10 Reasons Why Semiconductor Firms Should Rapidly Embrace Cloud

Semiconductor Market Trends


The semiconductor industry has been growing at a rapid pace for the past few years. Market research firm IDC estimates that  the semiconductor industry grew at a rate of 10.8% in 2020 and will grow at 12.5% this year, resulting in a $522 billion market sector. IDC attributes much of this growth to the impact of COVID-19.

The increased demand for semiconductor chips is due to new generations of smartphones, tabs, laptops, and desktop computers used in industries such as healthcare for telehealth services; in the education sector for online teaching and instruction; and as more people worked remotely. At the same time, the automotive industry, a heavy user of semiconductors,  is packing more and more chips into vehicles as it attempts to offer all the creature comforts  consumers want as they embrace the connected car experience.

In the manufacturing sector, too, the pandemic has driven home the values and virtues of setting up connected factories that enable contactless manufacturing and uninterrupted operations in the face of a crisis. All these trends indicate  that the demand  for semiconductor chips will rise steadily in the  future. Despite the rosy growth projections, the semiconductor industry still faces challenges, chief among which is continuing to innovate even as it delivers expected price/performance improvements.

Therefore, it is imperative that the industry invest more in research and development to drive innovation while at the same time optimizing costs by leveraging technology such as cloud computing.

If one examines the key attributes and requirements of the semiconductor industry – skilled resources, high competition, complex automation tools, data and IP, differences in industry supply chains, and the brief shelf-life of  designed chips,  it is apparent that these factors are highly expensive and difficult to manage. Given the level of  investments and expertise required, there are very few players in this industry. The race for excellence is fierce, and a considerable effort and investment is dedicated to driving R&D to identify areas and avenues for innovation.

Faster time to market through the acceleration of design cycles, performance enhancements of chips through upgrades and updates, and IP protection through foolproof and flawless security systems are the top three business priorities of this industry. The chip companies invest most of their time, energy, and capital in fulfilling these priorities. However, operational priorities are equally important, such as driving efficiencies in the manufacturing process through data analytics; optimizing  operations, processes, and costs; and driving productivity through collaboration.

Cloud computing provides a reliable and seamless infrastructure to address both the business and operational priorities of the semiconductor industry.

Reasons to Embrace Cloud

1. Faster Time to Market and Quicker Design and Development

The ever-increasing demand from consumers for products with higher compute powers and processing abilities has resulted in shorter product lifecycles, requiring semiconductor manufacturing companies to bring products to market faster.

To this end, applying cloud computing in the semiconductor industry offers scalable storage, big data analytics capabilities, and enhanced productivity with collaboration tools for reviews and feedback that enable quick product launches.

Cloud also provides a flexible, scalable, elastic, and secure infrastructure for chip designing by providing on-demand compute for EDA tools. It enables semiconductor manufacturers to set up and access high-performance computing (HPC) power with virtual machines (VM) images, enabling quicker design and development cycles.

2. Improvement in Foundry Operations and Yield

Cloud offers a data lake or repository that enables storing, processing, analyzing, and inferring the foundry’s generated data. Manufacturers can use data insights for predictive performance and analytics as well as the management of resources in their supply chains, thereby improving  production uptime and yield. It also allows for specific artificial intelligence and machine leaning use cases for fault detection in the production line using imaging techniques and smart analytics tools.

3. Smarter Manufacturing Powered by Democratization of Data and  Analytics

Chip designs evolve with each release, and the chip design companies have families of chips in incremental progression/evolution cycles. The chip lifecycle data must be logged, analyzed, and processed for value generation. Cloud Service Providers (CSPs) like Amazon Web Services offer storage and analytics capabilities to chip design companies to apply AI and ML models for systematic data processing. They also provide the necessary infrastructure to integrate IoT and implement Industry 4.0 solutions for smart and connected manufacturing .

