Profile
Semiconductor equipment and machinery designed and prototyped in Silicon Valley leads the industry in innovation. Silicon Valley is the birthplace of the semiconductor and the region itself is named for the concentrated presence of the semiconductor and related device manufacturing industry that is based here.
The industry is comprised of two major components, Semiconductor devices and Semiconductor manufacturing equipment. Companies producing semiconductors include Intel, AMD, Cypress Semiconductor, NVIDIA and National Semiconductor. Equipment companies include Applied Materials, KLA-Tencor and Lam Research.
Changes driving opportunities
The global consumer now dominates technology spending: According to the Semiconductor Industry Association, consumers and consumer products drive about half of all semiconductor sales. “With the Internet boom and declining PC prices, individuals now consume more than 30 percent of [semiconductor] units sold in the PC marketplace.” In the cell phone market, which is 10 percent of end semiconductor demand, consumers account 90 percent of all sales. The same holds true in the automotive segment. More information: http://www.sia-online.org/iss_economy.cfm.
The rise of the fabless semiconductor firm: Silicon Valley semiconductor firms have moved from producing and manufacturing chips to designing and prototyping chips. Fabless semiconductor firms design the specifications for chips using CAD software and industry specifications, and outsource production to chip foundries elsewhere in the U.S., and in Taiwan and China.
Design occupations comprise 57% of all employment in the semiconductor industry: Software design, electronic design automation, managerial, engineering, technical consulting, scientific research, creative occupations and other “design” talent make up the majority of employment in today’s semiconductor cluster.
The transition towards the fabless semiconductor company and the rise of design occupations is exemplified in the following chart showing the percentage of “design” occupations in Semiconductors and other major Silicon Valley industry clusters. Design occupations make up about 57% of all Semiconductor cluster employment - and pay wages that are 10-25% higher than the already high industry average.
Note: Chart data is from 2004 for Santa Clara and San Mateo Counties, combined.
Customer base is increasingly located in Asia: China is now the largest market for
cellular handsets, representing 20 percent of demand, and the second largest market for
personal computers. South Korea has the most advanced nationwide cellular network in the
world. The electronic equipment and semiconductor industries have evolved into a truly
global market.
More information:
http://www.sia-online.org/iss_economy.cfm.
Asia leads in electronic production - from low-end to advanced products: New fabrication plants coming on-line in North America are a declining share of investment worldwide. Chip companies want to be closer to their end customers, many of whom are located in China and India. China is a desirable, low-cost manufacturer providing production services to fabless companies. According to the Semiconductor Equipment and Materials Institute (SEMI), an estimated 60% of new wafer fabs will be built in China and Taiwan. More information: http://www.sia-online.org/iss_economy.cfm.
Nanotechnologies are being recognized as a foundation for advances information technologies. Nanotechnology refers to the manipulation of matter at the atomic and molecular scale (where the objects are 0.1 to 100 nanometers in size, hence the term.) Computer companies with large research labs such as IBM and HP have developed substantial nano programs in Silicon Valley. IBM researchers have already successfully created carbon nanotube transistors that substantially outperform advanced silicon devices.
- Intel recently announced a breakthrough in the design of chips that will enable the development of cheaper and faster microprocessors based on nano-level technology with more than 1 billion transistors compared to 170 million in Intel’s latest Pentium 4 chip, the P4 extreme edition (2/2005).
- Applied Materials is building “nanochips,” tiny computer chips to power mobile devices. Applied expects that high-speed wireless networks will drive demand for such chips.
Where the opportunities are
The value proposition for Semiconductor firms operating in Silicon Valley is a focus on continuous innovation and the development of intellectual property (IP). Research and development in nanotechnology is approaching the development of chips at a molecular level.
For example, scientists in HP Labs have demonstrated the possibility of advancing
computer power by eliminating the need for transistors - the basic building block of
computing for the last 50 years. In a paper published in February, 2005 in the Journal
of Applied Physics, three members of HP Labs’ Quantum Science Research (QSR)
group in
Palo Alto offer a feasibility-level description and demonstration of the “crossbar latch”
– a bistable-switch latch that promises to replace the traditional transistor
and to resolve some issues that have stymied progress in molecular scale computing.
More information: http://www.hpl.hp.com/news/2005/jan-mar/crossbar.html.
New market growth is in wireless devices, consumer electronics, and other types of
portable electronic devices. According to SIA, “the technology buyer of today may be a teenager
listening to a MP3 player, while text messaging and sending pictures on a cell phone.
Just as the corporate IT sector once largely determined spending, the global consumer
now dominates the technology spending of the early 21st century.”
More information: http://www.sia-online.org/iss_economy.cfm.
Major labor market trends
Semiconductors is the second-largest cluster and wages are rising. The semiconductor industry is the most concentrated and the second largest cluster after software in Silicon Valley. It has been undergoing significant changes in the past few years due to both structural and cyclical trends in the industry.
