The major trends in the semiconductor industry right now

Takeaways from the GSA European Executive Forum and SEMICON West 2023

Introduction

In the past months, we witnessed two major semiconductor events across the globe: The 2023 Global Semiconductor Alliance’s (GSA) European Executive Forum gathered leading global senior executives on June 14-15 in Munich to embrace the most pressing issues affecting an industry caught in the throes of change. SEMICON West 2023 took place in San Francisco on July 11-13 to discuss key challenges affecting the global microelectronics industry. In this article, we’ve distilled the major trends that arose during both events; trends that will continue to shape this industry in the foreseeable future. These include supply chain volatility, sustainability, government investments, generative AI, geopolitical tensions, equality, and the tremendous opportunities in automotive. We’ve also mapped out Capgemini’s role as an intermediary in building trust and understanding and helping to welcome new players to the market.

Resilient supply chains require flexible production and shipments

Semiconductors are pervasive and will become much more pervasive. Semiconductors are the brain of digitization. It is not widely known that semiconductors are among the most traded goods in the world. Any disruption in the semiconductor supply chain can significantly impact the global economy.

The first big trend centers around building resilience to the volatility of the semiconductors’ supply chain and ensuring end-to-end transparency to predict forecasts better and manage demand. Supply chain issues caused by the fragility of the supply chain and the incompatibility of production cycles have cost semiconductor company customers, such as automotive, many billions of dollars in lost sales and profits. Automotive customers controversially asked that they be given control over the flow of chips from one Tier 1 to another.  For semiconductor companies, it is imperative to build the resilience and process maturity that will enable them to switch easily between industries. GSA triggered a dialogue on how to be better prepared for whatever the future may hold by increasing inter-industry cooperation and building strategic relationships.

Harnessing the transformational power of sustainability

Another major trend broached at both events was the clear focus on sustainability and producing the products that drive it. As the earth’s ability to provide what we need decreases, the need to act on sustainability is increasing. Semiconductor companies have come out with their strategy and goals to become sustainable. Companies are launching initiatives focused on producing sustainable products that enable low power consumption or reduce the carbon footprint of their customers.

Sanjiv Agarwal, Vice President Global Semiconductor Industry Leader, says, “Semiconductor companies need to embrace sustainability and aim to make technology sustainable. Sustainability is everyone’s responsibility.”

As the semiconductor industry is projected to double by 2030, and carbon emissions projected to quadruple by 2030, sustainability and government investments also dominated the agenda at SEMICON West as well. Five key messages emerged:

• AI is very high computing power-intensive – for example, a ChatGPT search consumes thirteen times as much energy as a Google search
• Companies should design for sustainability – there is a need for dedicated engineering teams to support sustainability goals (equipment, sub-fab, process recipes, and operations). Companies such as Intel and Applied Materials have engineers dedicated to sustainability as part of the engineering PODS
• Every semiconductor company has thousands of suppliers – Intel, for instance, has 16K suppliers; however, most suppliers have yet to set their sustainability goals. Therefore, there is an urgent need to establish metrics and develop a measurable roadmap to achieve net zero. Sustainable procurement is gaining attraction in the market.
• Digital technologies can help reduce the carbon footprint and make fabs more sustainable – this can be achieved by optimizing efficiency through advanced analytics (ML, analytics, and AI); improving digital lifecycle collaboration within fabs (digital twin platform across the lifecycle of a fab can reduce production loss and energy waste); and ensuring enterprise-level collaboration across fabs.
• Companies have made more progress on their US sites than in other regions – for example, Intel and STMicro are net positive water in the US but not in other regions.

Generative AI – Need for extreme compute power and smaller suppliers

GenAI is probably our generation’s most disruptive innovation, and it can potentially shape humanity’s future. From simple automation of tasks to writing codes to drug discovery, the scope of areas where it can find use is practically limitless, and the semicon industry is right at the forefront to enable this transformation journey. With such technologies that have the potential to impact so many different industries in a myriad of ways, there are always the early adopters, the ones who need a plan, the late risers, the ones with the FOMO, and the ones who choose to be in their state of inertia unless the market forces apply.

Surprisingly with Gen AI, no one wants to maintain the status quo. There is a clear indication that almost every industry is looking for ways to adopt Gen AI in its day-to-day operations, be it in Manufacturing, Sales, Marketing, IT, or customer service – and the High-tech segment is leading the pack in terms of adoption. As Gen AI-based applications and use cases for design and manufacturing support start to proliferate, it will transform how the current automation in factories functions. This will create a major shift in how the industry adapts and molds itself to this new reality. According to Vignesh Natarajan, Hi-Tech Segment Leader of Europe, Capgemini, “As generative AI becomes mainstream, the transformation of the data center space will be driven by semiconductor players, who will be the crucial building blocks in the power chain competence.”

For Capgemini, the biggest trends are generative AI-based use cases, AI-based development use cases, AI-based joint design use cases, and foundry solutions. This will be the big wave as demand for consumer electronics continue to grow, albeit slower than during the Covid era. However, demand for electrification, sustainable solutions, and smart cities will soar. Government funding of large-scale projects will provide a floor for demand to produce the next “boom” cycle for semis.

