Think you're missing the IoT wave? Don't panic.
I just read Rick Merritt’s EE Times piece IoT's Assumptions Trouble Me, posted May 5th at 6:50PM. By my watch that’s about 3 margaritas into Cinco de Mayo, which is an excellent time to delve into such a controversial subject. What followed the article was an interesting array of commentary (get on the bandwagon here) that ranged from a history of the wrist watch to ignoring leash laws for domesticated animals. Really? Tag your cat so it can communicate with oncoming traffic to tell the vehicle to brake, swerve, or accelerate…whatever is necessary to save the cat? Don’t we have a horn to solve this problem?
Let’s just cut to the chase. First, there are admittedly useful and valid applications where connectivity with other like or dissimilar products will be beneficial to improving design, manufacturing, or in one way or another, our quality of life. I believe the real issue falls on the shoulders of those of us who were born and bred in the chip industry. Read the headlines. Our financial world is shrinking… again. Pundits are forecasting a decline in global semiconductor revenues… again. But this time it seems (to me) to be more serious than before. Read Evidence of Chip Sales Decline Mounts by Dylan McGrath, posted 5/16/2016.
The problem (again, in my opinion) is that we have run out of killer ideas. Investment money has abandoned.
Money is flowing like a tsunami into non-chip-related enterprises. Growth (maybe not the right word) in our fading silicon industry today is coming from artificial means: megamergers. Unfortunately, the sometimes robust quarterly or annual results that follow a megamerger are not from real “growth” as much as it is from cost cutting. Merge, combine revenue dollars, lay off duplicate / redundant functions and suddenly things look rosy (for the moment). Think I’m kidding? Look the billions of dollars of semiconductor M & A just in 2015. I just looked…it’s over $100 Billion…in an industry the has revenue of about $325 Billion… and still the chip market shrank. What’s that all about?
Innovation drives killer apps - that drive product growth - that drive the chip industry’s growth. Historically, much of this came from chip startups. But the semiconductor startup is beyond being an endangered species. It’s all but dead. Let’s face it; starting a new semiconductor company today has the ear markings of failure written all over it. Look what happened to Touchstone Semiconductors, an analog startup in 2010 that closed in 2014. Steve Taranovich of EDN reported several factors for the failure in his blog Touchstone Semiconductor falls prey to hard times, the last of which was his speculation that funding dried up.
Starting your own company can be a daunting task, emotionally and financially. The odds are clearly stacked against you with something less than 5% of startups ever getting it together. Investors know this and must take into account that the one that wins must reimburse them for all the ones that fail, PLUS give them a positive return on their investment. If you have ever done the funding dance, whether on Sand Hill Road or any of the other VC centers around the globe, you know how hard it is to raise capital to start a company. The difficulty is further compounded once you mention semiconductors. Why? Well, there are far too many reasons to discuss in this paper, but suffice it to say that there are more attractive opportunities for VCs to invest in that offer higher returns, quicker paths to an exit (acquisition or IPO), and lower risk, all for fewer dollars up front. Additionally, VCs have been spoiled by the Unicorn Effect. When was the last time you saw a chip company explode like Uber, Airbnb, Snapchat, Pinterest, Dropbox? Yeah, I can’t think of any either.
Circle back to IoT. What’s the frenzy all about? Aside from those applications that really have a valid need for connected devices, the balance (again, in my opinion) is driven by panic. When there is no killer app, (think back to the early days of PCs and mobile phones and the World Wide Web) beware of overzealous marketers, hawking their versions of snake oil remedies to spur growth. Much of the IoT hype is spaghetti thrown against the wall… I wonder how much will stick?
Clearly, IOT’s Assumptions should trouble everyone.
Bob Frostholm is Vice President of Sales and Marketing at Analog ASIC company, JVD Inc. (San Jose, CA.) Bob has held Sales, Marketing and CEO roles at established and startup Analog Semiconductor Companies for more than 40 years. Bob was one of the original marketers behind the ubiquitous 555 timer chip. After 12 years with Signetics-Phillips, Fairchild and National Semiconductor, he co-founded his first startup in 1984, Scottish based Integrated Power, which was sold to Seagate in 1987. He subsequently joined Sprague’s semiconductor operations in Massachusetts and helped spin off its semiconductor group, creating what is now known as Allegro Microsystems. He is the author of several technical articles and white papers. Here is his Email.