Ecosystem Building for IC Industry

Semiconductor Industry Development for Sustainability & Profitability: An Eco-systematical Approach to nurture China’s IC Industry Presented at “WiMAX Symposium” in HKSTP on June 10, 2008 Prepared by: Al Kwok President & Founder, CASPA PRD Chapter Former VP, NetLogic Microsystems (“NETL”) Governor & Co-founder, Savantas Policy Institute Vice Chairman, iProA China Committee

Information Age & Key Elements of the Ecosystem

The Engines for Information Age The 2 main engines of growth Moore’s Law : for hardware platform More functions for less cost over time CMOS is the enabling technology Power & signal integrity management is the key More functions for less power (device scaling) Metcalfe’s Law : for network platform More useful as more users join a network Internet (WWW) is the enabling technology QoS issues addressed by Knowledge-Based Processors Multimedia (Quad-Play) on a single network platform

Source: Intel Presentation Moore’s Law as the growth engine of hardware platform: IC cost reduction by 50% in every 18 months or less CMOS power scaling => Feature size scaling Feature size scaling => Price scaling The secret behind scaling: Price can drop because power can be reduced!

The CMOS Low Power Advantage Picture was taken on September 7, 1983 by A. Kwok (IDT) for a Fortune Magazine article about IDT (Integrated Device Technology) and CMOS technology published on the Oct. 17, 1983 issue (P.85) written by Gene Bylinsky. IDT went IPO in mid 1984 on CMOS. Source: “(Silicon Valley) High Tech – Window to The Future” (Gene Bylinsky)

Metcalfe's Law Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of users of the system ( n 2 ) More users also drive down the shared costs The trend: every person or device will be connected through internet!

Information Age Information Age (the age of knowledge-based society) is built on 3 successive global platforms: 1) Hardware platform that is mass-affordable - Moore’s Law 2) Network platform that is universally accessible - Metcalfe’s Law 3) Content/service platform that enables experience sharing Hardware platform means electronic devices… A vast network of electronic devices covering access (personal access devices), edge and core levels Made mass-affordable with semiconductor technology (scalability of CMOS) Network platform with global internet (Internet Protocol-based) connectivity Information highways, storages & traffic management Enable information-sharing for anybody anywhere anytime Content/service platform for experience sharing - the business link! Delivery of values (services, information, contents) to the masses Application service providers (ASP) for corporate clients Content providers for various consumer markets

Information Age - cont. IT (Information Technology) is the technological and associated business process engineering (BPE) know-how to optimize the interactions among the 3 platforms for valued goods and services to consumers/end customers Technology being disruptive in nature drives business process re-engineering for competitive advantages - that’s change! The shorter the technology/product lifecycles as fuelled by scalability of CMOS (the first cause on the supply side), the quicker the business process re-engineering cycles will be for better goods & services (the first cause on the demand side) Competitiveness based on Business Process re-engineering drive new business paradigms & models Outsourcing & business platform/ecosystem building Globally distributed work-teams/business networks

IT Business Areas & Opportunities Moore’s Law and Metcalfe’s Law (acting on H/W and Network Platforms respectively) are fuelling on-going IT systems re-engineering for global improvements (changes) like magma shaping earth’s crust’s movements High-valued services with good business potentials Network environment given (by providers) or to be set up Data mining from public domain to add values Factors given or to be used “as is” – not to reinvent H/W components S/W & F/W Network Platform System (H/W) Platform Network Services/environments: Internet, cellular, WiMAX System Integration Protocols & Interfaces (Open stds. for reuse?) Content Layer Service Platform CRM, ERP, POS, etc. Applications (ASP) Consumer Services Public Domain Company Proprietary Bus. Domain Knowledge Instructions & Interfaces New ICs and Devices every 18 months or less

IT Service Ecosystem (Pro-choice) Knowledge-based society is achievable only if a well-managed IT service ecosystem is sustaining it The service ecosystem (multi-sources & no weak-links) : Hardware platform: Components : IBM , Intel , AMD, TI , Samsung , Freescale, Infineon, nVidia, Broadcom, Qualcomm , NetLogic , MediaTek, TSMC , UMC… Systems : Apple , Dell , HP, Lenovo, IBM , Sun , NEC, Samsung… Software : Microsoft , Apple , IBM , Oracle , SAP, Sun, HP… System integrators : IBM , HP , Sun, Flextronix , Foxcomm , Quanta… Network platform: Service providers : AT&T , Verizon, China Telecom, China Mobile … Equipment suppliers : Cisco , Motorola, Siemens, Acatel, NEC… Service/Content platform: Google , Yahoo, AOL, Apple , DoCoMo, Baidu, China Mobile… BPE (business process engineering) service providers: IBM , HP, SAP , TCS (Tata) , Infosys , E&Y, PW&C…

