Frontier Exclusive Leadership Interview for hardware, software, system related business and and academia



Interview with eSilicon Chairman, CEO and President, Jack Harding, Former Cadence CEO

Frontier Journal(FJ): EVERY COMPANY HAS A STORY, WHAT'S ESILICON'S STORY IN BRIEF?

Jack Harding (JH): Early on, we saw that increasing complexity in the semiconductor industry was driving a trend toward re-aggregation of the global supply chain. We saw that as geometries continued to shrink, fewer companies would have the in-house expertise and equipment necessary to successfully take their products from concept to silicon.

We recognized the need for an experienced, reliable supply chain aggregator to manage the complex, specialized functions of chip manufacturing and so in 2000, with the launch eSilicon, we pioneered the fabless ASIC business model, which provides fabless semiconductor companies and system OEMs with a way to easily, reliably and cost-effectively develop and manufacture their custom ICs.

FJ: WHAT ARE ESILICON'S ADVANTAGES AND CORE COMPETENCIES AS A FABLESS ASIC DESIGN SERVICE PROVIDER?

JH: Just to clarify, eSilicon is not a design services company. We are a semiconductor company that designs and manufactures custom chips for system OEMs and fabless semiconductor companies. We enable custom chip development by integrating our in-house design and manufacturing expertise with the capabilities of our outsourced global supply chain - we provide design services in the context of producing chips for our customers.

One of eSilicon's biggest advantages is our ability to leverage the industry's annual, multi-billion dollar R&D activities via our extensive, third-party semiconductor supply chain, so we can invest our own money in developing and differentiating IP in the form of design and layout, DFT and DFM methodologies; product, test and package engineering; and differentiating semiconductor IP. This enables us to provide our customers with the smallest possible chips that work right the first time and can be quickly ramped into volume production.

Our overheads are very low as we don't own our own foundry and assembly plant, which means we are much more cost-effective than traditional ASIC suppliers. And with a team of experts who work on a multitude of chips, in different process technologies, using different package families, we are always on top of the latest and greatest, leading-edge technologies.

FJ: COULD YOU ELABORATE ESILICON'S POSITIONING, KEY STRATEGIES AND TACTICS IN BEING SUCCESSFUL IN TODAY'S HIGHLY COMPETITIVE DESIGN SERVICE MARKET, ESPECIALLY YOUR FABLESS ASIC MODEL?

JH: eSilicon is committed to providing fabless semiconductor companies and system OEMs with the lowest cost, lowest risk path to best-in-class, custom chips. We pioneered the fabless ASIC model back in 2000, to provide companies with the design and manufacturing services required to take their products from concept to volume production. Through this model, companies have been able to focus on their value-added activities at the system and application level and, instead of taking on the risk and cost of building an internal operations team, they've worked with eSilicon to manage the production of their chips.

We've recently expanded this model with our new eSilicon Direct(tm) model, which enables an even wider range of companies to easily, reliably and cost-effectively develop and manufacture their custom ICs, while maintaining a cost structure that is better than they could achieve themselves. With this new model, companies have full access to our design and manufacturing engineering expertise to get their products to market: while their products are immature and their yields and manufacturing costs are less predictable, they can rely on our pre-negotiated, committed pricing; after they reach a pre-defined production milestone, they transition to a 'cost plus' structure based on the true cost to manufacture which provides them with lower per-unit costs as their chip production increases.

FJ: IN THE DESIGN SERVICE BUSINESS, WHAT IS THE MOST CRITICAL FACTOR CLIENTS CARE ABOUT? WHAT IS THE MOST CRITICAL FACTOR A DESIGN SERVICE PROVIDER CARES ABOUT?

JH: The most critical factor for our customers - fabless semiconductor companies and system OEMs who rely on fabless ASIC companies like eSilicon to provide extremely cost-efficient custom chip solutions - is our consistent ability to get chips right-first time, with the shortest possible time-to-production and time-to-market.

