May 26, 2003
Down but not out in Silicon Valley
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Things were definitely quiet when I made my way down to Silicon Valley recently to sit for an hour of conversation with three EDA executives on May 6th. It's hard to miss the blocks and blocks of empty office space as you drive through some of the industrial business parks in the South Bay. However, Tommy Eng, Vice Chairman at Tera Systems, George Janac, Vice President of Engineering, CTO and Founder of InTime Software Inc., and John Ford, Vice President of Marketing and European Sales at Virtual Silicon, are neither shying away from the realities of the current economic climate, nor throwing in the towel in frustration. On the contrary, all three of these guys seem
steady, realistic, and quite determined to move forward despite the challenges. Silicon Valley has nothing to worry about in the long term, with folks like this driving the industry.
We started by discussing 90 nanometers.
Eng: “As far as I'm concerned, the industry is not doing 90 nanometers - or if they are doing it, they're not doing it happily. Most products coming off the line today are 0.18 micron. The remainder are at 0.13 micron, but we think by the end of the year, everything will be at 0.13 micron.”
Janac: “I think the main drivers for 90 nanometers right now are the FPGA guys. They're the ones who need it the most. The rest of the industry is only planning for what things will look like at 90 nanometers. Meanwhile, 0.18 represents about 20% of our business, with 0.15 or 0.13 micron being about 80%. But getting a high yield is still an expensive proposition when you're doing a 0.13-micron design.”
Ford: “We're doing 90 nanometers right now, and we have been at it for a year - although it represents under 10% of our business. We would characterize it as an [emerging] form of research. From a revenue standpoint, 013 micron has been a big node for us, although many of our customers are still working at 0.18 micron. Two years ago, everybody thought that we would all be at 0.13 by now - that it would be a big success. We were obviously way off. It's taken two years longer that we thought it would [to get 0.13 micron] up and running.”
twice as much memory - every 18 months.' So, the question isn't, 'Can we afford Moore's Law?' The question is, “How can we make products and keep it affordable?' The business model and economic climate both say this is the question we have to apply to the technology.”
Janac: “As NRE costs have gone up, it's created an imbalance that has caused a shift to the FPGA side. ASIC or COT models are falling behind. Meanwhile, there's no 'buy' economy for IP that's been massively established - no efficient selling system that's been built up. All of this [may be] causing a shift to software, especially at 0.13 and below. We saw a similar situation in the PC world - it was a slow process to set up a component market. So now we're [back to] whether to make or buy, whether it's design software or IP.”
Ford: “From a physics standpoint, nanometer lives. From an economics standpoint, however, the [design and manufacturing processes] have been broken for two years. Ten years ago, nobody would have thought twice about moving down to the next process node. The economics of the move clearly paid out. But that all stopped at 0.13 micron, and it's not being fixed by moving to 90 nanometers. The economic downturn makes it simple - you can't spend $750,000 to make a mask and spend $25 million on a design team, only to come up with a dry well. So you're seeing a split in the market plan. FPGAs are clearly driving the technology at the foundries. It's costing a lot in area yields, but the
wealthy companies are able to hang on [even in this economy] and they'll make money. So, here Ford's Law: 'In the future, everything is going to cost a buck.' Going forward, we're going to have to call the ball in the pocket every time, and call it perfectly. Fewer people will migrate to new nodes because that [choice] might drive them out of business.”
Eng: “What we're looking at here is a phony economy - one where a bunch of investors fueled development and purchases. That created the Bubble, which created the temporary state of imbalance that we're in right now. Economics always alternate between periods of expansion and consolidation. Market development, meanwhile, is always chaotic, emotional, and often associated with irrational behavior.”
Janac: “The cost of glass is what is going to pull us out of this. There are 300 million TVs in this country, which will be replaced by LCD monitors. That is, when the cost of that monitor drops to $299 - in other words, less than a [conventional] TV.“
Eng: “When they stop broadcasting analog TV, that will make it [happen even more quickly].”
Ford: “Right now, we're clearly seeing far more activity in the consumer store - cell phones, TVs - than we are seeing sales related to routers and switches. There's so much capacity right now in fiber, we got enough for years to come.”
Janac: “Meanwhile, we're seeing a completely different way of building companies. In the 1990's, investors didn't care about profitability. Think about it - how many quarters did you really need to go public?”
Ford and Eng, together: “Zero!!!”
Ford: “in 1999/2000, we did essentially 5 years' worth of IPOs in 15 months. It's going to take a long time to grow back to that level [of insanity] again. Meanwhile, it's the 'old school' economy once again. It's how you run your business. And, it's really foolish for anybody to be planning for an upswing. Nobody should be walking around this valley assuming that lower margins alone are going to get them back to profitability. We've all got to be watching our costs very, very carefully from here on out. We'll have better times, and wealth will be created once again, but the bottom line will be much more final going forward.”
Eng: “There's no doubt the Bubble was bad for business, but great for technology. We'll never again, in our lifetimes, see such a concentration of human capital and investment capital concentrated in one place [as we saw in Silicon Valley in the 1990's]. But the real legacy of the Bubble is not the human suffering or tragedy. The real legacy is the vast infrastructure that was built up [with all of that investment]. We're benefiting from that infrastructure now. We've got e-mail, shopping on-line, downloading lots of stuff - free stuff, X-rated stuff, pirated software - all of that and more. From that perspective, the Internet is just at the beginning.”
Ford: “Clearly with all of this, we don't really need 65 nanometers. There's lots of bandwidth waiting to be used in what we've got right now. But that doesn't mean innovation will stop.”
Eng: “What we have today are the consequences of the investment of the last decade. We've got data-video-voice technology. We've got communication-compute-entertainment technology. And we've got biology-medicine-electromechanical technology. Most importantly, we've got the silicon knowledge and the infrastructure to build on all of this. The best is yet to come.”
(Editor's Note: Thanks to VitalCom PR for facilitating this conversation. Thanks to John Ford, George Janac, and Tommy Eng for their willingness to speak with candor on the record.)
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-- Peggy Aycinena, EDACafe.com Contributing Editor.
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