My Reuters piece attempting to place the recent chip mergers in a longer timeline. Yes, I hate the term internet of things too.
SINGAPORE/TAIPEI | BY JEREMY WAGSTAFF AND MICHAEL GOLD
Chip companies are merging, signing $66 billion worth of deals this year alone in preparation for an explosion of demand from all walks of life as the next technological revolution takes hold: the Internet of Things.
As cars, crockery and even cows are controlled or monitored online, each will require a different kind of chip of ever-diminishing size, combining connectivity with processing, memory and battery power.
These require makers to pool resources and intellectual property to produce smaller, faster, cheaper chips, for a market that International Data Corp said would grow to $1.7 trillion by 2020 from $650 billion last year.
By comparison, chip markets for personal and tablet computers are stagnant or in decline, and even smartphones are near peaking, said Bob O’Donnell, a long-time consultant to the chip industry.
‘We’re very much done in terms of growth of those traditional markets,’ said O’Donnell. ‘That’s why they are looking at this.’
Last month saw the biggest-ever chip merger with Avago Technologies Ltd agreeing to buy Broadcom Corp for $37 billion. That eclipsed the $17 billion Intel Corp agreed last week for Altera Corp, and the $12 billion NXP Semiconductors NV offered in March for Freescale Semiconductor Ltd.
On Friday, Lattice Semiconductor Corp said it was open to a sale.
The Internet of Things relies on chips in devices wirelessly sending data to servers, which in turn process the data and send results to a user’s smartphone, or automatically tweak the devices themselves.
Those devices range from a light bulb to a nuclear power plant, from a smartwatch to a building’s air-conditioning system. This range presents both opportunity and a challenge for semiconductor companies: their potential customer base is huge, but diverse, requiring different approaches.
Qualcomm Inc, for example, is used to selling chips to around a dozen mobile phone manufacturers. The Internet of Things has brought it business from quite different players, from makers of water meters to street lights that sport modems and traffic-monitoring cameras. All have their own needs.
‘You can’t think the new market is just like the old one,’ Qualcomm Vice President of Marketing Tim McDonough said in an interview.
Qualcomm estimates that the Internet of Things will bring in more than 10 percent of its chip revenue this business year.
And then there are those cows. Instead of monitoring herds by sight, farmers in Japan have tagged them with Internet-connected pedometers from Fujitsu Ltd and partner Microsoft Corp, to measure when they might be ready for insemination. Cows in season, it turns out, tend to pace more.
SPECK OF CHIP
This new business is pushing chip companies together in part to consolidate their expertise onto one chip, a trend forged by mobile phones.
The Avago-Broadcom deal, for instance, brings together motion control and optical sensors from Avago with chips from Broadcom that specialize in connectivity via wireless technologies such as Bluetooth and Wi-Fi.
In the past ‘if you wanted to build a board that has all the components, then you needed to buy three different chips,’ said Dipesh Patel of ARM Holdings PLC, which licenses much of the technology inside mobile phones – and, increasingly, in the Internet of Things.
‘Now you only need to buy one chip. But you’re trying to get more of the same system on the same chip.’
As chips get smaller, they could be tiny enough to ingest, according to Vital Herd Inc. The Texas-based startup’s pill-like sensor, once a cow swallows it, can transmit vital signs, warning farmers of illness and other problems.
Jen-Hsun Huang, co-founder and chief executive officer of graphics chips maker Nvidia Corp, predicts chips will shrink to the size of a speck of dust and find their way into almost anything, from shoes to cups.
‘Those little tiny chips, I think they’re going to be sold by the trillions,’ Huang said in an interview. ‘Maybe even sold by the pound.’
Installing chips into end products is only one side of the equation. The more things connect, the bigger the number and capability of servers needed to process the vast amount of specialized data those chips transmit.
To meet the demand, Intel could employ chips for its servers designed by new purchase Altera that analyze streams of similar data – specializing in one function, as opposed to multiple functions like chips inside personal computers – industry consultant O’Donnell said.
Combining such strengths is going to be vital, said Malik Saadi of ABI Research, because consolidation is not over yet.
More chip companies ‘will have to make that radical decision to merge,’ said Saadi. ‘This is just the starting point.’
(Additional reporting by Liana Baker in New York; Editing by Christopher Cushing)”