of the market for field programmable gate arrays (FPGAs), or chips that are programmed for specific tasks after they are received by customers.

Gartner estimates that the market for FPGAs will grow 44 percent in 2010, outpacing the overall chip market. Achronix competes with two large chip design firms, Xilinx and Altera. Achronix is expected to account for a lot less than 1 percent of Intel’s available capacity for 22-nanometer production. Achronix has raised $90 million in funding since 2004.

Year-to-date sales are $194.6 billion, up 44.4 percent from $134.7 billion a year earlier. All sales are based on a three-month moving average, a mathematical smoothing technique which eliminates variations in reporting schedules. Chip industry sales are a barometer of the tech economy since chips are used in everything electronic.

SIA President Brian Toohey said the sixth-consecutive month of sequential (month-to-month) growth overcame concerns about economic conditions in the U.S. and Europe. Toohey said that demand for PCs and wireless products is driving sales, especially in China and India. The SIA said it is confident that its $290.5 billion forecast, which represents 28.4 percent growth for 2010, is on target.



Now that the government has opened up the “white space” in between television broadcast frequencies and other commonly used wireless frequencies, the next step for mobile phones is to design chips that automatically switch networks, Mollenkopf said. He said it was “good for business” for Qualcomm to develop chips with radios that can tap into new radio spectrum.

“What you’re going to be using, what radio technology you’ll go through, will vary in very short distances — sometimes less than a meter,” Mollenkopf said.

Phones today are configured for individual networks, with chips specifically designed with radios for GSM, CDMA, EDGE and soon the next-generation wireless data network LTE and other 4G networks. These networks are restricted to a certain range of the wireless spectrum, with each range separate so there isn’t interference between, say, television broadcasts and phone calls.

Mollenkopf was mum on whether Qualcomm was developing a CDMA-enabled chip for use in Apple’s iPhone — running on the assumption that Verizon will soon carry the iPhone that a number of analysts and rumors indicate.

U.S.-traded shares of ARM Holdings jumped 8.1 percent to $19.89 as of 9:33 a.m. PST, leading the way for the rest of the semiconductor stocks on the Philadelphia Stock Exchange semiconductor index — including Nvidia, up 4.4 percent, and Advanced Micro Devices, up 5.2 percent. The PHLX semiconductor index was up 3.6 percent.

Earlier this year, Oracle finalized its acquisition of server manufacturer and Java developer Sun Microsystems in a deal worth $7.4 billion, though the official announcement came in April last year. The European Commission had investigated the deal later that year over concerns that Oracle, a maker of commercial database management software, would stifle the MySQL open source database management software business within Sun.

Cambridge, England-based ARM has frequently been the subject of takeover speculation due to its close ties with Apple — it’s a partial developer of the Apple A4 processor found in the iPhone, iPad and iPod Touch devices. The company said that takeover candidates could easily access the technology by buying the chips rather than attempting to acquire the company, according to Bloomberg News.

[Photo: Oracle_Photo_Screenshots]

The investments range from cleantech to cloud computing and semiconductors — all areas Intel is probably beginning to branch out into, since the company is hoping to put chips in just about everything in existence. The announcements are timed to the Intel Developer Forum, which started yesterday with a keynote speech by Intel chief executive Paul Otellini (pictured).

The four companies receiving funding include: Provo, Utah-based Adaptive Computing — which provides cloud-computing and data-center software; Santa Clara-based Ciranova, a chip designer; San Francisco-based Joyent, a provider of cloud computing infrastructure that Intel Capital had formerly invested in; and San Francisco-based Nexant, which provides software to help with energy efficiency and clean energy solutions. Joyent received $15 million of the funding round, while the rest was undisclosed.

The funding comes as part of the $3.5 billion effort launched in February by multiple venture capital firms led by Intel Capital to help provide jobs for college graduates interested in working in the tech field.

Since 1991, Intel Capital has invested more than $9.5 billion in more than 1,050 companies — located in 47 countries.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Intel isn’t happy just putting its chips into every imaginable device. It now wants to help developers sell apps that run on the devices its chip powers, too.