FJ: WHAT ARE ESILICON'S STRENGTHS, WEAKNESSES, OPPORTUNITIES, THREATS? REGARDING OPPORTUNITIES, WHAT ARE THE BIGGEST EMERGING OPPORTUNITIES FOR ESILICON?

JH: I'd have to say that eSilicon's biggest strength is our people: our well seasoned management team and our incredibly experienced technical team who, together, have enabled the success we've achieved so far. It is through their skills and dedication that we have established a successful record of getting chips right-first time and then taking them quickly and cost-effectively to volume production.

According to the FSA, global revenue for fabless semiconductor companies was $41 billion in 2005. As our potential customer base includes both fabless semiconductor companies and system OEMs, the opportunities for eSilicon are vast.

In terms of threats and weaknesses, one could theoretically conceive a resurgence of vertically integrated ASIC companies who could address all the complex requirements of developing and manufacturing custom chips. But every year, that possibility becomes less likely as more of the key, vertically-integrated ASIC players - Agere, Agilent, LSI Logic, Philips - get out of the business.

FJ: DO YOU ENVISION ANY STRATEGIC INFLECTION POINT (SIP) IN YOUR BUSINESS WITHIN YOUR TARGETED MARKET, ESPECIALLY WHEN THE PROCESS TECHNOLOGY IS ADVANCING FROM 130NM/90NM NODE TO 65NM NODE? IF YES, HOW DO YOU COPE -- BOTH BEFORE AND AFTER IT HAPPENS?

JH: While the 90nM process brought the mask set cost close to $1 million and the 65nM process pushed that number over the threshold, this is just the tip of the iceberg. As process technologies continue to shrink, developing and productizing a chip costs many millions of dollars. This means that semiconductor companies will need to be much more cautious with how they approach their product development: as most companies will not have all the necessary expertise and equipment in-house, they will either need to do the aggregration themselves or have someone trustworthy - like eSilicon - do it for them.

eSilicon has a strong track record with growing-complexity process nodes from 0.18B5 through 90nM, and now 65nM. Our most recent chips have = been for large, established OEMs and public fabless semiconductor companies. This proven performance is making eSilicon a compelling choice for all sizes and types of companies, who are looking to easily, reliably and cost-effectively develop and manufacture their ICs.

We believe that a Strategic Inflection Point will happen in the next few years and the 65nM process could be the one to precipitate it.

FJ: YOU'VE BEEN IN THIS INDUSTRY FOR MORE THAN 2 DECADES, WHAT ARE THE "SIGNALS" AND "NOISE" IN YOUR CURRENTLY TARGETTED MARKET? ANY IPO PLANS FOR ESILICON?

JH: Some of the signals have been the same for decades: complexity increases relentlessly, the most successful products are those that can reach the hands of the consumer, and the never-ending goal of SFCB (smaller, faster, cheaper, better). It is no longer the "gold rush" of previous decades, when one chip replaced one printed circuit board or a very large part of it. Today, at best, one chip replaces two chips - and often only one - with a slightly higher price. Functionality and breakthrough are sharing the spotlight with cost. Ultimately, this means more projects must reach the market first pass and fewer companies have the scale to pay. We are fixing that for the marketplace and believe that in the future, very few companies will have the scale to be vertically integrated and the rest will rely on a fabless ASIC provider like eSilicon. These are rapidly changing - and exciting - times and we are pleased to be offering a solution that enables smaller, innovative companies to be competitive.

FJ: WHAT ELSE WOULD YOU LIKE TO BRING OUR READERS' ATTENTION?

JH: Aside from our segment, the other elements of the vertically-integrated semiconductor industry have been jettisoned to become individual, multi-billion dollar segments: packaging & test, EDA, foundry, IP and design are all key parts of the outsourced semiconductor supply chain. Yet there are still hundreds of small, under-resourced operations teams around the world, behaving and performing as they did 10 years ago.

As process geometries shrink and these operations teams are expected to be proficient with all these rare (and expensive) skills, this type of approach will no longer work. And as an aggregator of these less-frequently used but absolutely critical skills, eSilicon will become the source of many operations functions currently being provided by these teams that operate a 20-year-old model.


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