CHIPS IN THE STACK

CHIPS IN THE STACKSemiconductors: The critical foundation of your technology stack

AUTONOMOUS VEHICLES

Should it ask a remote server for instructions? Or should it make a real-time decision to stop or swerve?

Picture a self-driving car. Its sensors have just detected an obstacle ahead and the car has milliseconds to react. Should it ask a remote server for instructions? Or should it make a real-time decision to stop or swerve? The answer is clear: No remote connection could ever be fast enough to be safe.

That’s why self-driving cars have advanced cameras, radars, processing power, and intelligence. Their hardware is custom-designed for a specific purpose: to enable complex real-time decisions. Leaders pushing the boundary of autonomous driving capabilities are focused on understanding and preparing for the myriad situations these machines will encounter. And across other industries, custom-designed hardware is also becoming more common. Hardware companies that understand how their products will ultimately be used are creating “purpose-specific hardware,” making it possible for businesses to deliver intelligent solutions like self-maintaining industrial equipment, ICU hospital rooms that automatically manage patient IV fluids, and even entire intelligent environments like Amazon’s cashierless store.1

But before they can shift from general purpose to purpose-specific hardware, companies need to update their technology stack to be intentional about the end use. This includes all the hardware and software components – along with security, network, and other elements – that go into making an end product or service. To build a strong technology stack and enable more competitive and purpose-driven industry solutions, every company will need to forge new ties along the entire stack – and with semiconductors, in particular.

SEMICONDUCTORS: THE CRITICAL FOUNDATION OF YOUR TECHNOLOGY STACK

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Leaders are already making strategic moves in this direction. Facebook recognizes the opportunity to enable its urban users with better wireless connectivity at a fraction of the cost of fiber deployments. To accelerate its Terragraph technology, Facebook announced a partnership with Qualcomm Technologies that will use Qualcomm’s 60GHz multi-node wireless system. Facebook’s Terragraph cloud controller and TDMA architecture, coupled with Qualcomm Technologies’ solution, will help make gigabit connectivity a reality, delivering high-capacity coverage to avoid interference in dense urban areas.

In a similar move, Softbank Corp. entered the mobile business through its Vodafone KK acquisition in Japan and extended its footprint in the U.S. by acquiring Sprint Corporation. When SoftBank Group Corp acquired ARM in 2016, ARM powered over 95% of smartphones at the time. By first owning consumer-facing mobile businesses, Softbank gained insight into consumer expectations and demand for mobile devices. Then, after acquiring ARM, a semiconductor player, SoftBank was able to use that consumer insight to optimize ARM products for themselves and the rest of the mobile phone industry.

To build the hardware that companies need to make innovative products and services today, semiconductor companies need to know how that hardware will be used. Every layer along the technology stack needs to collaborate with semiconductors to create these solutions, and each industry will need a unique technology stack. Like Facebook and Softbank, many companies are ready to embrace new intentional relationships with semiconductors – relationships that will provide greater access to custom chips and accelerate industry-centric business opportunities.

In 2016, ARM powered over 95% of smartphones

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Semiconductor companies have faced physical limitations in the past around power, heat, compute, and bandwidth. But recent transistor advancements and design optimizations are helping them advance in ways that were unlikely or impossible before. More efficient compute, along with improved memory and portability, are making chips and hardware relevant to every global organization. Accenture’s own Technology Vision 2018 survey found that 63% of executives believe it will be critical over the next two years to leverage custom hardware and hardware accelerators to meet the computing demands of intelligent environments.2 This is because semiconductors operate at the intersection of technology and the physical world. Just as they do for autonomous vehicles and intelligent environments, semiconductors can deliver capabilities that enable entirely new opportunities for savvy businesses.