Today at the Intel Developer Forum in San Francisco, Intel launched its E600 Atom processor for embedded devices, a category of devices simpler than a traditional computer or smartphone which can include anything from a taxi advertising display to an Internet-connected treadmill.

But Intel isn’t satisfied with just providing chips to run those devices. It’s betting on the connectivity and massive breadth of devices — which include mobile phones, smart TVs and netbooks — that contain Atom processors to woo app developers. AppUp, the app development and distribution platform for Intel’s Atom processing architecture, also launched today into a world already dominated by Google’s Android marketplace and Apple’s App Store.

Intel, in short, is trying to brace itself against a world in which users code to specific devices or operating systems rather than the underlying microprocessor — which is, for Intel, a rather frightening prospect.

So far, the AppUp program has around 450,000 users and 23,000 program members, and offers some incentives for developing top-of-the-line apps. Rick Vanner, the co-founder of Game Creator, won a car for his efforts developing for AppUp.

Intel is partnering with Best Buy, Croma, Dixons Retail and Asus to distribute the AppUp developer platform. Best Buy, one of the largest electronics retailers in the U.S., is providing AppUp on its website and will sell Samsung devices that have AppUp pre-loaded.

Havok, which Intel acquired in 2007, also announced it will be providing its physics engine software-development kit for Atom architecture. The move could be another indicator that Intel is looking to take on Apple, as Apple has recently made a push to improve its gaming presence with its iPod Touch, iPad and iPhone platforms.

Intel also announced a new line of Atom processors for standard mobile platforms, including tablets, mobile phones and embedded devices. The CE 4200 series includes an H.264 encoder and integrated power management — and obviously improves on the last Atom processor’s capabilities. The Oak Trail processor for Tablets also allows for improved battery life and lets users to port an operating system of their choice onto the tablet.

Server chips command the highest prices of any chips, so the market Smooth-Stone is pursuing is worth billions. To date, Intel has dominated that market. But Intel’s mainstay server chips are still brainiacs, which perform powerful computing tasks but also consume a lot of power.

Smooth-Stone is one of a number of companies trying a different approach by using lots of little processors that consume small amounts of power. Instead of making Intel-compatible chips, Smooth-Stone will design chips based on the ARM chip architecture, which is commonly used for cell phone chips. The challenge for Smooth-Stone will be to create chips that are powerful enough to handle data center work. By contrast, Sea Micro is making low-power servers using Intel’s Atom chips, which are aimed at cell phones and netbooks. Other rivals include Agnilux, which was purchased by Google, and Tilera.

Austin, Texas-based Smooth-Stone was founded in January, 2008 and has just 12 employees. But it has some impressive backers in ARM, Advanced Technology Investment Company (or ATIC, which owns Globalfoundries and a chunk of Advanced Micro Devices), Battery Ventures, Flybridge Capital Partners, Highland Capital Partners and Texas Instruments. The company says it is hiring quickly now.

“This kind of investment, the amount, and the strength of this syndicate is a strong endorsement for the innovation we are bringing to market,” said Smooth-Stone chief executive Barry Evans.  “We look forward to taking advantage of the insights and know-how of these industry-leading investors.”

Chip designers have learned a lot of lessons in designing low-power chips for cell phones, which need computer-like processing power and long battery life at the same time. Smooth-Stone says it will apply those lessons to chips used in data center computers, where energy use has become the biggest expense.

“Our goal is to completely remove power consumption as an issue for the data center. Imagine that change for companies with a large presence on the Internet,” added Evans. “They all deal with the reality that, as the mass of information grows daily, so does their power consumption. Every day these companies are thinking about managing their data center sprawl. We want to make sure that space and power are not constraining their potential.”

“Smooth-Stone’s approach of bringing low power technology into the server domain made them a perfect fit for our investment model,” said Bruce Beckloff, vice president of corporate business development at ARM. “There is a strong market need for a new class of data center platforms that offer a significant improvement in performance from both the energy and density perspectives, and ARM is excited to support Smooth-Stone’s efforts to develop innovative chip solutions for this new class of platforms.”