The Future of the Microprocessor Business

In coming years, however, this seemingly unshakable industry paradigm will change fundamentally. What will happen is that the performance of middle- and lower-range microprocessors will increasingly be sufficient for growing—and lucrative—categories of applications. Thus microprocessor makers that concentrate single-mindedly on keeping up with Moore's Law will risk losing market share in these fast-growing segments of their markets. In fact, we believe that some of these companies will be overtaken by firms that have optimized their design and manufacturing processes around other capabilities, notably the quick creation and delivery of customized chips to their customers.

The changes portend serious upheaval for microprocessor design, fabrication, and equipment-manufacturing firms, which have been laser-locked on Moore's Law. Executives lose sleep over whether they can keep on shrinking line widths and transistors and fabricating larger wafers. We don't blame them, given their history. Nor do we see blissfully peaceful slumber in their near future: this is not another article forecasting the imminent demise of Moore's Law.

On the contrary, we believe that the top IC fabricators will have little choice but to invest ever more heavily so as to keep on the Moore trajectory, which we expect to go on for another 15 years, at least. We don't see these investments as sufficient for future success, however.

Will semiconductors hit a physical limit? They surely will, someday. But this is probably the right answer to the wrong question. The more important question is: as technological progress surpasses what users can use, how do the dynamics of competition begin to change?




Advanced Micro Device's Athlon: Hundreds of Athlon microprocessors, from Advanced Micro Devices, are fabricated on 200-mm wafers at a new plant in Dresden, Germany [below Though designed for PCs, the 1-GHz chips perform beyond the levels most PC users need.


Interestingly, while the latest microprocessors offer higher processing rates than most users need, semiconductor fabrication facilities now offer circuit design teams more transistors than they need.Put another way, the rate at which engineers are capable of using transistors in new chip designs lags behind the rate at which manufacturing processes are making transistors available for use.

This so-called design gap has been widening for some time. In fact, the National Technology Roadmap for Semiconductors noted it five years ago, observing that while the number of transistors that could be put on a die was increasing at a rate of about 60 percent a year, the number of transistors that circuit designers could design into new interdependent circuits was going up at only 20 percent a year.




The fact that microprocessor designers are now "wasting" transistors is one indication that the industry is about to re-enact what happened in other technology-based industries, namely, the rise of customization. Keep in mind that in order to develop a modular product architecture with standardized interfaces among subsystems, it is necessary to waste some of the functionality that is theoretically possible. Modular designs by definition force performance compromises and a backing away from the bleeding edge.