IDC's new Worldwide Semiconductor Market Forecaster predicts that the 2007 revenue slowdown in the worldwide semiconductor market will make way to a healthier year in 2008. The worldwide semiconductor market will grow at a conservative rate of 4.8 percent in 2007, compared to 8.8 percent in 2006. IDC expects growth to resume at 8.1 percent in 2008 based on the current outlook.

An even healthier outcome could be realized, should capacity expansion be more tempered in 2008 and growth in demand remain strong. Elsewhere, market trends point to ongoing mergers and acquisitions that will reshape the competitive landscape and bring traditional suppliers back to the forefront.

"The semiconductor market oversupply in 1H07 has tempered the revenue forecast of major suppliers and will put pressure on margins for the remainder of the year," said Gopal Chauhan, program manager, Worldwide Semiconductor Market Forecaster at IDC. "While broad base inventory correction for suppliers has bottomed out, pricing pressure will continue due to competition and volume growth coming from emerging regions which drive lower priced SKUs."

Outlook for 2007
* Demand for semiconductors is centered on the big three segments: PC and mobile phone unit volume is steady, led by emerging regions and low-end products. Consumer demand is lackluster, but excess inventory has subsided and IDC expects the design momentum to lead to healthy volume growth during the holiday season.
* DRAM and NAND are experiencing much lower revenue outlook this year following the severe price correction in the first half of 2007.
* Microprocessor market remains flat this year.

Long-term trends
* Emerging regions will boost semiconductor volume growth.
* Multimedia-rich mobile phones continue to drive semiconductor content and demand for processing, memory consumption, and power management.
* Personal computing further migrates toward mobility and low-priced form factors.
* Video processing proliferates across multiple consumer electronic segments, resulting in strong growth for semiconductor suppliers.
* Semiconductor connectivity technologies drive new usage models across device segments.
* Growth in personal content implies increasing need for storage, including NAND.

Top 10 vendors ranking
In 2006, the top 10 semiconductor vendors accounted for 48 percent of the worldwide market revenue. Intel, Samsung and Texas Instruments (TI) held on to the number 1, 2 and 3 positions respectively, with TI showing the highest growth percentage in revenue among the top three leaders.

With the exception of Intel, Renesas, and NXP, all other vendors in IDC's 2006 top 10 ranking showed positive growth. Hynix grew at an amazing rate of 43% over the same period thanks to the company's growing position in DRAM and NAND.


IDC's Worldwide Semiconductor Market Forecaster gathers revenue data from the top 40 semiconductor companies for 2004–2007 and provides market forecasts for 2008–2012. This database also includes revenue for 30 semiconductor devices and four geographic regions.

The Karnataka government is planning to set up a 15-acre Nano Park in Bangalore. The state will invest Rs 100 crore in the first phase of the two-phase nano centre.
The facility, which will be primarily industry driven with a focus on applications, is aimed at developing a R&D structure translatable into products.
According to M N Vidyashankar, state IT secretary, the department has identified four locations between Jakkur and Nagawara on the outskirts of Bangalore and will finalise on one of them soon.
The State government in association with Jawaharlal Nehru Centre for Advanced Scientific Research, is holding Bangalore Nano, a convention on nano science and technology in Bangalore on December 6-7.

Semiconductor chip designers may have to wait for some more time to get exclusive rights for their new chip designs. The government is likely to take at least one more year to set up the infrastructure for testing the originality of designs.
Sources in the IT ministry said that even the basic facilities for putting the lab are not in place. In the absence of a lab, the authority for semiconductor design registration -- the semiconductor integrated circuits layout design registry (SICLDR) -- has not been made functional till date.
The department of information technology (DIT) had proposed to put in place a testing lab at its headquarters in New Delhi in 2004 but the lab is not ready yet due to the scarcity of manpower and technological resources.
The industry is also concerned about the slow progress on the front as designing and manufacturing go hand in hand. “It is a thing of great concern. The industry is losing the opportunity in a competitive world where we have to compete with countries such as China and South Korea.
Such bottlenecks even detract the new entrepreneurs who want to set up their designing centres in India. The government should certainly look towards speeding up the process,” Indian Semiconductor Association member Ajay Jalan said.
The roadblock could work as a dampener for the global manufacturers of semiconductors who have not shown the desired interest in setting up centres in India even months after the announcement of the semiconductor policy in March this year under which the government has proposed a slew of incentives, including tax breaks and monetary support.
The industry is waiting for specific guidelines on how the incentives would be available to the individual companies. The IT ministry was expected to bring the specific guidelines in the next couple of days but sources said the government would not be able to bring the guidelines before September.
At present, there are about a dozen chip designers in India, including bigwigs such as Intel, EMT and Texas Instruments but no manufacturing is taking place in the country as of now.