IT Services Mean Everything! All services in any industry are relied on IT infrastructure and know-how for their effective deliveries IT is the critical enabler for global competitiveness Companies lack of IT proficiency will be history! IT services encompass everything: banking, finance, logistics, tourism, manufacturing and so on Integrating IT capabilities into the business process is a matter of survival of the fittest ! All business processes are continually reengineered for better IT capabilities in “ a globally networked world ” valuing “ differentiating customer services to anybody, anywhere and anytime ”. Inevitable future trends : IT service management is the hottest topic for this century! IT services will generate >50% of all high-paid jobs worldwide! “ IT proficiency + business domain knowledge” is a must! Productivity improvements greatly outweigh the cost! IT service capabilities determine global economic power!

IT Business Food-chain Hierarchy of IT Business (from “service to consumers” as the top of the food-chain with highest Gross Margin then down): Service (to consumers) <=> Domestic market (localization) (China market is huge enough) Application (for service) <=> Domestic market (localization) (China centric standards & IPs) Network platform <=> Domestic stds. for local services/appl. International stds. (for global interface) System Integration <=> Domestic market (localization) vs. Int’l. mkt. (for applications) (China centric standards & IPs vs. Int’l. ones) S/W & F/W platform <=> Int’l and domestic stds. (global & local) H/W platform <=> International stds. (global IC supplies) Service requirements drive H/W platform improvements Existing OEM/ODM business model breaks the IT Business Food Chain without positive feedback from Service to drive next product dev. cycle

Existing Issues Lack domestic IT Services as the engine to pull the China’s IC industrial development The existing IC industrial ecosystem is OEM-centric, geared up to support overseas consumer market (for the benefit of overseas consumers) and not for domestic IT service ecosystem building: Subsidizing overseas consumers’ quality of living Neglecting domestic IT service business ecosystem building Low profit margins (~30%) from overseas business (mainly consumer electronic) cannot sustain future R&D efforts and growth Urgent need to develop domestic IT service market as the nursery for IC industry - bonding between IT services and IC applications

Proposed IT-based Service Platforms Business applications/services ( domestic TAM estimated ): Location-based logistics service platform ( ~20M vehicles & containers ) GPS + 2.5G/3G/4G mobile connectivity + Map + WBS (web-based services) Leading providers: MyCard (SZ/HK), Autotoll (HK)… POS/CRM and business intelligence services ( ~250M consumers ) RFID/smartcard + wireless sense/reader network + data/ service center Leading providers: Octopus (HK); need an equivalent in Guangdong! Office-based workstation/ASP platform ( >300K enterprises )* (* = TBD) Thin client + smart server/data center + ASP + ITO/BPO services Home applications/services: Home energy management/conservation service platform ( >50M homes ) Green energy generation unit + energy distribution monitoring/control system + wireless data communication system + customer service center Leading providers: Towngas/MyCard for gas delivery Intelligent home service platform ( >50M homes )* Cable STB + control console/network + programmable devices + WBS Personal/consumer applications/services: Personal mobile (leisure) service platform ( ~250M consumers )* Cellular/WiFi/WiMAX + map + MP3/MPEG + camera + GPS + WBS Portable education/vocation training platform ( >200M users )* eBook + USB memory cards + WBS

Hong Kong as the Enabler Hong Kong can help speeding up China’s IT service industrial development The most established international business platform in China - for over a century! With seasoned and educated professionals, business executives, small business owners, engineers, civil servants, etc. comprising a advanced middle-class society - the best trial & launch site IT service developments! No restrictions for immigrant entrepreneurs - can attract the best and brightest talents worldwide A well-respected common law based legal/financial system The only international capital market in China Free flows of information, capital, goods & services, human resources… A natural IP licensing and technology transfer hub for China The most developed service industry base & infrastructure in China

IC Industrial Development Issues

China IC Industrial Landscape Three strategic anchor bases YRD (Yangtze River Delta) region Covering Shanghai, Wuxi, Suzhou, Hangzhou, Kunshan As the leading IC manufacturing base BGC (Bohai Gulf Coast) region Covering Beijing, Tianjin, Dalian As the leading system-level R&D base PRD (Pearl River Delta) region Covering Shenzhen, Hong Kong, Zhuhai, Guangzhou, Foshan, Dongguan… (Should be) As the leading domestic IT service market (services/applications) development base

