The pros and cons of chip design outsourcing

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The pros and cons of chip design outsourcing [Copy link]

Semiconductor manufacturing is traditionally divided into four processes: design, manufacturing, packaging, and testing. From the perspective of technical content and cost, the design and manufacturing of the front-end process accounts for the highest proportion, while the packaging and testing of the back-end process accounts for a relatively low proportion. Semiconductor device suppliers began to outsource packaging and testing to third parties in the 1990s. Later, with the increase in integration, the capital expenditure of manufacturing equipment soared. Semiconductor device suppliers then outsourced or offshored the wafer manufacturing of the front-end process, retaining only the design process in hand to achieve the purpose of reducing production costs and grasping core technologies. After entering 2000, the semiconductor market rose first and then fell. R&D investment decreased with the decline in sales revenue. The design process at the forefront of the semiconductor production chain was also outsourced one after another. It can be expressed in the words of a senior industry insider, "Design outsourcing is as regular as the laws of physics." Here is a survey result on design outsourcing published by EETimes media in August 2004. The survey subjects were semiconductor suppliers in North America. Their average annual sales reached US$2.3 billion, of which about 1/4 were large companies with US$5 billion and about 1/4 were small companies with US$50 million. Their responses to the design outsourcing survey are summarized below:

? 36% of companies have recently outsourced their designs to third parties, while 64% have not.

? The occupational classification of the respondents is as follows: hardware engineers account for 43%, software engineers account for 11%, project managers account for 12%, system architects account for 16%, and managers of various types account for 18%.

? The classification of work outsourced to third parties is back-end chip-level design accounting for 45%, followed by software design 40%, front-end chip-level design 35%, and system-level design 26% (there is overlap in the statistics).

? The third-party companies that outsource design work are classified as design consulting companies (46%), followed by independent design consulting companies (41%), foundries and electronic manufacturing service providers (23%), ASIC suppliers (21%), electronic design automation suppliers (21%), and others (3%) (there is overlap in the statistics)

? About 33% of design outsourcing companies have design teams with less than 5 people, and about 16% have more than 30 people, which is obviously insufficient. The average time required for project design has been shortened from 18 months ten years ago to about 12 months now, and the time to market for products is even more urgent.

From the above statistics, it is not difficult to see that 36% of semiconductor suppliers in North America outsource chip design, of which 45% are back-end chip-level design work, and 46% of contractors are design consulting companies. The reasons for chip design outsourcing are reduced R&D funds, insufficient manpower, and shortened time to market. The latest trend of global chip design outsourcing has attracted greater attention from the industry. At the Electronics Summit 2005 in the United States in March, the speeches of many experts at the seminar "The Gains and Losses of Chip Design Outsourcing" attracted attention.

Chip design outsourcing has gained industry consensus

The session was moderated by Bryan Lewis, research vice president and principal analyst at market research firm Gartner Dataquest.

Five companies participated in the discussion: HP and IBM are both giants in the computer industry and IC manufacturers, Xilinx is an important supplier of FPGA devices, they have a great influence on the semiconductor industry and are well known. Open-silicon and Wipro are suppliers mainly engaged in chip design outsourcing and services, the former is based in the United States, and the latter is based in India, and both have become well-known outsourcing suppliers of pure IC R&D services. Wipro has 30,000 employees, and its customers include many IC manufacturers in North America and Europe. It is also a representative global chip design foundry service company.

Bryan of Oataquest spoke first. He believed that “outsourcing chip design has its pros and cons. The semiconductor industry has outsourced manufacturing for a long time. Obviously, the reason for outsourcing is that cost and labor are cheaper. However, outsourcing design is not a simple equation. It is related to engineering experience, technical skills and many specific issues. It can be seen that outsourcing is a complex equation.

The focus of today's forum is, what kind of outsourcing is most effective for users? Does outsourcing design only provide more jobs, higher wages and better profits for your country? Obviously, it is more than that.

Bryan Lewis continued to elaborate on the characteristics of chip design outsourcing, "There are two ways of outsourcing, one is commissioned outsourcing, and the other is offshore outsourcing. The two types of outsourcing have both similarities and differences. As we all know, commissioned outsourcing completely entrusts chip design to a third party. Offshore outsourcing usually designs and manufactures domestically and internally, however, the company can send the design team abroad, but it is still an internal matter. For example, Intel has design teams engaged in offshore outsourcing in India, China and other places. TI and HP also use offshore outsourcing, but HP also uses subsidized commissioned outsourcing. IBM and Xilinx's outsourced design is mainly arranged in the United States. Open-silicon and Wipro are both outsourced design suppliers and offshore contractors, mainly to reduce costs."