THE sky is falling. The sky is falling. The ground is rising.

Could the subprime problems that have fouled the public market be a mixed blessing for Silicon Valley’s high-technology investors?

Highly out of favor in recent years, public offerings of technology start-ups are enjoying a mild resurgence. And some venture capitalists are arguing that the fragile momentum could be bolstered by the problems that mortgage-related securities have caused in the stock and credit markets.

The rationale is that technology investments, because they are far removed from credit-centric securities, could look relatively enticing.

“People are being scared away from other investment strategies,” said Keith Benjamin, a partner at Levensohn Venture Partners, a San Francisco firm that focuses on technology investments.

“The credit crunch can help venture,” he wrote on his blog. “One man’s ceiling is another man’s floor.”

The logic is being echoed in Silicon Valley, albeit somewhat sheepishly given the self-interest involved and the fact that there is but one major data point. That point is the initial offering of VMware, a company that makes software for servers. It went public on Aug. 14 at $29, and its shares surged 76 percent. VMware shares closed yesterday at $70.20, up $3.35.

The sharp rise of VMware, while the markets have been so volatile, punctuates what appears to be the end of the technology drought for initial public offerings. In the second quarter, 26 venture-backed offerings raised $4.3 billion, compared with 19 such companies raising $2 billion in the period last year.

Venture capitalists now hope that the disfavor technology companies engendered during the dot-com collapse is being more quickly erased — or put into perspective — by the risks evident in the struggling hedge-fund investment strategy.

But, that said, venture capitalists said the subprime-spawned troubles could be a mixed blessing — given that those troubles could take a negative toll, though an indirect one, on the seeding and growing of high-tech companies.

On the downside, venture investors said, they could have a tougher time raising investment funds from big financial institutions and other limited partners. The concern among some venture investors is that those institutions have less money because of recent declines in the market and also that they are distracted by all the fallout.

In addition, limited partners tend to some extent to lump together venture firms and hedge funds as alternative investment options. That means that as hedge funds come under scrutiny, some venture firms may get less money, said Paul Kedrosky, a venture capitalist in San Diego and author of the blog Infectious Greed.

Another concern is that tighter credit, by making it harder to borrow debt, could sap the ability of some larger companies to pay for and acquire start-ups. While technology investors would rather take their investments public than have them acquired, a potential dip in the mergers sector could hurt one of venture capital’s primary strategies for selling investments.

More indirect still could be the impact the credit crunch has on the ability of venture-backed technology companies to attract and retain talent. Yogen Dalal, a managing partner at Mayfield Fund, said his biggest concern was the inflated housing market in Silicon Valley.

The credit crunch “may not affect the engineers and others who are well paid, but it may affect the labor and service people who keep the machinery of the valley humming,” Mr. Dalal said, noting that the added new pressure could create an exodus of people who do essential jobs in the valley.

One venture capitalist who is experiencing the mixed blessing of the market shake-up is Sunil Dhaliwal, a partner with Battery Ventures, which is in Waltham, Mass., and Menlo Park, Calif.

On July 25, a company backed by Battery, Blade Logic, which makes software to automate data centers, went public. It was initially priced at $17, rose to $27, and has settled in around $25 — a healthy run that Mr. Dhaliwal said reflected in part the renewed embrace of technology investments.

But the broader market dip has brought challenges for a different company that Battery has supported.

That company, which operates landline telephone businesses but which Mr. Dhaliwal declined to name, needs $50 million to $100 million to make acquisitions. The trouble is that banks are not in a lending mood, and so Battery and the other backers are dipping into their own coffers to finance the acquisitions.

“I’m having to put more equity at risk,” Mr. Dhaliwal said. “With a normal debt market, that’s one more risk I wouldn’t have to take.”

But Mr. Benjamin, the venture capitalist with Levensohn, and a former technology industry analyst with Robertson Stephens, is bullish about the overall impact on the venture business of that latest market dynamics.

He said he was hearing from investment bankers who focus on the technology sector that they were finding themselves not just coming back into favor, but freed of comparison to and pressure from hedge funds, which have held sway in the market in recent years.

