Despite Severe Shortages, Chip Innovation is Hot

he global semiconductor shortage casts a shadow over the plans of automakers and other companies. But for Silicon Valley executives like Aart de Geus, there is a silver lining.

He is the chairman and chief executive officer of Synopsys, the largest software supplier used by engineers to design chips. This position allowed Mr. Geus to maintain accurate insights into a 60-year-old industry that has only recently revealed its roots.


Now, everyone seems to want Geus's opinion, as shown in the dozens of emails, calls, and comments he received during a recent online gathering for customers. Synopsys said that 408 companies participated in the online seminar, which is more than twice the number of people in the last face-to-face event held in 2019, and many companies are not traditional chip manufacturers.


They come from cloud services, consumer electronics companies, defense contractors, auto parts providers, U.S. government agencies, universities, bitcoin mining machine companies, and furniture manufacturers. Their first question is: how to develop chips faster?


Even if the chip shortage brings troubles to all walks of life, the semiconductor field is entering an astonishing era of innovation. From industry giants to innovative start-ups, venture capital funds that have traditionally avoided chips are proliferating.


For example, TSMC and Samsung Electronics have solved the difficulty of packaging more transistors on each silicon chip. IBM announced the launch of 2nm chips on Thursday, which marks the continued strength of the United States in the technology race.


Perhaps the most striking thing is that new chip companies are flooding. CB Insights data shows that for many years, stock investors have always believed that the cost of establishing semiconductor companies is too high, but by 2020, 407 chip-related companies have raised more than $12 billion in venture capital.



 As of the last quarter at the end of March, there was a high demand for the earnings of chip companies. For example, NXP Semiconductors’ revenues increased by 27%. NXP Semiconductors is a large automotive, communications and industrial chip manufacturer, despite the temporary closure of two plants in Texas due to the cold.


Historically, the industry has been notorious for booms and busts, usually due to fluctuations caused by the purchase of specific products such as PCs and smartphones. According to estimates by research company Gartner, global chip revenue fell by 12% in 2019, and then rebounded at a rate of 10% last year.


But people are increasingly optimistic that the cycle should ease, because now chips are used in many ways. Philip Gallagher, CEO of Avnet, a large electronics distributor, cited some examples, such as sensors that track cows, taps in beer barrels and utility pipe flow meters, and thermometers. He and other executives said that the number of chips in major products such as cars and smartphones has been growing.


NXP CEO Kurt Sievers said: "This is a lasting growth cycle, not a short peak."


Handel Jones, a long-term industry observer, is the head of the consulting firm International Business Strategies. He predicts that by 2030, total chip revenue will steadily grow from about US$500 billion this year to US$1.2 trillion.


As the industry fundamentally changes, this growth may come. More and more companies have concluded that software running on standard Intel microprocessors is not the best solution to all problems. Therefore, companies like Cisco Systems and Hewlett Packard Enterprise have long designed dedicated chips for products such as network equipment.


Giants such as Apple, Amazon and Google have all recently joined the action. Google’s YouTube department recently unveiled its first internally developed chip to speed up video encoding. Volkswagen even said last week that it would develop its own processor to manage autonomous driving.


Pierre Lamond, a 90-year-old venture capitalist who joined the chip industry in 1957, said: "The chip design team is no longer just working for traditional chip companies. They have created a new situation in many ways."


Keller and others said that without the advancements in design software by Synopsys and its biggest competitor, Cadence, it would be almost impossible to carry out any activities.


Chip design software became popular in the 1980s to simplify the tasks that engineers used to use pencils and drawing sheets to meticulously draw transistors and other components on the chip. Geus said that software tools are constantly evolving, and now some automakers use the simulation functions provided by Synopsys to simulate the working state of future chips in order to write software for them in advance.


Synopsys, which he co-founded in 1986, has grown steadily through acquisitions, and its valuation has reached US$36 billion.


Geus said that the new growth comes from what seems to be a problem: Moore's Law is slowing down, and some companies are using Synopsys tools to design entire systems and smaller aggregates of chips that work like a single processor.


In a recent speech, Mr. Geus demonstrated how artificial intelligence enhancements enable Synopsys tools to automatically determine the best placement and connection of circuits on the chip. Mr. Geus said that through artificial intelligence, a system managed by an engineer can work two to five times faster than a team of designers.


"Using artificial intelligence to design artificial intelligence chips is pretty cool, just like science fiction." He said.


Rick Lazansky, founder of Silicon Catalyst and industry veteran, said that EDA software is the biggest expenditure faced by start-ups. This incubator aims to provide start-ups with donated design software and other services in exchange for equity.


The company estimates that it has evaluated more than 400 such companies and selected 38 to provide assistance. Gary Spittle, CEO of Sonical, one of them, said the company is developing chips to power an earbud computer that uses artificial intelligence to mix the sounds around the user with the sounds delivered by devices such as smartphones.


Spittle said that despite the success of start-ups, it is still difficult for him to attract venture capitalists who continue to prefer businesses such as software. Semron CEO Aron Kirschen also expressed this view. Semron is a German start-up company that is working on an augmented reality chip that can be mounted on contact lenses.


He was helped by Berkeley Skydeck, a business accelerator affiliated with the University of California, which helps 130 start-ups every six months. So far, it has only selected seven semiconductor-related technologies, but as more investors are keen on the field, it hopes to speed up