The overall market change.

What should have been the expected end of the current semiconductor cycle has transformed into a more complex market dynamic that has been experienced earlier. Since the beginning of the current cycle, most semiconductor product groups have generated significantly more revenue in growing end markets but a few have been on fire. We are now at a point where some product groups have stopped growing signalling an end to the cycle but one product group, in particular, has more fuel.

Two markets, in particular, has fuelled this growth cycle:

1. The consumer market is driven by the semiconductor content growth in smartphones and the booming Chinese demand for cheaper local products.
2. The computing market consisting of a mature PC market, a declining enterprise market and a data center cloud market on steroids.

From a product perspective, both markets have had a hunger for more memory, creating shortages and increased pricing. The memory market has generated more than double the revenue it did at the beginning of the current semiconductor growth cycle.

This development has favoured the large memory producers and forced Intel to abdicate the semiconductor throne to Samsung in Q2-17. Intel and Samsung combined are generating close to the same revenue as all the semiconductor companies outside the top 10 list.

The strategic rise of Semiconductor Memory Products.

A deeper dive into the market share data reveals how memories have overtaken processing products as the largest category dwarfed all other product categories.

Of the underlying product categories, only the main memory product groups, DRAM and NAND flash are gaining share, all other product groups are down.

The current DRAM boom is to a high degree driven by price increases. This is a result of the investment strategy of the main DRAM companies that all expected that NAND flash would be driving the next growth cycle in Smartphones and the Datacenter. The overinvestment in NAND flash and underinvestment in DRAM will take some time to correct. The market has not been able to get the DRAM needed and the response has been increased prices to a level where it is now limiting smartphone growth.

The Data Center is now dictating the semiconductor market

While the price of DRAM can suffocate Smartphone growth it can do little to limit the appetite of memory in the Datacenter. Amazon, Microsoft, Google, Apple and Facebook all invest heavily in data center infrastructure and with that – DRAM. The buying decision is a long-term investment decision and not consumer decisions as drove the memory markets in the early days. Amazon is not going to say no to an AWS customer because of high DRAM pricing.

The semiconductor revenue in the data center has grown quite dramatically in the current cycle and most of the growth has been in the Memory category.

As a result, Memory products are now more important than processing products in the Datacenter.

The memory revenue growth in the Data-center is close to a staggering 4x in only eight quarters.

This has caused a dramatic shift in the Semiconductor bill of material for a new cloud hyperscale datacenter.

Where the first call used to go to Intel for processing products, it might now go to a memory supplier.

As Semiconductor memories is a brute force investment game, it requires a lot of resources and guts – something only a few companies in the industry has.

Amazingly Nvidia has been able to generate similar growth rates as the memory companies in the data-centre. This is a piece of the puzzle that is transforming the Semiconductor industry.

Most of the top 10 Semiconductor companies now derive a significant proportion of their revenue from the Data Center Market.

The growth rates of the individual product areas give the last piece of the puzzle to how the semiconductor market will be transformed. It has long been known that datacenters are in the process of shifting their workload away from traditional processing storage and delivery of data to AI workloads of machine learning and inference. As a result, more of the total data in the Datacenter will stay in the datacenter and not be externally communicated. We believe the high growth rate of memory (even cleaned for pricing) and GPU’s combined with the low growth rate of processing is the first evidence that AI is now impacting the Semiconductor industry significantly and will change it forever.

The transforming semiconductor market drivers:

1. Computing is now the largest and fastest growing market segment in the market
2. The Datacenter market is over half the computing market and the only one that is growing. PC is stagnant and the Enterprise datacenter is in decline.
3. The datacenter makes investment buying decisions that are less price sensitive than consumer decisions.
4. The Datacenter is only at the beginning of it AI revolution and will need a lot more GPU and DRAM in the future.
5. The current semiconductor cycle is not over for DRAM. This is not likely to change for several quarters.
6. DRAM supply might not be able to fulfil Data center demand for quite some time, maybe even years.
7. Semiconductor companies that are not aligned with this market, might struggle to grow and to attract investors.
8. The Datacenter market is dominated by a few very large tech companies that are experiencing significant revenue growth in their cloud data center revenue. For Amazon, AWS is much more profitable than the rest of their business.
9. The tech companies are much more likely to increase their investments dramatically than cutting them back.
10. We believe the semiconductor market will never be the same again.

Source and Full Article: http://engagement-group.com

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Although the Japanese company Honda is widely known as one of the largest automobile manufacturers in the world and also the largest manufacturer of motorcycles, it is increasingly on the front edge of technological innovation outside the automotive world. The company’s investment in research and development landed it on the “Top 20 R&D Spenders” list that includes five other automakers but representatives from other industries as well. Based upon the innovations Honda has shared publicly, it’s using some of this R&D budget to get ready for the 4^th industrial revolution by using AI and big data to not only design safer and more personalized autos, but also create robots.

“Maximizing the joy of driving”

With the tremendous amount of data that’s created from a wide variety of sources including sensors on cars, customer surveys, smartphones and social media, Honda’s research and development team uses data analytics tools to comb through data sets in order to gain insights it can incorporate into future auto designs. As the company’s big data maturity has increased, its engineers are learning to work with and leverage data, that had previously been to cumbersome to find meaning, thanks to the assistance of big data technology and analytics tools. There are more than 100 Honda R&D engineers who are now trained in big data analytics. Thanks to the sensors on Honda vehicles and feedback from customers, the team is able to make adjustments to the design of its fleet for things they would have never realized were an issue without the data insight. The analytics tools help Honda “explore big data and ultimately design better, smarter, safer automobiles,” said Kyoka Nakagawa, chief engineer TAC, Honda R&D.

As a $200 billion global automotive manufacturer with more than 20 million customers, IBM Watson Explorer helps Honda’s quality assurance division understand the messages and make sense of the enormous amount of customer feedback, mainly unstructured, they receive from multiple sources. It has helped Honda reduce the time required to understand customer feedback by 80%, certainly an essential element to the company’s success.

Develop new vehicles

At this year’s Consumer Electronics Show, Honda unveiled its NeuV, New Electric Urban Vehicle. It comes with a personal artificial intelligence assistant, HANA(Honda Automated Network Assistant) who can read the driver’s emotions and adjust the music, temperature and more in response. HANA can also remind the owner of important dates and help make reservations and appointments. Realizing that around 96 percent of the time vehicles are in garages, parking lots and driveways, Honda’s NeuV would be an automated ride-sharing vehicle that could be summoned to pick up and drop people off when the owner is not using it thereby becoming more valuable to the owner because it can monetize its downtime. Engineers also envision that NeuV would be able to sell energy back to the electric grid when it isn’t in use. Honda’s concept for the NeuV vehicle combines artificial intelligence, big data and robotics in a way that can transform commuting.

In addition to NeuV, Honda built a sports car, Sports EV concept, that uses both artificial intelligence and electric technologies. The Sports EV concept aims to have the driver and car communicate with one another.

Source: https://www.linkedin.com

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