The first microprocessor, the Intel 4004, introduced on November 15, 1971: “With its launch in November 1971, the 4004 paved the path for modern microprocessor computing – the “brains” that make possible nearly every modern technology, from the cloud to the edge. Microprocessors enable the convergence of the technology superpowers – ubiquitous computing, pervasive connectivity, cloud-to-edge infrastructure, and artificial intelligence – and create a pace of innovation that is moving faster today than ever.” That comment from Intel is probably an understatement in that, here in Silicon Valley, the 4004 processor is known as the “Shot Heard Around the World” because it birthed Silicon Valley itself. Almost every CPU made since then can trace its roots back to this major development in harnessing transistors to create a working semiconductor that was initially used to power the first digital calculator. The next iteration of this chip was the 8088, which IBM chose to use in their original IBM computer, which birthed the PC revolution that is still going strong today. I have one of the actual IBM 8088 motherboards in my tech museum today. Shortly after that initial launch, Intel introduced the 8086 processor and IBM quickly moved to integrate that chip into their line for its first two years. Intel continued to evolve this chip that begat the 80286, 80386, and 80486 processors that dominated the fastest growth period of the personal computing era. While semiconductors are the backbone of all technology, it is an area that does not get as much respect as it deserves. Today’s tech coverage is dominated by FAANG (Facebook/Meta, Apple, Amazon, Netflix, and Google.) Add to that Twitter, Instagram, Pinterest, Snapchat, and other social media sites, and the role and importance of semiconductors are drowned out. At Creative Strategies, we have been deeply involved in the tech world for close to 40 years and have been extremely close to the developments in semiconductors and how they impacted tech in the past, present and are constantly studying its potential in powering our technology future. “This group consists of AMD, Intel, Qualcomm, Nvidia, and Apple. These companies are the driving force behind a much broader future of computing. They will be responsible for pushing all hardware, software, and services forward in the future via their innovations. Throughout my career as an analyst, studying the semiconductor industry has proven to me that once you understand the roadmap of semiconductor companies, it is much easier to see what is possible in the future. Marc Andreeson famously wrote an Op-Ed stating how software is eating the world. Taking a spin-off of his column, I wrote about why semiconductors have to eat the world before any software (or services) can. The reality is, every major software or services breakthrough has come and will come because of innovation or invention from the Silicon Big Five.” It is important to note here that there are other major players in semiconductors such as MediaTek, ARM, TSMC, ASML, NXP, Marvell, etc., that we see as enablers, and their efforts are not discounted in this analysis. Ben will do a follow-up on some of these companies shortly and put them in perspective of their role in the future of tech. Something important to keep in mind when thinking about these companies. The trap many make is to think about silicon just as a physical chip and nothing more. These companies do not just design physical semiconductors. All of these companies are actually software companies that create computing platforms. Silicon is just part of their platform story. This is one of the reasons it is so important to recognize the future shaping role these companies play. Semiconductors might be the Rodney Dangerfield of tech since they do not get the respect they deserve. But make no mistake, without the incredible work the ‘Silicon Big Five” and all of the other semiconductor companies that have contributed to our tech past and present, we would not have all of the great technology we have today and will have in our future. Tech companies have boomed during COVID as more businesses looked to online and cloud based solutions that enabled their workforce to continue working from home. At home, people looked for technology that would keep them entertained and connected with family and friends as lockdowns and travel restrictions made getting out and about an impossible task. Parents and schools had to quickly gear-up for online learning, with parents taking on the roles of Tech Support and Teacher’s Aide in addition to their normal day jobs. Now, the Tech Industry is known for its fast-changing nature and its ability to deliver solutions in a short amount of time. However, there is one core part of the tech supply chain which has been struggling to keep up – semiconductors. The great COVID Semiconductor Shortage started on the back of unforeseen demand for tech consumables and infrastructure such as laptops, smartphones, networking equipment, and datacenter equipment. This unanticipated spike in demand had an immediate flow-on effect to industries running a well-forecasted but lean supply chain such as Automotive. Now that it’s well over a year since this demand imbalance was first highlighted, how is it that we are hearing about shortages throughout 2022? To understand this, we have to take a look at how semiconductors are made. Semiconductor manufacturing has two major processes, Front-end manufacturing where the semiconductor silicon is manufactured, and Back-end manufacturing where the silicon chip is placed into its final package ready for sale to an electronics assembler. Front-end manufacturing is a highly specialised field, and consequently expensive – Intel are expecting to spend U$100B to build and fit-out their new semiconductor fabrication plants. TSMC, the world’s largest contract manufacturer of semiconductors, is also spending U$100B over the next three years on new capacity. To put this in perspective, that’s about the same as Atlassian’s current valuation. A new fabrication plant takes time to build, and the lead time for key lithography equipment is no overnight event either. Intel’s new facilities won’t be producing anything until at least 2024. Even though the industry announced it was investing capital in new fabrication capacity last year, we can expect it will be at least another year before any of this extra capacity is operational. The old saying “Rome wasn’t built in a day” certainly applies to Semiconductor Fabrication Plants. The Back-end facilities are another unique aspect of semiconductor manufacturing, and due to their high manual labour requirements, have traditionally seen them located in countries with low-cost labour rates. Unfortunately, many of these countries are struggling with COVID vaccination access and roll-out, which will continue to result in sporadic disruption of Back-end plants. The highly automated processes employed in