Labor market overview
| Semiconductor and Semiconductor Equipment Cluster | 2004* |
|---|---|
| Employment | 59,241 |
| Pay per employee | $ 120,997 |
| Employment Concentration** | 14.1 |
| Share of Silicon Valley Employment | 5.2% |
| Number of Firms | 651 |
Source: California Employment Development Department
*2004 is the average of quarters 1 & 2 based on data availability,
**Employment concentration is given in 2003
An outward-oriented industry, semiconductors and equipment remain intensely concentrated in
Silicon Valley, at 14.1 times the national concentration in 2003.
Semiconductor employment made up about 5.2% of the regions employment in the first two quarters of 2004.
Employment in semiconductors was 59,241 in the first two quarters of 2004.
At the same time, the region had approximately 650 semiconductor industry firms.
Pay per Employee
| Semiconductor and Semiconductor Equipment Cluster | 2001 | 2002 | 2003 | 2004* |
|---|---|---|---|---|
| Pay per employee | $ 115,335 | $ 107,395 | $ 121,241 | $ 120,997 |
Pay is rising, a signal of rising productivity and demand for talent.
Average pay per employee rose from $115,335 in 2001 to about $120,997 in 2004.
Silicon Valley Firms
Semiconductor companies remain a large and important sector in the Silicon Valley. The companies listed below were ranked among the top 50 Silicon Valley companies by total sales in 2004.
| Top ten Semiconductor companies in Silicon Valley by sales | |
|---|---|
| Intel | Semiconductors |
| Electronic Arts | Creative Services |
| Applied Materials | Semiconductor mfg equipment |
| AMD | Semiconductors |
| National Semiconductor | Semiconductors |
| KLA-Tencor | Semiconductor mfg equipment |
| LSI Logic | Semiconductors |
| Maxim Integrated | Mixed Signal Semiconductors |
| Atmel | Semiconductors |
| Lam research | Semiconductor mfg equipment |
| Novellus Systems | Semiconductor mfg equipment |
Source: Silicon Valley 150 (by sales) San Jose Mercury News. April 11, 2005
New Fabless Semiconductor Companies
- Beceem Communications, headquartered in Silicon Valley with R&D operations in India, is a semiconductor company focusing on broadband wireless communication. Beceem Communications Inc. is a fabless semiconductor company developing innovative solutions for the broadband wireless market. The company is formed with a strong foundation in wireless systems, signal processing and software skills. More information: http://www.linksv.com.
- Leadis Technology is a fabless semiconductor company based in Sunnyvale, California,
with operations in South Korea, Taiwan and Hong Kong. Leadis designs, develops and markets
mixed-signal semiconductors that enable and enhance the features and capabilities of small
panel displays. The company's core products are color display drivers with integrated
controllers, which are critical components of displays used in mobile consumer electronics
devices.
More information: http://www.linksv.com. - Triscend is the leading provider of field Configurable System-on-Chip devices and
Customizable Microcontrollers. The company is a fabless semiconductor business that designs,
develops and supplies hardware and software solutions for configurable system-on-chip products.
More information: http://www.linksv.com.
Venture Capital Investment
Semiconductors get a larger share of funding in the 2001-2004 period.
Venture Capital Investment in Silicon Valley Software and IT Services Firms
| Semiconductors | Semiconductor share of Silicon Valley | Silicon Valley | |
|---|---|---|---|
| 2002 | $ 534.57 | 10.6% | $ 5,045.26 |
| 2003 | $ 605.09 | 14.2% | $ 4,269.55 |
| 2004 | $ 633.51 | 15.4% | $ 4,100.51 |
| Grand Total | $ 1,773 | 13.2% | $ 13,415 |
Dollars in Millions
Source: PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree Survey
Semiconductor and equipment companies captured an increasing share of
venture capital in Silicon Valley during the last four years. Semiconductors were 10.5% of all venture capital
dollars given to Silicon Valley companies in 2001 and 15.4% by 2004.
The number of dollars also increased, even during a time when all
VC investment was declining in the Valley. Investment in semiconductor firms rose from $534 billion in 2002
to $633 billion in 2004.
Cluster Infrastructure
Semiconductor Equipment and Materials Institute (SEMI), located in San Jose, is an
industry association advocating for the semiconductor equipment and materials companies
in the areas of public policy, environment, health and safety, workforce development and
investor relations. SEMI hosts events such as technical conferences, educational events
and collects and analyzes market data.
More information: http://wps2a.semi.org/wps/portal.
Semiconductor Industry Association (SIA) is the premier trade association representing the U.S. semiconductor industry. SIA unites 95 companies responsible for more than 85 percent of semiconductor production in this country. The coalition provides domestic semiconductor companies a forum to advance the global competitiveness of the $80 billion U.S. chip industry. Through a network of corporate CEOs and working committees, SIA shapes public policy on issues critical to the industry and provides a spectrum of services to aid members in growing their own businesses. More information: http://www.sia-online.org/home.cfm.
Cluster Components
| NAICS Code | Description |
|---|---|
| 333295 | Semiconductor machinery manufacturing |
| 333314 | Optical instruments and lens manufacturing |
| 334413 | Semiconductor and related device manufacturing |
| 334513 | Instruments and related product mfg for measuring, displaying and controlling industrial process variables |
| 334515 | Instrument manufacturing for measuring and testing electricity and electrical signals |
| 334519 | Other measuring and controlling device manufacturing |