The PRD IC/IT Industry Ecosystem The IC/IT business food-chain/value-chain: IT Services: Hong Kong (as the development site), Shenzhen, Guangzhou… IT/IC application platforms: Hong Kong (ASTRI), Shenzhen (Telecom), Foshan (RFID, LED), Guangzhou (Logistics, auto subsystems)… System manufacturing bases Shenzhen (Telecom), Foshan (home appliance), Dongguan (electronics), Guangzhou (auto subsystems) System integration bases: Shenzhen (many FAEs), Hong Kong (ASTRI, HKSTP) IC design bases: Shenzhen (SICDIC), Hong Kong (ASTRI, HKSTP), Zhuhai, Guangzhou IC manufacturing bases: Shenzhen (foundries), Hong Kong (assembly), Dongguan (assembly & test) Recommendation: Anchor bases: Shenzhen (SZICDIC) and Hong Kong (ASTRI, HKSTP) Key bases: Foshan, Dongguan, Guangzhou, Zhuhai…

Types & Ranking of Innovation In the order of lasting value impact to society (from most to least): New business model (global productivity jump) - great lasting value impact E.g.: e-Commerce (internet), pure-play foundry business model, carbon trading… New business process (global productivity jump) - great lasting value impact E.g.: Window/Office (new work environment), outsourcing, TQM, ERP… New application/market (for exist. prod. or tech.) - great value impact E.g.: GPS, RFID, radar guiding… - from military to commercial applications New technology (for existing product) - great value impact sometimes E.g.: High-speed CMOS (over NMOS) for power reduction and device scaling New product/service (for existing market) - medium value impact E.g.: On-line shopping/trading, SMS (China), digital broadcast… New combination of package of technologies, products and services E.g.: Apple’s iPhone and iPod, Blackberry, solar, clean tech… New design (implementation or appearance) - limited value impact New system architectures: e.g., the Sandisk “338” patent for flash-memory card New subsystem/circuitry

Market Positioning - Product Focus Mature (must have) Under-developed Ecosystem Well-developed Cut-throat Competition (me too!) Application Futuristic (nice to have) Too Far-out: Not ready, hype, bubble Future Growth: Longest-term Future Growth: Long-term Future Growth: Short-term Well-developed infrastructure: consumer market by nature with lower (30->50%) profit margins Building infrastructure & ecosystem: Industrial market by nature with higher (50->70%) profit margins

Difference in Application Paths US traditional application migration path (since the beginning) Military -> industrial -> commercial -> consumer: a top-down approach High profit margin up-front from military/industrial sectors (infrastructure building) and gradual cost-down to get into commercial and consumer Strong in system architectural designs and close customer collaboration to gain system-level (infrastructure) domain knowledge and capabilities Pacific Asia IC supplier application migration path Consumer -> commercial -> industrial (?): a bottom-up approach Primarily focus consumer market with cost-down as the core strategy - serving mainly OEM/OBM manufacturers (lesser value providers) Mainly with fabless design house business model, taking advantage of foundry capabilities & relationship: Taiwanese IC houses are key drivers Focusing on low-hanging fruits (with lower entry barriers) and simpler applications, leveraging Taiwan strength in cost-down but lack of differentiating high-values - essentially a “me-too” approach Cut-throat competitions with short product lifecycles (due to seasonal and fashion-like consumer demand patterns) hurt profitability & steady growth Lack of high-level system domain capabilities/knowledge is the major hurdle towards long-term sustainability and prosperity

Core Problems Too heavy on consumer applications Not enough profit margin to fund world-class improvement efforts Not enough focus on infrastructure building Lack of ground-breaking innovations Due to shortage in system architect know-how & talents Lack business connections between innovations and values to consumers - cannot create new business models or processes! Inadequate spending in R&D - due to insufficient profit margin! World-class innovation needs R&D spending @ ~30% of revenue Lack of business ecosystem concepts & builders Little emphasis on IT services as the lead engine for IC industrial development China’s IT service industry needs to be the engine (like in US) to drive the domestic ecosystem development for China’s IC industry. Confusion over standardization strategy Cannot balance globalization & localization issues on standardization Causing delay and opportunity loss to develop domestic market Ignorant about early time-to-market means leadership & huge profit!

Key consideration and strategy: Globalization <=> International standards (for global market) Localization <=> China standards (for domestic market) Hierarchy of standards (from top as “service to consumers” down): Service (to consumers) <=> Domestic market (localization) (China market is huge enough) Application (for service) <=> Domestic market (localization) (China centric standards & IPs) System Integrat. (for app.) <=> Domestic market (localization) (China centric standards & IPs) Network platform <=> International stds. (global network) S/W & F/W platform <=> Int’l and domestic stds. (global & local) H/W platform <=> International stds. (global IC supplies) Suitable strategy on standards: China can use its huge domestic market as leverage for favorable international standard participation and IP pooling/licensing negotiation. Standards & Associated IP Issues

Benchmarking with the Best Rising Star: NetLogic Microsystems (“NETL”) in Silicon Valley Understand its Journey to be “The World-class Leader” in Knowledge-based Processors for the Information Age