“When the credit crunch happened, it almost immediately led to a better mood for tech bankers,” Mr. Benjamin argued. He added that the latest events will create critical momentum for the investors tempted to return to technology start-ups. “The credit crunch pushes these people over the edge.”

There is good news for early stage entrepreneurs in India. Draper Fisher Jurvetson, Silicon Valley's leading venture capital fund focused on early stage companies, is setting up on the ground presence in India. DFJ, as it's popularly called, is moving one of its directors Mohanjit Jolly to Bangalore to its soon-to-be-set up India office. Jolly has confirmed his move to India's tech capital in an email to VC Circle, and he said he would be in India in early September.
The move is significant since this is the first time DFJ having a physical presence. Jolly recently moved to DFJ from Garage Technology Ventures, a seed and early stage venture capital firm founded by Guy Kawasaki. Jolly was a managing director at Garage, where he worked with over 30 companies such as LeftHand Networks, PureSight (BCGI), Kaboodle and SimplyHired.
Past India Investments
DFJ has been investing in India on and off, though. It has made the initial investment of $2 million in online DVD rental company Seventymm, and made several co-investments in firms like online ad network Komli (along with Helion Venture Partners), and $20 million in Bangalore-based electric car maker Reva (along with Global Environment Fund). The other Indian entrepreneurs backed by DFJ include Sabeer Bhatia of Hotmail, Pavni Diwanji of MailFrontier, and Pankaj Shah of 4info.
DFJ has allocated $75 million for investing in India over the next three years from its Fund IX of $600 milion. An India specific fund is not on cards yet. In late 2005, Tim Draper, the founder and managing director of DFJ, had said that the firm would look at launching a $200 million fund for India. He had also said that the firm would look at early stage opportunities in India.
Global Push
It's not just India on DFJ's radar. The firm is also looking at entering other countries like Turkey, Russia, Japan, Korea, and Israel. Early this month, DFJ announced that it's partnering with Esprit Capital Partners, a top tier European venture capital firm to form DFJ Esprit in Europe.
In fact, over the last 16 years, DFJ has created a collaborative network of venture capital partnerships. The firm now has more than 120 venture capital professionals, stationed across 30 cities in the US, Asia, Europe and South America. It has some $5.5 billion in capital commitments spread over 22 funds. Some of DFJ's successes include Hotmail (acquired by Microsoft), Chinese search engine company Baidu ($109-milion IPO), Skype (acquired by Ebay), United Online, and Overture (acquired by Yahoo).
DFJ's earlier international foray was led by a joint fund called DFJ ePlanet Ventures formed in 1999-2000. They had a $650 million global fund, and their investments included China's Baidu and Skype. But the two firms decided to split in 2006 and go solo in in their international investing forays.
Who Will Follow Suit?
You can see more Silicon Valley based venture capital firms setting up shop in India. The most immediate candidates to have on the ground presence in India will be Norwest Venture Partners, Greylock Partners (which recently debuted in India with an investment in payment company TechProcess), and Lightspeed Venture Partners. Norwest, which has already invested $70 million in five Indian companies, is likely to set up office in India as early as September. Reports also suggest that NVP may station three partners in the country.
Update: Jolly informs that Sateesh Andra has also joined DFJ in India as a Venture Partner. Andra, currently based in Hyderabad, has spent some about 15 years in Silicon Valley as an entrepreneur. He founded Metrikus (acquired by Persistent Systems) and co-founded Euclid (acquired by e4e). The DFJ team will also include a couple of analysts in the future. "Of the current Fund IX which is $600 milion in size, $75 million is allocated for India over the next three years (between investments and reserves)," Jolly says.

The Economy, Trade and Industry Ministry will start a project to develop a high-performance computer chip with a processing speed 10 times faster than existing ones in cooperation with industry from fiscal 2008, METI said Friday.

The project aims to significantly enhance semiconductor performance by making a "3-D" semiconductor--current chips are flat--and use it to realize "dream technologies," such as domestic robots.

While several countries, including the United States and South Korea, have been trying to develop a "3-D" semiconductor, the ministry hopes to revive the computer-chip industry in Japan by beating them to it.

The ministry will include a budgetary request of 1.5 billion yen for the project for the coming fiscal year and establish a joint research body by calling for leading domestic semiconductor companies, such as Toshiba Corp. and Fujitsu Ltd., to join the five-year project by the end of this year.