Front-end processes means that COVID-related labour disruption is primarily a Back-end problem. However, COVID disruptions aren’t just limited to Back-end plants. A semiconductor chip can make a full lap of the world before it’s sold to an electronics manufacturer as it travels from a Front-end plant, to a Back-end plant, and then through Distribution channels. COVID related disruptions to shipping have had a direct effect on semiconductors as many international flights have been cancelled. Due to their low weight and high value-to-volume, semiconductor shipping by aircraft was common pre-COVID, and passenger airlines formed a key part of the shipping strategy. So where’s the good news? As international flights start to return to normal we can expect the current shipment bottlenecks to ease. As more countries get better access to COVID vaccines and implement more efficient vaccine roll-outs, we can expect Back-end stability to return. But most importantly, as we see more semiconductor fabrication capacity come online, we will see a return to a somewhat more stable availability of these crucial Tech components. Until then, Tech companies need to be implementing contingencies to ensure they can continue to deliver high-quality products while their competitors are struggling, now is the time for savvy companies to gain market share and maximize profits. As a specialist Technology Product Engineering company, we help our clients to navigate these tricky times and to continue manufacturing successful products. This requires specialist engineering and industry knowledge which we call Contingency Engineering. Electronic Components Market With the amplification of advanced technologies and the effective usage of internet networks in manufacturing, there has been a boom in the IoT industry and IoT applications. The infrastructure of the Internet of Things is undergoing major advances. As reported in the Mobile Economy 2020, released by the GSM Association, the number of devices connecting to the Internet—i.e., IoT connections are estimated to hit 25 billion in 2025, from 12 billion in 2019. In a few years, the greater involvement of IoT devices will gradually connect computers to software and link users to essential resources, streamline the corporate workflow, and benefit people. Electronic components have a wide variety of modes of failure, such as excess temperature, excess current or voltage, ionizing radiation, mechanical shock, stress or effects, and many other factors that can be responsible for failures. Problems in the product packaging can cause failures in semiconductor devices due to corrosion, device mechanical tension, or open or short circuits. Some of the common failures are packaging failures, contact failures, printed circuit board failures, relay failures, semiconductor failures, passive element failures, and MEMS failures. The recurring failures are a cause for concern, thereby restraining the growth of the market. Transistors, diodes, triodes, optoelectronic modules, photoelectric tubes, and integrated circuits are some of the active electronic components. Because of its vast number of applications, such as electronic cameras, microphones, laptops, among many others, integrated circuits are quite in demand active electronic part. Besides, it has been the most profitable of a large range of technical advances in integrated circuits, such as modular IC and multi-layered IC. The automotive sector caters to the largest share owing to its high dependence on the passive components. Further, Modern Electric Vehicles, Hybrid Electric Vehicles, and Plug-in Hybrid Electric Vehicles need electronic components more than ever before in the control electronics, driving the need for passive components. With the high requirement, manufacturers and suppliers are striving to keep up with the accelerating pace of technological advances. Asia-Pacific is accounted for the maximum share in the global electronic components market due to the presence of favorable technical infrastructure in countries, such as Japan, South Korea, and China. Cost-effective manufacturing and the presence of a large amount of inexpensive labor in China and India has bolstered the growth of the market. As of 2020, the Asia-Pacific region encompasses approximately 61.7% of the total world population, thus holding a major share in the global trade and an impact on the shipments and the adoption of consumer electronic goods. Semiconductors Introduction
The Backbone for All Technology Past, Present and Future
On November 15th of 2021, Intel celebrated the 50th anniversary of its first semiconductor known as the 4004 processor. On this anniversary date, Intel put the importance of the 4004 into historical perspective-
Of course Intel, following Moore’s Law, which states “the number of transistors in a dense integrated circuit (IC) doubles about every two years” has continued to make their processors faster and more powerful and is still the number one PC semiconductor company in the world today.
To that end, my son Ben Bajarin, who is now CEO of Creative Strategies, penned an interesting perspective on what he calls “The Silicon Big Five.”
He prefaced this perspective in the following way-
Ben’s criteria for the Big Five was to emphasize companies with unique IP around the central computing units of CPU and GPU technology. The companies he chose create the end products, with unique IP, and have significant competitive differentiators around CPU/GPU architectures and solutions.
Although the components are invisible to users, they are incredibly important to the future of technology. As Ben stated, “once you understand the roadmap of semiconductor companies, it is much easier to see what is possible in the future.”
Early observers of the Intel 4004 could never have predicted the catalyst it would have provided for the next few decades of computing. Today’s semiconductor innovations may be similarly invisible but the efforts of the Silicon Big Five will provide the impetus for every major technology breakthrough in the future. What’s Up With Semiconductors in 2022?
Expansion of Electronic Components Market during 2021
The global electronic components market is expected to grow from USD 375.2 billion in the year 2019 to USD 522.1 billion in 2029 at a compound annual growth rate (CAGR) of 9% in the forecast period. An electronic component is any simple discrete device used to influence electrons or related fields in an electronic system, assisting in circuit operation. A variety of electrical terminals have computer parts. Further, to create an electronic circuit, these terminals link to other electrical components. Electronic circuit guides and regulates the electric current, including signal amplification, computation, and data transfer, to perform different functions. It contains various elements, including resistors, transistors, condensers, inductors, and diodes.
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