Basic Reqm’ts. for Competitiveness The foundation for Global Competitiveness are: Value Proposition ( demand-side/external critical success factors), Domain Capability/knowledge ( supply-side/internal critical success factors) and Organization (the means to meet the demand with the supply) Value Proposition: Values to customers, shareholders & partners; customer services; product differentiation… Organization: Core team, TQM, human resource managm’t., CRM, structure, system, procedures, etc. Domain Capability: Core competency, intellectual capital, supply-chain mgmt., technology, innovations, etc. The Foundation for Global Competitiveness

AK comment: Consistent continuous linear growth to manage Wall Street expectations

AK Comment: Need GM @ ~65% to sustain R&D efforts @ ~30% for continuous world-class Independent Innovation

AK comment: All high-value mission-and-time critical service-enabling applications for infrastructure and ecosystem building

AK comment: IPTV is the emerging broadband driver

AK comment: wire-speed decision making with the lowest possible power at 64Gbps - dominating the 10Gb Ethernet landscape

AK comment: Content-aware (Layer 7) wire-speed information distribution decision-making (including routing) has been the holy grail for IT infrastructure management.

AK comment: Outstanding jobs to establish crowning leadership in emerging mission-and-time-critical applications with strategic lead users since IPO!

AK comment: Considering the facts that NM is much less than 1/10 of the size (in revenue) of the other 9 top-ranking companies and much younger (~10 years old ), it is a crowning achievement! Likewise, “ipIQ” rated NM’s portfolio the best for a medium size (~$100M) high-tech company worldwide in its “Patent Scorecard 2006” report with the 2nd highest CII (current impact index). (All multi-billion $ companies) AK comment: With only 163 granted US patents as of June 8, 2008

Anatomy of a Generic Problem-solving (Intelligent) Process Presented by Al Kwok as a vision in Jan., 2000 The NetLogic Microsystems’ patent portfolio was fundamentally based on this core concept: how to perform pattern recognition better through parallel-search engines (including Layer 7 since then). Pattern recognition parallel-search engine is fundamentally superior to algorithmic one

The basic DNA of intelligence is the ternary (“1” or “0” or “X”) CAM cell with the implementation of “don’t care” state in circuit by means of the Mask bit 2 memory cells, a comparator circuit to determine “Match” (i.e., basic intelligence) & a Mask bit to give a dimension of freedom (i.e., option) Degree of intelligence <=> degree of possible options The ternary CAM (content addressable memory) becomes the basic building block for parallel-processing engines/filters . KBP (knowledge-based processor) is essentially a massy array of ternary CAM with some classification and prioritization circuits . SRAM that was avoided by IC manufacturers like plague has reborn into its second life as high-value ternary CAM -- What an innovation! Discovering treasure in a junk yard! A Fundamental & Useful Innovation! 1 1 Input bit = Ref. bit 1 0 Input bit = Ref. bit Mask bit = 1 Mask bit = 0 Match bit

Path to Success! Great companies take advantage of the 2 engines driving Information Age! As NetLogic Microsystems are benefiting greatly from both Moore’s Law and Metcalfe’s Law For all IC manufacturers, the questions are: Does the Moore’s law work for you or against you? Does the migration to a new technology node give you better performance, lower cost , more functionality, lower power and more profit opportunities ? Does the Metcalfe's Law work for you or against you? Are your solutions (architecturally) scalable with the increasing bandwidth requirements? Are your solutions independent of the carrier characteristics ? Do your solutions provide differentiating (mission-&-time-critical) values (like “QoS” and security)?

The Key to Success of “NETL” Value proposition (with 2 nd highest Pipeline Impact index ): Enable IT service providers to provide high-value mission-and-time-critical differentiating services Enable cost-effective IT network security end-to-end up to Layer-7 content filtering level at maximum (backbone wire) speed Domain capabilities/knowledge (being the sole leader in its domain ): Fully capable of providing cost-effective turn-key best-of-class system-level “QoS” solutions from H/W level to service level Capable of addressing all relevant mission-and-timer-critical applications within its domain of expertise Comprehensive IP portfolio to further enhance innovation leadership Organization/execution : A corporate culture striding for continuous innovations Product development for 1 st silicon success All-out efforts for securing design wins Product introduction for best possible time-to-market Product engineering for best possible time-to-mass production Corporate dedication to total customer satisfaction

Ecosystem Building for IC Industry

More Related Content

What's hot (20)

Viewers also liked (7)

Similar to Ecosystem Building for IC Industry (20)

More from Asia Pacific Cloud Apps Alliance (19)

Recently uploaded (20)

Ecosystem Building for IC Industry

Editor's Notes