Industry Outlook 2023: Four IC Design Megatrends to Watch

December 20, 2022

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Despite the uncertainties in the current economic and geopolitical landscape, 2022 was a stellar year for electronic innovation, and I am sure in 2023 we’ll see continued innovation in the IC and electronic systems design industry. Here are some megatrends in the industry that I think are worth monitoring in the year ahead.

Megatrend 1 – More Systems Companies Becoming Vertically Integrated and Designing ICs

Ten years ago, systems companies accounted for roughly one percent of IC foundry capacity. Today they account for over 20 percent. A greater number of systems companies in a wider range of industries are developing their own ICs. Why?

There are primarily two major trends driving systems companies to design their own ICs. First, at the base level there’s an economics issue. A greater percentage of the value of the system is captured in semiconductors, so naturally there is a desire for systems companies to accrete more of that value and design their own ICs.

Second, and perhaps even more important, is the opportunity for internally designed semiconductors to create innovative and differentiating system value. All of today’s advanced electronic systems are “smart.” But how you apply that embedded intelligence and optimize the performance of your devices to achieve that intelligence are key factors to both differentiating a product as well as improving that product’s profitability. A prime example of leveraging IC design for greater system value is Apple. Years ago, the company made a decision to go to 64-bit computing before any other application company. They did so not for 64-bit’s additional address space, but to have more efficient and less power-hungry memory access. In other words, it allowed them to provide mobile devices that ran faster and longer than the competition. Their competitors followed suit.

A lot of companies are turning to AI & ML at all levels of system design to add greater degrees of differentiation to their systems and to ultimately make their systems smarter than the competition’s products. As we find more AI becoming a part of edge-based devices, we are finding that the leading companies in this space achieve greater degrees of differentiation by building their own optimized AI accelerators rather than using off-the-shelf AI accelerator IP. This allows companies to optimize their systems for the best overall system functionality power and performance, while also making it harder for the competition to become fast followers.  

Megatrend 2 – Holistic System Design (The Convergence of Electronics, Mechanical and Software Worlds in Comprehensive Digital Twins)

These smarter electronic systems (which I referred to above) are increasingly being developed in a real-world, system context. Whether it be applications like autonomous driving, 5G networks or chip-to-city type initiatives, knowing in advance how the system will perform (versus expectations) in the presence of real-world inputs and real-world outputs provides greater degrees of differentiation. The two biggest impediments to the IC industry in enabling full autonomous driving are power consumption and determining how much processing will be required as the system is moving through a complex, real-world environment. In turn, these challenges reinforce the need for comprehensive digital twins capable of modeling how complex electro-mechanical systems will function in this complex, real-word environment. In a full-autonomous environment, this complex electro-mechanical system commanded by software will need to function in a larger network of other systems – in a complex ecosystem. It needs to be tested exhaustively in the virtual world before being tested in the real-world and deployed commercially. Look for more focus and advancements on this front in the year ahead.

Megatrend 3 – 3D IC Moving Toward Mainstream Availability and the Potential Rise of Chiplets

3D IC design is compelling on many levels. At an IC level, it can enable chip companies to develop smaller die while yielding more known good dies per wafer, as a smaller percentage will be adversely affected by random defects. And at the system level, 3D IC enables companies to achieve new levels of miniaturization and reduce BOM costs. But, far more importantly, 3D IC enables design teams to place or stack different types of ICs - SoCs, analog ICs, and memory ICs (each implemented in their ideal process nodes) to achieve greater levels of system performance and functionality than is possible in conventional PCB or even SoC configurations.

Design teams are finding that 3D IC calls for a system architectural mindset. It not only requires system level planning across multiple substrates, but also an integrated design solution that accounts for IC, package and PCB level design, analysis, and test – not only at each level (IC, interposer, package and PCB) of the design phase – but all of them together, holistically. Ideally, it also requires a solution that takes into account mechanical stresses, supply chains, and the tracking and management of all this data together. So, it’s worth shopping around to see which vendors offer the most comprehensive holistic 3D IC solution, encompassing  IC, interposer, package to PCB design, analysis/test, and mechanical, supply chain and enterprise elements.

As 3D IC becomes more mainstream, there’s industry-wide momentum to create a new industry standard for “chiplets” – small ICs that can be easily plugged into standard interposers for 2.5D IC design, or on top of one another in 3D configurations (think silicon LEGOs). Standards bodies like UCIe were established in 2022 to develop an ecosystem that will hopefully turn the plug and play capabilities of chiplets into a reality. It’s imperative for EDA companies to be active in these efforts to ensure IC tool suites facilitate the creation of standards-compliant, socket-ready chiplets and that their larger 3D IC solutions do, as well.  There are many challenges for the design industry to address, but hopefully the hard lessons learned from the industry’s formation of the IP industry in the late 1990s will translate to a faster establishment of formal standards for chiplets to become a new thriving industry, leading to new system innovations driven by 3D IC integration.

Megatrend 4– AI & ML is Now Ubiquitous in EDA Tools, and Holds Promise for More EDA Innovation

It is now clear that AI & ML have become a significant algorithm toolkit that EDA companies can leverage to solve customer problems. It ranges from aspects of true innovation – creating products that would have been impossible before – to more minor fixes where AI is being used to get around problems of existing approaches. An example of the latter is when companies use AI & ML to patch the shortcomings of their tools because they aren’t inherently well correlated to a given foundry’s process rules. We can expect this use of AI & ML to continue and simply become a normal part of what we all have under the hood in our tools. It will be interesting to see if AI & ML can start to take on a role that folks tend to imagine it to be – which is to become not only a better way to do fast analysis and a faster way of exploring the design space, but a tool that actually enables the creation of designs – such as generative design in the mechanical space. It’s early days, but something to watch in 2023.