Look at Application Specific Integrated Circuits (ASICs). Despite their high cost to develop and manufacture, ASICs are in high demand today. Microsoft HoloLens uses an ASIC – the Holographic Processing Unit (HPU) – which enabled the company to build a headset that doesn’t need to be tethered to a computer. Google’s Tensor Processing Unit (TPU) is also an ASIC, and developers can access its powerful AI capabilities – the same technology that powers apps like Street View and voice search – through the Google Cloud Platform. By moving from general purpose to purpose-specific and specialized designs, semiconductors are becoming the foundation for technology innovation across industries.

ENABLING APPLICATION-SPECIFIC DESIGNS

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In the past 20 years, most technology stacks have been characterized by software and application layers at the top and physical layers at the bottom, with many other layers and partners in between. Hardware was a utility and software was the differentiator. But as hardware breakthroughs seemingly outpace software innovation, companies are becoming more interested in the lower layers of the stack, and many are partnering, acquiring, and finding new ways to influence those layers in the race to control the full stack.

Amazon, traditionally a software company, is demonstrating one way that companies can dominate an industry technology stack: by blurring technology stack layers. Amazon created the Echo, a voice-first home assistant, and acquired Ring, a video doorbell maker, and Blink, a maker of battery-powered connected cameras. By expanding vertically from software into hardware, Amazon controls multiple layers of its retail technology stack. Control of the hardware layer allows the company to lower production costs and repurpose the utility of its many devices to be more purpose-specific. Camera technology from Blink or Ring, for example, can be used to create custom hardware for entirely new concepts like Amazon Key in-home delivery.3

Other recognizable players are also looking to dominate more of their technology stack by directly expanding into the semiconductor layer. Apple is pushing more aggressively into custom hardware. The company is developing the graphics processors and power management units for its iPhones, as well as a “neural engine” as part of its A11 Bionic chip, which handles on-device machine learning for Face ID and augmented reality apps.4,5 Huawei is experimenting with custom hardware with Artificial Intelligence (AI) capabilities. The Kirin 970 will function as an embedded AI neural processing engine, which allows cloud-based and on-chip AI to run alongside one another.6 And Google is developing custom AI chips to power devices like the Clips camera, and has even designed a custom image processing unit for the Pixel 2 smartphone.7,8

For companies like Amazon, Apple, Huawei, and Google, there are clear competitive advantages in controlling the design for their own chips. The design flexibility will allow them to improve and innovate their products more rapidly.

THE RACE TO CONTROL THE NEW TECHNOLOGY STACK

Design flexibility will allow companies to improve and innovate their products more rapidly

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As companies race to control the technology stack, the value of semiconductors is rising. The worldwide semiconductor market was up 21.6% in 2017, to an all-time high of $412.2 billion. The year 2018 is also expected to be strong, with 9.5% growth to $451 billion, with the largest growth across memory, optoelectronics, and logic.9

To strengthen their influence as the foundation of all technology stacks, semiconductor companies must influence hardware utility and innovation. One approach is to share knowledge within existing partnerships, and identify areas where technical creativity can improve general-purpose hardware to make it more industry-relevant and purpose-specific. By expanding their product offerings to be more intentional, semiconductor companies can diversify the industries and ecosystems they participate in. Compared with Amazon’s top-to-bottom strategy, this approach reaches wider within the semiconductor layer, penetrating across multiple industries.

Qualcomm, for example, is using its semiconductor position to grow adjacently to its traditional power management business. The company is moving into IoT and automotive, and is widening its hardware base by acquiring entities like CSR and Atheros. It’s now participating in many industry technology stacks. Western Digital acquired Sandisk in an effort to go wider as a storage solution, and in doing so, expanded the reach of its IP library and diversified its customer base in a dynamically shifting marketplace. And Intel’s acquisition of Mobileye positions the company as a key player in the self-driving car industry. By offering products across multiple industries, semiconductors control more elements and provide more influence across a range of technology stacks.

Going wide offers semiconductor companies security as more businesses bring hardware development in-house, and will also position them in a crucial role in multiple ecosystems, where they will have influence over entire technology stacks.