4. Improved Collaboration, Transparency, and User Productivity

The semiconductor manufacturing industry is highly competitive, and the success or failure of a chip manufacturer entirely depends on the ability of the manufacturer to collaborate effectively with an  eco-system that includes suppliers, OEMs, and internal teams for design reviews, feedback, and testing.  Cloud infrastructure provides a centralized system to track the productivity of the different stakeholders, enabling transparency and boosting efficiency, especially in the current times of COVID 19 using collaboration tools such as MS Teams, Google Workspace, and Google Meet.

5. High Operational Efficiency  

Unlike on-premise data centers managed by internal IT teams with constraints on skill, availability, and resources,  cloud infrastructure is managed by specialists such as GCP, AWS, and Microsoft. These service providers have made huge investments in R&D, infrastructure, and resources, and provide service-level agreements which ensure uninterrupted operations for semiconductor foundries.

6. Higher Service Levels Due to Better Availability

One of the primary reasons for the semiconductor industry to not adopt or scale cloud has been the business criticality of its operations. However,  modern-day CSPs provide SLAs that comply with industry requirements and, in some cases,  go beyond to ensure reliability. For example, GCP provides a robust architecture with high-bandwidth connectivity across 25 regions and 76 availability zones to deliver global services.

7. Organizational Agility and Flexibility to Scale-up 

The use cases for sensors, chips, computing, IoT, and Industry 4.0 are ever-increasing. It is thus imperative for the semiconductor industry to be extremely agile and offer unmatched on-demand scalability and flexibility to ramp up/down its compute infrastructure to accommodate R&D, design, testing, and validation of GTM activities. Analytical capabilities to draw insights and make quick decisions must also be in place in order for the industry  to deliver on its reputation of being agile. Cloud offers all these capabilities to the industry and at the same time drives home the cost benefits, security, and efficiency.

8. Backbone for Driving Innovation

There are several aspects of cloud infrastructure that can drive innovation for the semiconductor industry. To begin with, it can provide a leeway for the industry to squeeze in cost efficiency to a perceived rigid cost structure. The possibilities of leveraging IoT, AI,  ML, big data analytics for gaining visibility, and driving efficiencies throughout the chip manufacturing value chain are tremendous. It can provide EDA support, high-performance design, HPC, and High Volume Manufacturing (HVM) capabilities that will enable  better outcomes at lower costs.

9. Cost Efficiencies

Cloud offers instant scale and capabilities to perform and execute operations across the semiconductor value chain from design to yield without investing in physical on-premise data centers, reducing infrastructure development costs. It provides a collaborative infrastructure for value chain stakeholders to review and test the designs and offer feedback irrespective of the location of the stakeholders. Chip manufacturers can also drive the cost efficiencies on account of improved uptime owing to predictive maintenance capabilities and the security that cloud infrastructure offers.

10. More Secure Environment for IP Protection


The semiconductor industry powers a host of other industries, and several of these industries manage data categorized as highly sensitive, IP, business-critical, or compliance-driven. The dedicated investments by the CSPs in ensuring the security of their cloud infrastructure is an added advantage for the semiconductor industry to ensure data and IP protection for its clients. These CSPs provide more secure and reliable infrastructure at lower costs than the on-premise setup. For example, Google’s global-scale infrastructure protects billions of users with world-class security.

In Conclusion

The semiconductor industry has been a pioneer in enabling digitalization across industries. With Industry 4.0 and IoT gaining prominence, the use-cases of semiconductor chips have evolved rapidly from device-specific applications to sensorization, integration, and communication areas.

However, the irony of this industry is that despite being the transformation catalyst for all the other sectors to adopt digitalization, the industry on its own has been lagging when it comes to the adoption of technologies such as cloud computing for cost optimization, innovation, and streamlining operations. According to KPMG, even when most other technology industries have been adopting digital transformation at a rapid pace of 89%, the adoption rate of the semiconductor industry remains at a paltry 50%.

Considering the outlook for the semiconductor industry, utilizing the cloud for digital transformation is the only way the  industry can scale and position itself to meet  consumer demands for speed, accountability, security, innovation, and reliability.


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