“Our ambition is to support the semiconductor ecosystem companies in scaling up to meet their market opportunity with solutions in Intelligent Industry and Enterprise Management,” says Shiv Tasker, Global Industry Vice President, Semiconductor and Electronics.

Digital Twin offers fast scalability

Digital Twin showcases huge potential in the semiconductor industry through its ability to simulate the entire fab, manufacturing processes, and various use cases and models to improve efficiency and productivity. Companies are looking to transform various aspects of the manufacturing processes. Some of the examples where semiconductor companies are focusing are:

1. Device-scale twin – detailed visualization of a device to reduce cycles of silicon learning, thus reducing waste and resources,
2. Process-scale twin – using simulation to streamline process development thus reducing chemicals and electricity usage,
3. Equipment-scale twin – improving first time right from design through installation by finding issues before physical build or building equipment expertise faster and more effectively.

Digital twin, or the digital omniverse, coupled with Generative AI, provides an incredible opportunity by providing millions of variations to the model, and through reinforcement learning, can change models for best-performing output or model. When implemented well, it can escalate product output at a speed that tests the laws of physics.

OEMs’ growing needs, especially in the automotive

Automotive is a huge driver for many of the changes facing the semiconductor industry. In fact, there was palpable tension at the GSA event between the semiconductor representatives and auto manufacturers. The auto market is hard to resist for any semi-manufacturer due to its size, but the auto manufacturers will never forget the chip shortages of the Covid era and the tremendous damage that did to their business. The evolving supply chain relationships and the trust challenges were the subject of many formal and side-bar discussions.

Sanjiv Agarwal adds: “At Capgemini, we work both sides of the equation, helping chip manufacturers “get to market” and fit into the automotive ecosystem, working with the automotive manufacturers to create their chip strategy, selecting and working with foundries to manufacture those chips, and integrating chips into their designs.” We bring in the promise to create an affordable, ever-smarter, software-driven mobility ecosystem that’s centered around customer needs and protects them from both physical and digital threats.

Geo-political tensions

Geopolitical tensions are a shared concern rather than a trend, but they will have a large impact on the way semiconductor companies work since 60-70 percent of all chips are manufactured in Taiwan or South Korea, which are both relatively volatile. Divergent national approaches exacerbate these concerns. The US, for example, has shifted from outsourcing production to encouraging chip producers to transfer operations stateside. In general, the U.S. CHIPS Act and the European Chips Act will “onshore” more production and drive diversification of production geography.

Brett Bonthron, Executive Vice President and Global High-tech Industry Leader, says, “Through the two Chips Acts, semiconductor companies see that governments understand the criticality of the industry.”

The US Chips Act is a true public-private partnership model and probably the first proactive federal program where the program will be executed along with the states, which would manage permits, labor, land, and other logistics.

Statements of interest are currently being accepted for all direct funding opportunities (USD2B floor, no ceiling), and over 400 have already been received. The US Chips Act envisions success in four areas:

• Leading-edge logic –at least two new large-scale clusters of leading-edge logic fabs wherein US-based engineers will develop the process technologies underlying the next-generation logic chips.
• Memory – US-based fabs will produce high-volume memory chips on economically competitive terms and R&D for next-gen memory technologies critical to supercomputing and other advanced computing applications will be conducted in the US.
• Advanced packaging – the US will be home to multiple advanced packaging facilities and a global leader in commercial-scale advanced packaging technology.
• Current generation and mature – the US will have strategically increased its production capacity for current-gen and mature chips. Chipmakers will also be able to respond more nimbly to supply and demand shocks.

Similarly, the European Chips Act enables the EU to address semiconductor shortages and strengthen Europe’s technological leadership. It will mobilize more than € 43 billion of public and private investments through the Member states through five key areas:

1. Strengthen Europe’s research and technology leadership towards smaller and faster chips,
2. Put in place a framework to increase production capacity to 20% of the global market by 2030,
3. Build and reinforce capacity to innovate in the design, manufacturing, and packaging of advanced chips,
4. Develop an in-depth understanding of the global semiconductor supply chains,
5. Address the skills shortage, attract new talent, and support the emergence of a skilled workforce.

Diversity and workforce development

Diversity, workforce development, and talent were major topics at both events, with the consensus being that inclusion must start at a much earlier age and that more women and minorities must be allowed to enter leadership positions. Considering the existing workforce, many companies are partnering with universities, granting scholarships, and launching apprenticeship programs so that when these fabs are ready, and the existing workforce is close to retirement, the new, more diverse talent will be ready.

Conclusion

The semiconductor industry is in a state of flux. This year’s European Executive Forum by GSA outlined the five major trends – supply chain resiliency, generative AI, geopolitical tensions, the impact of the automotive industry, and sustainability – to emerge from this transition. There are, of course, numerous other factors at play, including issues around inclusion or reducing barriers to entry within the industry. There are also several topics that remained unsaid, for example, shifting relationships between automotive OEMs and tier-one suppliers or the evolution of the semiconductor company vis a vis the value chain. However, at the end of the day, semiconductors are fundamentally about propelling civilization forward and enabling the creation of better societies. As something that is also written our raison d’etre, Capgemini has substantial know-how and near-tech vision to drive this ultimate goal forward.