The number of companies building and designing
microprocessors is likely to shrink by about 40% over the next 10
years, analysts from Gartner at the firm's Semiconductor Industry
Summit conference predicted.
"We are expecting [there to be] far fewer chip suppliers in the
next 10 years or so," said Jim Tully, Gartner's vice-president and
chief of research.
The semiconductor industry was hit hard by a downturn in
high-technology spending that began in 2001, before recovering late
last year. However, this recovery is not expected to last.
Gartner research predicts that there will be weakness in the
semiconductor market until 2006, combined with consolidation in the
industry, Tully said.
As chip makers begin integrating features like processing,
networking and graphics on to single chips, many companies that
today focus on a particular system function will have to change
their ways. That will, in turn, reduce the number of chip-makers in
the industry, Gartner research predicted.
Pat Gelsinger, Intel's senior vice-president and chief
technology officer, agreed that consolidation is in store.
The move toward including a greater number of systems components
on microprocessors will also put pressure on chip companies that do
not own manufacturing facilities, called fabs, Gelsinger said.
"That is one of the reasons you are seeing design costs for some
of the fab-less guys going up," Gelsinger said. "That will drive
consolidation going forward."
Gelsinger predicted that Intel will maintain its historical pace
of doubling processor performance every two years for at least
another decade, at which point the company will be building chip
components using a 20nm process - far smaller than the 90nm process
that is just now becoming state of the art.
By the time it is using a 20nm process, Intel expects to be
building processors in the "20 billion transistor range", Gelsinger
said. Intel's current Itanium 2 processors contain about 500
million transistors.
However, more advanced process technologies, and the added
complexity they introduce, will slow down the rate at which
"fab-less" companies can bring their own chips to market, Gelsinger
said. "It's going to increase the separation of the haves and
have-nots"
And keeping pace with the technology required to maintain a
state-of-the-art fab is not cheap, Gelsinger added. "If you're not
investing at the rate of $2bn (£1.12bn) capital [per year], get out
of the business," he said.
Although Intel experienced weaker than expected consumer PC
sales during the recent back-to-school period in the US, the
company sees potential in countries like China, India and Brazil,
Gelsinger said.
"We have not given up on the PC market. We think there is still
a growing business there, especially when you consider it
geographically," he said.
"Ultimately the semiconductor business can be five or 10 times
the size it is today," he said. "There are a few turbulent years of
cycles between now and then, but ultimately it's a growth
business."
But the industry will not hit the high growth rates Wall Street
analysts once expected, Gartner said. "We saw 16% growth up to
1996," said Tully, predicting that rate will fall to 10% through
2010.
Robert McMillan writes for IDG News Service