A NEW ROLE FOR SEMICONDUCTORS

9.5% predicted estimate

21.6%

1.2%

REVENUE GROWTH

$451B

$412B

$339B

$335B

2018

2017

2016

2015

Worldwide semiconductor market with largest growth across memory, optoelectronics and logic

Graphics/Images created by Accenture based on global semiconductor revenue as per the World Semiconductor Trade Statistics 2017.

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In the past, technology stacks had clear distinctions from the physical layer up to the application layer. But they’ve blurred, and today, stacks are industry-centric. There may be a health stack, a retail stack, a home appliance stack, and many others. Each stack will look different, and each will have different solutions and partnerships. Google or Huawei might dominate a consumer electronics technology stack, but might also be a strategic player in a health technology stack dominated, hypothetically, by Philips or Siemens.

Competition to dominate industries will be between competing technology stacks, and the strength of the hardware layer will be the differentiator. Partnerships between semiconductor companies and the rest of the stack will strengthen their understanding of industry nuances, and enable them to build the purpose-driven solutions necessary for innovative products and services.

As hardware merges with upper layers in the technology stack and gets closer to the end user, it has a bigger impact on the overall competitiveness of that industry’s technology stack. The stronger the semiconductor foundation, the more insight it will provide for companies to successfully navigate industry competition. Leaders are racing for control, with the knowledge that whoever most influences the hardware layer will have the most influence over the industry as a whole.

HARDWARE AS YOUR DIFFERENTIATOR

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There are clear competitive advantages in controlling the design for their own chips

1Strickland, E. (2017, March 7). In Hospital ICUs, AI Could Predict Which Patients Are Likely to Die. IEEE Spectrum. Retrieved October 26, 2017, from https://spectrum.ieee.org/the-human-os/biomedical/diagnostics/in-hospital-intensive-care-units-ai-could-predict-which-patients-are-likely-to-die

2Accenture Technology Vision 2018 Survey, Accenture, February 14, 2018.

3Exclusive: Amazon Paid $90 Million for Camera Maker’s Chip Technology - Sources. (2018, February 12). Reuters. Retrieved from https://www.reuters.com/article/us-amazon-com-m-a-chips/exclusive-amazon-paid-90-million-for-camera-makers-chip-technology-sources-idUSKBN1FW0BI

4Liao, S. (2017, November 30). Apple Will Design Its Own Power Management Chips, Says Report. The Verge. Retrieved March 14, 2018, from https://www.theverge.com/2017/11/30/16719724/apple-power-management-chips-dialog-semiconductor

5Apple’s ‘Neural Engine’ Infuses the iPhone With AI Smarts. Wired. (2017, September 13). Retrieved April 18, 2018, from https://www.wired.com/story/apples-neural-engine-infuses-the-iphone-with-ai-smarts/

6HUAWEI Reveals the Future of Mobile AI at IFA 2017.HUAWEI press release. (2017, September 2). Retrieved May 4, 2018, from https://consumer.huawei.com/en/press/news/2017/ifa2017-kirin970/

7Google’s Clips Camera Is Powered by a Tailor-Made AI Chip.The Verge. (2017, October 6). Retrieved April 18, 2018, from https://www.theverge.com/circuitbreaker/2017/10/6/16434834/google-clips-camera-ai-movidius-myriad-vpu

8Pixel Visual Core: Image Processing and Machine Learning on Pixel 2. Google Blog. (2017, October 17). Retrieved April 18, 2018, from https://www.blog.google/products/pixel/pixel-visual-core-image-processing-and-machine-learning-pixel-2/

9“WSTS Has Published the Q4 2017 Semiconductor Market Figures,” World Semiconductor Trade Statistics news release. (2018, February 28.) Retrieved April 5, 2018, from https://www.wsts.org/76/103/WSTS-has-published-the-Q4-2017-semiconductor-market-figures

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KEY CONTRIBUTORS:Syed Alam [email protected]

Timothy Chu [email protected]

AUTHOR:Maria Ergueta McGinley [email protected]