Semiconductor industry: Is this a good time to enter the semiconductor industry as an engineer (2014)?
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Intel has just announced to cut 5 percent of its work force. http://bits.blogs.nytimes.com/2014/01/17/intel-to-cut-5000-jobs-as-pc-market-continues-to-disappoint/?_php=true&_type=blogs&_r=0 I'd like to hear from people working in the industry.
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Answer:
I've heard semiconductors are dead and that software is the future. That was in 1999. Judging by the number of software billionaires I'd say it is still true.
Jack Dahlgren at Quora Visit the source
Other answers
I work in the semiconductor industry and will give some insights into this. The semiconductor industry is under consolidation. Look at the number of acquisitions that have happened in the last 2 years namely NXP-Freescale, Intel-Altera, Avago-LSI, Broadcom-Avago, Cypress-Spansion, I am sure most of people outside the industry would not know about multiple other mergers like Qualcomm-iKanos, Avago-Emulux and so on. The semiconductor industry is about 310B$ in size and is growing at the rate of 5-6% in the past few years. With the industry growth stagnating, all companies are looking at acquisitions as a means of growth. The overall prediction is that consolidation will happen quickly over the next few years and market leaders have begin to emerge in each of the segments. Cost has become a driving factor in consolidation. The explosion in the sales of cell phones have changed many semiconductor industries. E.g. Precision analog sensing have been replaced by high speed cameras where sensing can be done in software. All of this is possible because of cost of image sensors which have been driven down by mobile phones (even expensive ones). To give an example of how costs are being driven, the cost of some of the touch sensing chips sold for 1.5$ in 2011, however the same chips are being sold for 0.2$ now. If you are operating in the cell phone industry, the margins could be evaporated quickly because of rapid innovation that happens in the Asian semiconductor companies in driving costs low. Cost of computing has been coming down and most innovation are happening in that space. 'Crappy Analog can be fixed by powerful digital' is a trend that is catching up. Digital computing is catching up and 'good enough' analog is driving away the key innovation which was happening in analog industry for long. Good enough computing on cell phones could cause Intel a dent in the sale of microprocessors. Venture capital in semiconductor industry is coming down. There is very little innovation in terms of new chips. The total cost of building a new silicon is getting very difficult and huge costs in marketing etc and the probability of the silicon being successful is getting very less. This is keeping the VC away from the industry where they can 'fail quickly and cheaply'. No wonder most of the new billionaires are coming from the software industry of late. The job market is getting very competitive in the semiconductor industry. Compared to rapid growth of engineers who are leading teams /defining architecture in e-commerce/software industries in their early 30s, it requires a lot of patience and time to get into such a position in a semiconductor industry. One reason is that the risk of a mistake is much bigger in a semiconductor industry. The job pyramid is stable and not growing because of which a lot of engineers are stuck at the bottom of the pyramid for a long time. Listening to all this, it looks like all doom and gloom for the semiconductor industry, but below are some of the things that will kick start a revolution. a) Semiconductor industry is always been through ups and downs. People predicted a demise of the industry when laptops/desktops growth started stagnating. However new waves of segments where semiconductor are being used have always been coming up. The growth of semiconductors in the auto industry has always been on the upside. Industrial automation has a slow growth with more automation happening in production. Wearable is another segment which will start seeing growth very soon. We are just talking about internet of things which will again start consumption in the semiconductor industry. The entire chain of consumption will kickstart again in networking industry, hub and node. b) Cost rationalization - The Japanese semiconductors started attacking the American semiconductor industry in the 80s. The Japanese industries had a high focus on quality and was subsidized by a low interest rates in Japan. With continuous innovation in quality, Japanese semiconductor companies dominated in the top 10 semiconductor companies of the world for years. Look at the status of the industry now. Most of the Japanese semiconductor companies are loosing money and market share. The list is again dominated by American companies with number of Japanese companies being 1-2 from 6-7 in the top 10 compared to early 90s. The assault of Chinese semiconductor companies could also face the same problem in the near future as the funding from government and cheap money may not stay for long. The innovation will start coming in once the industry consolidates. Source: https://en.wikipedia.org/wiki/Semiconductor_sales_leaders_by_year c) Tough-brutal but highly rewarding for employees- If you are an employee in the semiconductor industry, thing about the potential challenges you face and how competitive you have to be to just stay in the same place. As an engineer, you are expected to innovate every day to reduce the size of the chip. This involves redesign of the chip which was done last year completely. The entry barrier for such a job is relatively high. A team which has worked on a previous generation chip can build the next generation chip much faster than a new team. So top performers have to be rewarded and motivated to stay in the industry. The job of a sales guy is equally tough. Customer demands price to be slashed to half every 1.5 years for incremental increase in production. If the sales guy negotiates a higher price selling the total value added benefits, he is a super hero in the company. In an industry where differentiation among the products is very less, the marketer who generates demand by understand the psyche of the engineer/purchase manager who is involved in the decision cycle is a smart marketer. So bottom line: Semiconductor industry is one where you work in a factory which costs billions of dollars to build, where you use equipments worth millions of dollars, you are paid 100ks of $, to optimize stuff worth 100s of $, which are sold to customers for few $ and you need to reduce few cents. Good luck with you stint in the industry.
Ajay Bharadwaj
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