5 Reasons Why NOT To Hire a Tier 1 Semiconductor Supplier for Your Custom Silicon Project.Raul Perez
It’s quite common for system companies to want to work with brand names whenever they start playing with the idea of a custom silicon program. Like the old adage says: “no one ever got fired for choosing IBM”. And it’s not a bad deal for some system companies to go work with brand name semiconductor suppliers. Large semiconductor suppliers will offer great deals to large system companies with an established record of shipping in large volumes and ramping to mass production on time. Many of these semiconductor companies own their own foundries or have long standing relationships with large foundries, they have in-house teams improving their PDKs and technology, they have a ton of silicon proven IPs, have a great staff, have great financial stability, have great operations teams, etc…
However, for some smaller system companies, going with a brand name tier 1 semiconductor supplier is potentially going to mean trouble. The first trouble you may find is that none of them want to work with you!
Here are five reasons why it may not be a good idea for you to hire a tier 1 silicon supplier:
- Less chip design team options. When you restrict yourself to working only with companies that can go from concept all the way to mass production of your silicon including doing all the operations back end work for the life of the chip you will be buying, you are leaving out many design houses that operate on a concept-to-GDS business model. So you’re losing out on a lot of design talent that is available in the market. However, to be able to use the latter design houses, you need to have in-house expertise on how to drive a silicon supplier. CustomSilicon.com provides this service in multiple of its services packages so you can take control of your silicon project with confidence.
- Cost of opportunity.Tier 1 semiconductor companies are usually public companies. That means they need to deliver satisfactory quarterly financial results. So they need to generate projected revenue in the projected dollar amount, and at the projected time. Every business unit needs to perform, and while your business may not be large compared to the total revenue of the tier 1 company, it may be large for the business manager whose job it is to manage the P&L for that particular business unit making your silicon project. While design houses that operate on a concept-to-GDS business model will be happy to work for NRE only, the Tier 1 companies want to make money in volume shipments of the chip itself. The business case based just on NRE is not usually anywhere near attractive enough for the Tier 1 companies to be interested in the business. So now the problems come if your system company starts having issues either ramping to volumes in the range of what was initially assumed for the business case the tier 1 semi supplier assumed, or if you start delaying the ramp of your system. This can really become a difficult situation for both parties, and it can jeopardize your project in different ways.
- Future plan to start your own silicon team.A tier 1 semiconductor supplier WILL NOT deliver the database for the chip design, or any of the files needed to fabricate the chip. So every time you want to iterate that chip design for a new system program you have to work with that semiconductor supplier. A design house on the concept-to-GDS business model will provide the entire database of the design, and will also provide you all the files needed to manufacture the design. You can continue hiring them, or hire a different design house if you so choose for the next iteration, and can eventually hire your own staff and start producing your own chips in-house. In the meantime, you can use FA labs to help debug issues found with the chip, and continue to hire the design house to support the debugs and iterations. A tier 1 supplier will definitely resist the idea of you taking over the design since their business model is to own the chip, and make money in volume production of the chip not by selling services to the system company
- You want to run the operations side of the semiconductor supply chain. Different system companies have different reasons to want to take over the operations side of the production of the chips they use. For military companies, they just want to make sure the chips are fabricated in a secure environment (note: CustomSilicon.com doesn’t participate in the military/defense industry). For consumer electronics system companies, it could be the system company wants to ensure the testing of the chips is done to their standards, they may be trying to save money (see point 5 below), they may want to have tighter control over their supply chain, and there could be other motivations. It is a well known fact that over time semiconductor suppliers will remove tests from their production test program to be able to meet a lower pricing curve over the lifetime of the product, so system companies that want to be sure what is the level of testing of their chips may want to simply take control of the back end operations to ensure quality.
- Save margin dollars.This one is a possibility, but it does carry some assumptions. The system company can buy the mask set from the chip design house with a database, and now you own the design and can work directly with the wafer foundry, package and test company, and do all the operations work to get the chip delivered to system builds. But to save margin dollars the system company needs to be able to command better pricing than the semiconductor supplier does from the foundry, the packaging and test companies, and operate your operations team handling this activity with less dollars than what your supplier would accomplish. It’s possible to partner with major semiconductor backend companies that can aggregate your volume to their overall volumes to obtain better pricing on wafers, and package and test, but you need to make sure this analysis is done up-front so you are sure to understand what are the actual savings achievable by hiring a concept-to-GDS design house instead of a tier 1 semiconductor supplier.
There are many design houses offering their services in the marketplace. Many of them are listed in sites such as anysilicon.com. CustomSilicon.com can help you select the right design house for your project, and help you stitch together all the pieces needed to go from concept to mass production. It’s a big world out there with many choices, and the rewards are many for those who choose to get custom silicon designed for their projects as long as they mitigate their risks with good process, and experts guarding the system company’s best interests.
At CustomSilicon.com we specialize in managing custom silicon engagements with our battle tested process. Custom system silicon when done with the assistance of silicon experts puts the system company in control of its own destiny. Hiring silicon experts full time at your company may not be reasonable due to insufficient continuous work for them, and that is why customsilicon.com provides you a solution so that you can engage with chip suppliers on custom silicon programs and mitigate all the risks associated with that choice.
Developing custom silicon can have huge benefits from an economic, engineering and market perspective for system companies, but it takes a structured and detailed approach to ensure proper take off and a successful landing. Don’t hesitate to contact us at email@example.com for any further questions, or help you may require.
- System Custom Silicon Development by Raul Perez
- How to keep your leverage while single sourcing custom system silicon by Raul Perez
- 5 things you need to plan for custom system silicon by Raul Perez