Silicon Valley at the heart of semiconductors and chips around the world
FrenchWeb publishes an excerpt from the book David Fayon (“Made in Silicon Valley, digital in America», Pearson, 2017).
In 1971, journalist Don Hoefler, noting the high concentration of semiconductor companies in the Santa Clara Valley, first used the expression “Silicon Valley” (silicon, silicon in English, being the basic material of electronic chips). In many cases, these are start-ups founded in garages often by students or recent graduates – the first being that of Hewlett and Packard in 1939 and then Intel and Apple followed.
Companies in semiconductors (Intel, Samsung, etc.) need programming and rely on equipment manufacturers.
A whole ecosystem has been created. The semiconductor memory market (Dram and Flash) is dominated by the Koreans Samsung Semiconductor and SK Hynix, the Japanese Toshiba and the Americans Micron Technology, Intel and Western Digital.
Historically, all companies that designed chips (Motorola, Texas Instruments, Philips, STMicroelectronics, etc.) had their own production units. Texas Instruments bet on Morris Cheng, a promising South Korean who obtained a PhD from Stanford in 1964. He later became VP of the semiconductor branch of Texas Instruments. He pioneered the idea of establishing semiconductor sales below cost. The objective was to sacrifice the expected profits in order to gain market share in order to obtain manufacturing returns and then generate long-term profits. He then founded Taiwan Semiconductor Manufacturing Company (TSMC) in 1987, a pioneering company and currently the world’s largest semiconductor foundry. This is where Taiwan’s predominant place in chip manufacturing started. In Sunnyvale is GlobalFoundries, the world’s second largest semiconductor foundry. It produces integrated circuits for semiconductor companies like AMD, Broadcom, Qualcomm and STMicroelectronics. So-called companies have appeared fabless, that is to say that without a factory and without a manufacturing unit, they only provide chip design. The first of its kind is Nvidia. This offers the advantage of an economy of scale for purchases made by technologies. There are manufacturing models that estimate the cost of silicon per cm2 weighted by room size. They have been adapted for the industry, IBM having adopted them. IBM still produces high performance servers for banks and insurance companies, where very high reliability and strong security are required. IBM holds around 80% of the market share in processor architectures of this type.
Applied Materials is one of the major players as an equipment supplier for semiconductor manufacturers (microprocessors and other chips). The Applied Materials research center is designed as a start-up, one of the recent developments is the arrival of OLED technology for the screens of smartphones, Samsung and Apple in particular. All disruptive innovations are made along three lines: new designs, new materials, new processes. Cadence Design Systems produces software and hardware used in the design of chips, integrated circuits and printed circuit boards. Like Silicon Graphics in the past, their business model is to be reinvented due to technological evolution because workstations are in competition with increasingly efficient PCs and smartphones. Nvidia supplies graphics processors and graphics cards for PCs and game consoles.
The giant Intel has stagnant results and is looking for sources of growth (for example datacenters, autonomous car), which also explains all-round takeovers in areas beyond its original positioning such as Movidius for real-time image analysis or Nervana Systems in the deep learning. Arnaud Pierres emphasizes that “Intel can stop projects or even lay off people overnight and hire in sectors deemed more strategic”. With connectivity, small micro-processors, you can have Intel products everywhere. Replay Technologies was acquired because 3D replay in sporting events is synonymous with a lot of data and processors. For example in baseball stadiums or for basketball games, it is possible to broadcast interesting videos with slow motion that gives the impression of having a camera circling the player. In a stadium, between 30 and 100 cameras can be placed, each camera being associated with a PC. Data transfers are measured in terabytes and are transmitted to a server with software running to create the image, etc. Nicolas Breil underlines that the slogan “Intel inside” which is resonating in people’s minds is a “formidable marketing coup” because “Intel is a B2B player and the campaign was carried out at the consumer level for a low cost”.
Intel has its largest factories in the United States in Phoenix, Portland and Austin. These are places where taxation is beneficial. Fabs in semiconductors are highly automated. And in countries where labor costs are higher, this can be offset in part by automation and to a lesser extent proximity to customers.
Another trend, besides the evolution of chip performance according to Moore’s Law, is the use of less energy-intensive architectures which can prove to be more efficient. ARM, an English company, now a subsidiary of the Japanese company Softbank, has developed machines with advanced RISC processors.
According to Todd Morimoto, “the debate between a single, very fast microprocessor and a multicore architecture turns more to the advantage of the multicore given the physical limits to be pushed for most common consumer goods.”
The hard drive market is dominated by Western Digital and Seagate Technology, which are headquartered in Irvine, South Los Angeles, and Cupertino respectively. The first bought the Japanese Hitachi Global Storage Technologies in 2011 and the second, which invented the first 5 ¼ hard drive for computers, bought Maxtor in 2005 then the hard drives division of Samsung in 2011 and the French LaCie in 2012 Then follow the Japanese Toshiba and Fujitsu. We are witnessing a concentration of the sector. Overall the question is to know where the data storage will be in the long term, in the cloud, on hard disks or in Flash memories (typically USB keys). A trend is to have hybrid storage arrays with Flash stages for recent data that we want to access more frequently and also rotating hard drives for the benefit of their large capacity. Jeff Fochtmann points to the massive need for exabytes for storage. Companies will create big data analytics with a process where data creates data. Platforms like Snapchat have massive data that is created in real time and only a fraction of which is stored. To have better performance in real time, a mix of technology between Flash and storage should be sought. Conversely, Facebook has different requirements even though tools like Facebook Live are likely to challenge Facebook’s relationship to data and storage. Drones with on-board cameras are also likely to require a lot of storage infrastructure. Jeff Fochtmann concludes: “There is an innovation in the hardware (hard disk, microprocessor) – the invisible lower layers – which multiplies the field of possible innovations likely to change the world.”
David Fayon is a consultant in digital and Web transformation from Silicon Valley for French companies and speaker. Administrator of telecommunications posts, he is also a doctoral candidate at Télécom ParisTech, where his work focuses on the digital transformation of banks. He runs the blog davidfayon.fr.