Semiconductor design is booming, propelled by unrelenting demand for new memory chips, cloud computing and the digitization of entire industry sectors such as automotive and industrial.
Technology tracker IHS Markit estimates chip design spending will top $300 billion in 2018 for the first time, up nearly $20 billion over last year. Annual spending will “remain strong, thanks to expensive memory components whose high prices carried over to this year after puffing up the chip market in 2017,” said Myson Robles-Bruce, semiconductor industry research manager at IHS.
“Last year’s boom gave memory companies surplus cash to increase investment in production capacity and to boost output, improving the supply of NAND and DRAM and forcing prices to soften,” he added.
Along with memory market gyrations, the chip design report cites growing digitization and networking on the factory floor and behind the wheel. For example, automotive industry analysts note that innovators like Tesla are incorporating internally designed ASICs into electric car applications such as power management.
Nevertheless, IHS notes that global chip designers led by Samsung and other South Korean powerhouses continue to focus heavily on wireless and computing applications. Indeed, chip industry leader Samsung Electronics (KRX: 005930) is readying a new GPU design one industry analyst touts as “the first new GPU design in over a decade.” AI is among the likely application for the new Samsung GPU.
Samsung is among a group of Korean chip makers pouring tens of billions of dollars annually into chip design. IHS estimates Samsung, LG Electronics and other Korean manufacturers alone invested $29 billion on electronics design last year. It forecasts that total Korean spending will jump 13 percent this year.
Wireless communications remain the key driver for chip design, accounting for more than one-third of global spending. Enterprise computing ranks a close second as cloud computing, big data and storage—especially flash storage—continue to drive investments in design and verification tools.
IHS also cited continuing strong demand for storage products and memory as new in-memory approaches emerge to analyze soaring data volumes.
The market watcher said Internet-of-Things connectivity and edge computing being adopted at scale in industrial markets also are keeping chip designers busy.
While South Korea and other Asian nations along with India (where many American chip makers have shifted their round-the-clock design operations), the established U.S. design sector continues to lead in overall chip design spending. Domestic design investment has slowed slightly, IHS said, but “vigorous chip spending” in the computing and industrial sectors is expected to boost annual design budgets by 4 percent this year to an estimated $88 billion.
Those continuing U.S. industry investments in electronic design automation are being reinforced by new federal programs aimed at moving chip design into the post-Moore’s Law era. For example, the Defense Advanced Research Projects Agency announced research teams last month for a pair of initiatives: Intelligent Design of Electronic Assets and an accompany open source hardware effort that seeks to emulate successful open source software development. The DARPA chip design efforts include top electronic design automation companies such as Cadence Design Systems (NASDAQ: CDNS), Synopsys Inc. (NASDAQ: SNPS) and Xilinx Inc. (NASDAQ: XLNX).