By making the integrated circuit in the envisaged "3-D" chip 10 times denser than existing ones, it will be possible to dramatically boost the processing speed of the semiconductor and make it smaller and cheaper to run. It also will become possible to combine several computer chips, such as an arithmetic processing unit, memory unit and sensor unit.

More circuits can be combined efficiently in a smaller space in a "3-D" semiconductor, but the catch is that producing this type of chip is technically difficult.

Smaller and more efficient semiconductors may make it possible to develop devices such as robot caregivers that can talk with people while checking their health condition, cars that can avoid crashes or traffic jams, and cell phones that can be used for more than a month without charging.

Japan led the world in the semiconductor industry in 1980s, but now companies in South Korea and the United States have the edge.

To restore the country's international competitiveness, plans to regain the initiative in the semiconductor industry through a joint effort by the industrial world and the government have emerged several times since around 2000, when Japan was suffering from a recession.

However, as companies concerned have failed to make concerted efforts, such plans have not produced the desired results.

"The project aims at developing an innovative semiconductor--it won't be an extension of conventional research--so we hope many companies will join in," a ministry spokesman said.

With its purchase of LSI's mobile chipset business, Infineon has bought itself market share. The move, however, doesn't guarantee to bring the company closer to breakeven point.

Solar Semiconductor Inc. (Sunnyvale, Calif.) has said it has signed a supply contract with Q-Cells AG (Thalheim, Germany) worth $170 million. Solar, with its manufacturing base in Hyderabad, India, has signed a multiyear agreement for the supply of 156-mm mono- and multicrystalline cells by Q-Cells for use in module production in Solar's photovoltaic module manufacturing plant in India.

Software and IP solutions took center stage at this year's Embedded System Conference-Taiwan and EDA & Test-Taiwan. ARM and nemesis MIPS Technologies pitched their new IP and processor core solutions here. MIPS showcased its 24KE processor cores for consumer applications like digital TV and set-top boxes. MIPS stressed that its IP cores consume less power than is commonly believed in some design circles.

Issues of concern
Madhan said that the major issues of concern to make India as a telecom-manufacturing hub have to be cleared at the earliest time possible.
In the case of transfer of assets to SEZ, the current Income Tax provisions (as applicable to SEZ units) allow transfer of plant and machinery up to 20 per cent of the total value. Whereas the current SEZ Rules prohibit any transfer of plant and machinery from DTA into SEZ.
“This anomaly in legal provisions penalizes the early bird manufacturers who have come to India and made investments under non-SEZ regimes, i.e prior to SEZ Act being enacted. This anomaly between SEZ rules and Income Tax Act needs to be corrected considering the limited availability of space in SEZs now. To safeguard the interest of Govt., industrial units set up at least within three years may be allowed to transfer up to 20 per cent to SEZ units,” he suggested.
Madhan said that the Semiconductor Policy should be implemented immediately by announcing the operational guidelines in respect of eligibility, computation of incentives, exit, etc.
“Similarly, the inverted duty structure needs to be studied and rectified especially in the background of surging imports due to Free Trade Agreements. Goods manufactured in SEZ using the combination of Non-ITA products and ITA products should be treated at par with ITA products and should not suffer taxes/duties,” he said further.
Repeating success
“India has become a knowledge hub for services especially a powerhouse for IT and ITeS services due to tax benefits and ample support by the government. The success model for IT sector can be replicated in Electronic Hardware manufacturing with adequate support of Government. Nurturing electronic hardware manufacturing in SEZ will benefit India by way of wealth creation, employment generation and economic growth,” Madhan added.

Finnish handset maker Nokia disclosed that India has become its second largest market in terms of sales, going past the United States in the quarter ended June 2007.

There’s not much silicon left in the Silicon Valley these days, with most chip production having been transferred to other locales long ago. However, the Valley remains the world’s preferred location for semiconductor-supplier headquarters, with the region continuing to host the largest and most diverse group of chipmakers of all global electronics hot spots, according to iSuppli Corp.
The Silicon Valley's 56 semiconductor suppliers in 2006 collectively posted revenue of $68.2 billion, an increase of 5.8 percent compared to $64.5 billion in 2005. This lagged behind worldwide semiconductor growth of 9.6 percent in 2006. However, if the results of one company are excluded—Intel Corp.—the region’s semiconductor suppliers achieved revenue of $36.7 billion, up 26.4 percent from $29 billion in 2005, handily outperforming the worldwide average.
Semiconductor companies headquartered in the Silicon Valley accounted for 26.1 percent of global chip revenue in 2006. iSuppli estimates 25 percent of global semiconductor companies are headquartered in Silicon Valley, with 39 of these companies generating annual revenue of more than $100 million.
The table attached presents iSuppli’s ranking of the Top-10 semiconductor suppliers in Silicon Valley in 2006.