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According to the EETimes chip design outsourcing survey in January 2005, the following results are shown: ? The most popular locations for outsourcing design are the United States, followed by mainland China and Taiwan, and India (accounting for 80% of the responses), and other countries and regions (accounting for 20% of the responses). ? What types of design outsourcing engineers are needed? a Logic verification (accounting for 62% of the responses), b Structural design (accounting for 37% of the responses) c System final design (accounting for 1% of the responses) ? What problems may be encountered in design outsourcing? a Completion time is longer than expected, b Communication problems with third parties (such as time difference, skills, etc.), c Cost is higher than expected, d Management problems. ? Which types of designs can be outsourced? And ? Which countries benefit most from outsourcing services? China leads in chip manufacturing outsourcing services and is expected to benefit most from chip design services, followed by India. China is the fastest growing country and will have the ability to improve from unit-level circuit design to system-level design. Chip design outsourcing is an inevitable trend. Moderator Bryan Lewis asked each of the five panelists a question about chip design outsourcing. The questions and responses are briefly summarized as follows. Question to IBM: Outsourcing design is challenging. Everyone will enter this field that is different from traditional design. How do you view the value of outsourcing design? How do engineers participate in IBM's projects? What are the real reasons and main benefits of outsourcing? Answer: Mahamed Ali (Vice President of IBM Engineering and Technology Services, managing domestic design outsourcing, coordinating the work of various companies that undertake IBM outsourced design, and understanding the service quality of these companies.) said: "IBM focuses on the value of outsourcing, that is, the cost factor of outsourcing. Many customers value the innovation of their products or the rapid resolution of problems. IBM will pay attention to the help they can provide." In terms of value, he believes that "IBM needs a lot of intellectual property (IP), a high degree of engineering skills, manufacturing skills and industrial design experience. IBM pays more attention to providing complete solutions." He uses a root-and-branch approach to assess the contractor's solution capabilities. The chip is like a table. Only after opening it can you see its structure and foundation. He said: "To evaluate the technical capabilities of a design outsourcing company, we need to look at the overall picture, including Si processing, software, products and electronic devices, as well as a comprehensive approach to engineering, manufacturing and industrial design, rather than just looking at a finished chip." Question to Wipro: Have you found which design outsourcing companies are doing well and which are not doing well? Answer: Satish Premanathan (Executive Leader of VLSI/System Design, North America, Wipro Technologies. Wipro, based in India, is probably the largest outsourcing company in hardware and software.) "You need to understand the problems that outsourcing needs to solve. The contractor should not just complete the design and throw it away as scrap if the outsourcing client is not satisfied. The contractor should start all over again until they get a satisfactory design. The key issue for the outsourcing client is to understand what projects the contractor is suitable for and what projects he is not suitable for. Which projects are very time-sensitive, etc." He believes that chip design outsourcing will enter new areas. "There are two key aspects to design outsourcing. First, when entering a new area, if the design agency lacks experience, it is necessary to find a contractor with the ability to handle the design of the new area. Second, for designs that require a large number of variables but lack the ability to develop all the variables, it is best to outsource these variable designs to capable contractors. There must be a gap between the requirements of the outsourcer and the contractor, and both parties need to work together to minimize the gap." Question to HP: What are the challenges of design outsourcing, including local outsourcing and offshore outsourcing? A: Mobashar Yagdani (ASIC manager at HP responsible for design outsourcing, whose products include DSP, FPGA and other chips) has the following opinion: "We outsource about 50 to 58 types of chips every year. Usually, the reason for outsourcing is to reduce costs. The biggest problem encountered in outsourcing is that the expected goals cannot be achieved. You really don't know who can undertake your design outsourcing and what the capabilities of the contractor are. There are often different answers for the same chip, with companies that believe they have only 30% confidence and companies that say they have 70% capabilities. The actual situation does not match up. It requires evaluation and in-depth discussion between both parties, and finally a conclusion is drawn from the finished chip. In fact, outsourcing requires more than just paying attention to costs, you may have to take into account more aspects." To Xilinx's question: Please share your experience as both a supplier and a customer. Answer: Dave DeMarinis (Xilinx's general manager in charge of design services, who has extensive experience in design outsourcing) believes that "Xilinx is mainly built on the basis of product outsourcing. After we determine what are the core businesses and what are our strengths, we will play to our strengths and outsource the rest. From the customer's point of view, outsourcing should consider two factors: First, design outsourcing is an inevitable trend, because entering certain new technologies and processes will encounter high cost barriers, and physical chip design is an example. Xilinx adopts a strategy of openness to contracting companies because it has nearly 200,000 chip designers in third parties and can give full play to their role. Second, pay attention to reducing costs, reducing risks and improving performance, or all three requirements at the same time. Xilinx requires contracting companies to provide complete solutions, while paying attention to the implementation of the three requirements at any time. Xilinx has achieved effective results through design outsourcing." Question to Open-silicon: Open-Silicon is a company that combines design outsourcing and offshore outsourcing. Which form do you think is most suitable for your company? Answer: Naveed Sherwani (President and CEO of Open-Silicon, has been engaged in IC design for nearly 20 years, is an entrepreneur and professor, and was one of the first to propose the idea of design outsourcing business.) said, "When I was in charge of ASIC business at Intel in the 1990s, I was involved in both design and manufacturing. When thinking about the development in the 2000s, I believed that design has its commonalities and a common model can be established, and the design process and manufacturing process are similar. IC suppliers can become 'design-free companies' and 'manufacturing-free companies' at the same time. The design and manufacturing of the front end of the chip production chain are completed by design contractors and pure wafer processing plants respectively. This approach can be adopted regardless of design outsourcing or offshore outsourcing." As for the scale of outsourcing, Naveed Sherwani believes that "small and medium-sized companies are more suitable. If a company only designs 3 to 4 chips a year, it certainly cannot compare with the experience of a contract company that designs 30 to 40 chips a year. However, large companies produce more chips every year and can have their own design teams. In short, resource utilization should be maintained above 75%. When it drops below 50%, half of the people have nothing to do and the company will have to close down."