A Difference of Business Models: Semiconductor Companies with End-user ProductsFebruary 02, 2020 by Robin Mitchell
Some traditional semiconductor companies step into the end-user market and some do not. What companies are making this move and how does it affect the industry as a whole?
Semiconductor companies come in all shapes and sizes. Some are fab-less, some are "pure-play" foundry businesses; some offer components directly and some have diversified their offerings to include subsystems and consumer-end devices.
How do these various business models affect the amount of R&D they conduct into progressing IC design and development?
The Importance of R&D
The high marketability of ICs has effectively guaranteed long-term profits for some of the world's most notable producers, including Intel, AMD, Qualcomm, and Texas Instruments.
The past 50 years of silicon development have seen these device producers heavily invest in R&D as they vie to make the smallest, most efficient devices at the lowest cost. The result has been nanometer-scale transistors with entire computer architectures now fitting onto a single silicon device.
This competition has seen silicon producers refine their skills and create their own specialized technologies, helping engineering companies to produce the latest devices. Since the conception of the integrated circuit, many semiconductor companies have essentially stuck to what they are good at and have stayed out of the consumer market, but not all.
Some have branched into subsystems, T&M equipment, and even consumer-end products. For some of these companies, like Maxim, developing consumer-end health products is an achievable goal.
The logos of the top 10 semiconductor companies, by yearly revenue
Some companies create silicon devices designed for one specific product, with a classic example being processors. When Intel was approached to produce a 4-bit calculator IC, they decided to produce a range of chips that would all work together to produce a 4-bit computer that would execute code held in memory. The core chip of this chipset, the 4004, became highly popular as it was not designed for one product but designed to be used in any computational task.
Out of the top 10 semiconductors by revenue, Samsung and Intel have had the highest total revenues in recent years. Behind them are SK Hynix and TSMC, both of which are notably much narrower in the scope of their offered products.
Semiconductor Companies in the Consumer Market
Some producers of semiconductor devices are publicly associated with end-products more than with the silicon they produce. Examples of these companies would be Toshiba and Samsung, which are most famous for their line of consumer products including mobile devices, cameras, TVs, computers, and tablets.
When compared to companies that solely focus on semiconductor products, these multi-disciplinary companies do not necessarily make fewer advancements in silicon technology nor do they suffer from being behind in the technological race; if anything, these very large businesses are the ones that tend to make the giant leaps and bounds. Toshiba was the company responsible for NAND FLASH memory, which is now used in a wide swath of products. Samsung has made major developments in SDRAM, semiconductor fabrication techniques, and display technologies.
There exist a small group of semiconductor companies that can be associated with either end-products or the silicon they produce. Such companies would include Texas Instruments, which is famous for both their chips and their calculators while others, such as Omron, are famous for components but also their wearable medical devices.
This capability is most likely due to the large nature of the business with plenty of resources for R&D whereas other smaller companies may struggle to find the same level of funding.
No Slow-Down for R&D
If the semiconductor manufacturers who are dedicated to chip production start to produce their own consumer products, will it affect design engineers? This is an incredibly hard question to answer.
One of the biggest driving forces in IC development is the competition between semiconductor companies. An engineer, when designing a product, will look at what is available on the market and choose the most appropriate design for the application. This is where semiconductor manufacturers can gain feedback on their design and technology and therefore make improvements to try and increase sales.
Last month, IC Insights released its McClean Report—A Complete Analysis and Forecast of the Integrated Circuit Industry. According to their release on the report, "annual spending on research and development averag[es] about 15% of total sales" for these major semiconductor companies, with the exception of a slide backward in recent years due to the slow of growth:
Image used courtesy of IC Insights
How do engineers see the differences between these varying companies? How does the perception of a semiconductor company change when that company chooses to pursue consumer products in addition to R&D efforts? Share your thoughts on these semiconductor companies in the comments below.