Conglomeration of diversification

The key factor behind the Valley’s continued semiconductor success is the diversity of the companies headquartered in the region, iSuppli believes.
“Silicon Valley chipmakers serve virtually every major application market in the global electronics industry,” said Dale Ford, vice president with iSuppli. “Although the region is heavily associated with the computer industry, with companies including Intel, Advanced Micro Devices Inc. and nVidia Corp., semiconductor suppliers in the region also have a strong presence in the consumer-electronics, wired-communications and industrial segments, which represent four of the six major markets for chips.”
This diversity is particularly apparent when Intel is removed from the equation, Ford added. If the PC microprocessor giant is excluded, the Valley’s semiconductor companies display a healthy balance of different markets served.
The diversity of the Valley itself bodes well for the semiconductor industry in the region, iSuppli believes. The region still attracts talented engineers and others from many businesses. This is because beyond electronics, there are other industries operating in the region, from energy to biomedical. On the downside, the region has a relatively small presence in mobile communications. Furthermore, the Valley’s chipmakers have only a very minor participation in the automotive market.

Staying ahead of the Hsinchus

Silicon Valley remains the largest region for semiconductor headquarters, despite the rise of other chip hot spots, most prominently Taiwan’s Hsinchu City. Hsinchu is the only region that comes close to Silicon Valley in terms of amount of semiconductor revenue, at $50.2 billion. However, the region lacks the Valley’s diversification, with Taiwan’s semiconductor industry heavily focused on foundry chip manufacturing.

A shell of an industry?

While many semiconductor companies have their headquarters located in Silicon Valley, they have moved most of their operations elsewhere. Semiconductor suppliers often locate their management and senior engineers in the Valley, while conducting production and design activities overseas or in other parts of the United States. However, the Valley remains a hotbed for semiconductor startups that play a key role in promoting industry innovation.
Much basic innovation still occurs in the Valley. For example, most new emerging memory technologies are being developed in the region, although actual production will occur in South Korean, Taiwanese and Japanese fabs.
So, while the Silicon Valley may not have much silicon these days, it still remains the center of the global chip industry.

Cosmic Circuits and Red Herring Magazine announced today that Cosmic Circuits has been officially selected as a winner of the prestigious Red Herring 100 Asia 2007 awards. The news was announced at during the Red Herring 100 Asia event in Hong Kong, China, happening from August 29 to 31.
Speaking about the event, Gani Subramaniam, CEO of Cosmic Circuits said that, “We are delighted at Cosmic Circuits being selected as the top-100. We are into our third year of successful operation now and we take this award to be an indication of the potential and performance of the company in the Analog semiconductor space”. He also added that “with a strong pool of analog talent and a wide portfolio of best-in-class Analog IP-cores, we are hopeful of an interesting time ahead”.

The Red Herring editorial team carefully selected the winning companies based on both quantitative and qualitative criteria such as financial performance, technology innovation, quality of management, execution of strategy, and integration into their ecosystem.
"After a rigorous evaluation process, we’re very happy with winners we selected,” said Joel Dreyfuss, Editor-in-Chief of Red Herring. “There was a large pool to choose from and we’re impressed by the caliber an innovative talent bursting from Asia’s business and technology sector.”

NXP, the n 5-billion semiconductor giant, is expanding the scope of its activity in India, which includes alliances with leading academic institutes. NXP's India operations employ about 900 people, with a majority of them located at its Bangalore R&D centre. The company now sees the entire physical back-end design activity being done out of the country.

Rene Penning de Vries, CTO, NXP, said: "We are looking at building a very strong development centre here and also to tap into the business opportunities in the Indian market." The Indian operations already house some of the key R&D activities for NXP globally, besides programming in the areas of digital television, cellular and RFID. NXP has already entered into an alliance with the Centre to be a technology provider for electronic passports. Trial runs are going on and the product is likely to be introduced so on.