AI and ML Create Exciting but Challenging 2019 Outlook

2018 was another banner year for the global semiconductor market, with 4th quarter Year-over-Year growth of nearly 23%. However, analysts are not so bullish for 2019, forecasting much more modest +4.4% growth on average.

Much of this is due to the softening memory market. Memory was the key driver for the spectacular semiconductor revenue growth in 2017 and early 2018. But, as more capacity came online, memory prices peaked in the first quarter of 2018, with the current forecast for memory ASP (average selling price) for the 4th quarter of 2018 slightly above Q4 2017.

Fortunately, emerging trends in semiconductor design offer promising areas of growth in 2019. Specifically, the continuing ramp of next-generation technologies, fueled by artificial intelligence (AI) and machine-learning (ML).

AI is providing new capabilities and driving new requirements for applications that involve pattern recognition and data analytics. Current chip architectures lack the performance and lower power required to perform advanced ML algorithms. This explains the surge in new custom chip design. It has also encouraged the development of new EDA chip design methodologies, many of which incorporate AI to improve the design process.

All of this is leading to a revival in venture capital focus on semiconductor AI and ML applications in early-round funding. Semiconductor initial rounds 1-3 of VC funding in the second quarter of 2018 alone swelled to $1.2B, with the largest portion allocated to startups focused on AI and ML. What is noteworthy is the majority went to Chinese fabless companies.

Given that AI has been touted for 30 years, what explains this sudden renewed interest? AI design and startups are flourishing today because crucial capabilities are now widely available. These include big data accessibility, powerful algorithms, and high-performance computing power. Together, these enable a host of domain-specific AI ‘killer’ applications. Simultaneously, high-level synthesis design and cutting-edge verification are enabling small startups to compete with larger semiconductor companies in creating AI-based solutions.

So look for continued robust revenue growth for the EDA industry, fueled by the multitude of new AI-driven fabless semiconductor start-ups. This is in addition to revenue growth from new entrants into the IC design world, like networking companies (e.g. Google, Facebook, Amazon, Alibaba, etc.) and automotive system and Tier1 companies. Since design activity comes before semiconductor revenue growth, we should expect to see continued strong EDA company performance in 2019.

Tags: AI, Artificial Intelligence, EDA industry, Machine Learning, memory market, ML, Predictions, semiconductor market

This entry was posted on Thursday, January 3rd, 2019 at 4:42 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.