Chip industry, long-awaited prosperity
Latest update time：2021-09-04 20:26
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In the more than 60 years of semiconductor development history, the chip industry has experienced several booms. Each time a boom comes, a group of semiconductor companies take advantage of the situation and a large number of start-ups emerge in the market. With their joint efforts, the chip industry has prospered several times.
But in the past decade or so, as the semiconductor industry matured, mergers and acquisitions have been booming. In this process, the giant semiconductor companies of the past are facing the risk of being eliminated, not to mention how difficult it is for a start-up to survive in such an environment.
After more than a decade of silence in the chip industry, especially after 2017, news about start-up chip companies getting financing or launching new products began to appear frequently in the market. Does this news mean that the chip market will usher in a period of prosperity again? What forces are supporting the development of the chip industry in this long-awaited prosperity?
The past prosperity laid the foundation for today's semiconductor market
The glory of the semiconductor industry originated in Silicon Valley.
Shockley founded Shockley Laboratory in Silicon Valley with transistor technology and recruited top engineers from across the United States. However, due to problems in business operations, some outstanding employees fled, including Robert Noyce, Gordon Moore, Julius Blank, Eugene Kleiner, Jean Hoerni, Jay Last, Sheldon Roberts and Victor Grinich, who were called the "Eight Traitors".
After leaving Shockley Laboratory, they founded Fairchild Semiconductor. In less than half a year, Fairchild Semiconductor became one of the giants in the semiconductor industry with its technological advantages. The company is also recognized as the first modern startup in Silicon Valley.
As a start-up, Fairchild Semiconductor's huge success provided a model for entrepreneurs of insight at the time. Therefore, starting in 1959, people left Fairchild Semiconductor and joined the "gold rush" of semiconductor entrepreneurship. Among them were Intel, AMD, and venture capital firm KPCB.
Benefiting from the development of personal computers at the time, these companies that "left" Fairchild Semiconductor had opportunities to grow. Some companies even took advantage of this market opportunity to become giants in the semiconductor market.
However, the lively semiconductor market did not become quiet due to the birth of giants. The semiconductor industry, which originated in the United States, began to go global, and semiconductor start-ups began to bloom around the world. In this process, new semiconductor business models were also derived.
The emergence of the new foundry model has lowered the threshold for semiconductor companies to enter this field, providing a foundation for the emergence of a large number of chip design companies. On the other hand, the market driving the growth of semiconductors is also shifting from PCs to mobile phones. Taking this opportunity, companies such as Qualcomm and MediaTek have also grown and become giants in the semiconductor industry today.
After these rounds of prosperity and development, today's semiconductor market structure has been formed.
The chip industry is booming again
No new dividend market emerged, and there was no innovation in the model. The lively semiconductor market ushered in a period of silence for more than ten years. During this silence, the development of certain market segments gradually matured, leading to intensified competition. As a result, semiconductor companies also began to roll in frantically, and reached a peak of mergers and acquisitions in 2015.
If the involution continues, perhaps more semiconductor companies will disappear from the market. The turning point came in 2017. According to data from Tracxn cited by semiwiki, since 2017, the market investment in semiconductor startups has begun to increase significantly. Among them, the financing situation of AI chip companies is the most typical.
(Source: Tracxn)
Founded in 2016, Habana Labs received a $75 million Series B financing led by Intel Capital in November 2018. As of before the acquisition (Intel acquired Habana Labs in 2019), Habana Labs had raised a total of approximately $120 million.
Founded in 2016, Cerebras received $475 million in Series E financing in November 2019. After the financing, Cerebras Systems was valued at approximately $2.4 billion.
Founded in 2017, SambaNova Systems announced in February 2020 that it had raised $250 million in Series C funding. As of this round of financing, SambaNova has raised a total of $456 million.
Founded in 2016, Graphcore raised $222 million in December 2020, less than a year after the company's last $150 million in financing. As of now, the company has raised a total of $710 million.
In April this year, Groq, which was also founded in 2016, officially announced that it had received $300 million in new financing. Before receiving new financing this year, Groq had also raised $67 million.
