A look at trends that will shape the semiconductor industry in the coming year.
Looking back at 2021, seismic shifts moved the semiconductor industry, with the most notable being the global ripple effects of the chip shortage. The year 2022 is bound to see the chip shortage continue to impact supply chains, but there are several other key trends that will dramatically shape the landscape of this industry. Let’s look ahead.
The Chip Shortage Lives On
As demand for chips continues to soar, supply chains will remain constrained for the foreseeable future. That means everyone — semiconductor businesses and their customers — should focus on building more resilient supply chains and use just-in-time models selectively. There is a lot we can learn from the shortages that disrupted manufacturing worldwide and 2022 will be the perfect time to leverage those lessons and re-examine near and long-term strategies.
Today’s mergers and acquisitions are generally involving smaller deals or are taking longer to finalize due to geopolitical considerations. While the environment has not been very conducive toward larger, cross-border deals, select megadeal opportunities have emerged even as the effects of COVID-19 continue to exacerbate global chip shortages. We expect these larger deals will face similar geopolitical constraints, making smaller transactions an attractive alternative.
Geopolitical considerations are also impacting the industry because some companies are building or planning to build their own fabs to secure chip production capacity. Governments around the world are setting policies and programs to help solidify or establish their position in the global semiconductor value chain. As a result, we expect the global semiconductor ecosystem to evolve as the flow of chips and accompanying hardware and software shift.
Many tech giants are now making their own ASIC chips designed specifically for their products. This gives them more control over the integration of software and hardware while differentiating themselves from their competition.
For example, Amazon is now using its in-house Graviton processors. Likewise, Google just unveiled its new Pixel 6 and Pixel 6 Pro Phones that leverage Tensor, the first chip designed by Google that brings AI capabilities to its mobile phone line-up. And more recently, Apple’s new 2021 MacBook Pros were based on the company’s in-house-developed M1 chips. These companies believe they can achieve technology differentiation through custom-made chips fitting their applications’ specific requirements rather than using the same generic chips as their competitors.
Even non-tech companies are getting into the chip business, with Ford announcing a deal with Global Foundries to collaborate on research and development for new chips for electric vehicles, autonomous driving systems, and other cars.
Arm Emerging as High-Performance Contender
The x86 architecture has dominated the microprocessor industry for over 50 years. However, this is now changing with the growing popularity of Arm. While Arm’s architecture was born out of a need for low-power chips needed for vertical applications, they have also emerged as a high-performance contender, rivaling the established x86 players.
As a result, when hyperscalers such as Google and AWS decided to make their own chips, they opted for the Arm architecture.
This growing shift towards Arm is changing the dynamics in the semiconductor ecosystem. Unlike the x86 platform, where companies can buy from one or two suppliers, Arm has become a broker that provides their IP to multiple companies. By choosing Arm, businesses can design their own chips and have them manufactured by foundries without having to build their own fab.
Additionally, the RISC-V architecture has been gaining momentum in IoT devices and other applications due to its open-source nature.
The demand for semiconductors has never been greater and is expected to keep increasing due to emerging technologies such as 5G, AI, and the Internet of Things (IoT). To meet this demand, semiconductor production will need to increase, which will cause a massive surge in energy consumption and water usage.
In today’s environment, every business should consider sustainability efforts as an integral part of its strategy. Following are just a few ways they can start making this happen:
A New Year with New Opportunities
Just as we have seen in 2021, companies have an amazing opportunity to transform themselves into more competitive and agile businesses in 2022. Those companies willing to undergo significant digital transformations will have an opportunity to grow their business long term while avoiding disruption in the short term.
This article was originally published on EE Times.