Behind these companies’ financing, we not only see the popularity of AI, but also the prosperity of chip technology (including architecture). The same situation also occurs in China, which is related to the general trend of technological development. On the other hand, the Sino-US technological dispute has further promoted the growth of China.
Zhao Zhanxiang of Yunxiu Capital also said in a speech in January this year that according to statistics from his team, there were 413 equity investment cases in the semiconductor industry in 2020, with an investment amount of more than 140 billion yuan, an increase of nearly 4 times compared with the investment amount of about 30 billion yuan in 2019. This is also the year with the largest investment in the history of China's semiconductor primary market. This has also promoted the vigorous development of domestic chip companies.
According to the figures released by Professor Wei Shaojun at ICCAD last year, there were 2,218 chip design companies in my country in 2020, a year-on-year increase of 24.6%. Overall, from the changes in the growth of the number of chip design companies in my country from 2010 to 2019, it can be seen that 2016 was a peak period of growth for chip design companies in my country. This is also the same time when a large number of semiconductor start-ups emerged in other regions.
From this, we can draw the conclusion that the chip industry has ushered in a long-awaited prosperity.
Why is the chip industry so prosperous?
Perhaps we can find the value of these chip startups themselves.
As we all know, Graphcore, Habana Labs, Groq, Sambanova, Cerebras, Syntian, etc. are all start-ups related to the development of AI. The innovative products they provide have brought new possibilities for AI computing needs.
From the perspective of domestic companies, BiRen Technology, a general-purpose intelligent chip design company that was established just over a year ago, has raised more than 4.7 billion yuan in total, and is also one of the representatives of domestic start-ups in this AI wave. Recently, Xu Lingjie, president of BiRen Technology, also stated at the "AI Chip + Big Data International Summit Forum" that disruptive innovation is needed in the field of AI chips. Breakthroughs in AI chips require bottom-level innovation, first of all, architectural innovation, ecological innovation, and technological innovation. His view is also one of the reasons why the chip market, especially the US chip market, has been so hot in recent years.
From the market perspective, an AI application survey released by IHSMarkit last year predicted that AI applications will surge from $42.8 billion in 2019 to $128.9 billion by 2025. IHS said the AI processor market will expand at a considerable rate, reaching $68.5 billion by the mid-2020s. IHS believes that leading applications such as automobiles, computers, and healthcare are driving a new wave of AI applications.
On the other hand, the emergence of new application scenarios such as the Internet of Things has also brought new vitality to the chip market. The RISC-V architecture, which was born for low power consumption, is expanding into multiple markets including the PC field. The emergence of the new architecture also provides opportunities for start-ups to join the chip competition.
The flourishing of new application scenarios and the emergence of various innovative architectures are one of the reasons why the chip market has regained vitality.
In addition, changes in trade relations have also attracted the attention of the world to the development of the semiconductor industry. Driven by localization, start-up chip companies have begun to emerge in large numbers around the world.
Facing new opportunities, not only have opportunities been brought to start-ups, but many giants in other fields have also begun to get involved in the semiconductor industry. Internet giants represented by Amazon and Google have also joined the competition for chips, and they have also become new acquirers of semiconductor start-ups.
High-quality chip startups are not only the targets of acquisition by cross-field giants, but also the targets of sniping by traditional semiconductor giants. Driven by new application scenarios, many semiconductor giants have begun to transform, but for traditional semiconductor giants, transformation is a long process. In order to adapt to the development of the future market more quickly, acquiring high-quality startups has also become an important part of their transformation.
As manufacturers from all fields are entering the semiconductor industry, competition in the semiconductor market has changed. Traditional semiconductor giants not only have to face competition from start-ups that are trying to seize new markets, but also have to face the sudden rise of cross-field manufacturers.
The arrival of this new competition has also brought prosperity to the chip industry in another sense.
Finally, what is worth thinking about is how long this long-awaited boom in the chip industry can last and who will be lucky enough to be the final winner.
*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.
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