Semiconductor Industry Deep Dive with Dave Anderson of Semi.org

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Michael Scharf: Austin continues transforming into the next innovation powerhouse. In this podcast, we explore how central Texas is growing the people and companies, the industries, and infrastructure, the macro and micro trends that come together to create the future of Austin. I'm Michael Scharf advisor, and consultant to FinTech, cyber and environmental companies.

Jason Scharf: I'm Jason Scharf, a biotech executive, and early stages.

Michael Scharf: And this is Austin. Next,

Texas has long been a home for the semiconductor industry. I guess it started with a little company named Texas instruments. But today in the Austin area, we have Samsung NXP. Micron had AMD, even Intel may not have a family. Has a huge engineering facility across or park. This growth doesn't happen in a vacuum.

It takes a lot of people doing a lot of work. So today we're going to take a deeper look into this part of our ecosystem and try to better understand where Austin semiconductor industry is coming from and where it's going. And it may be going to chip city. Semi is the international organization representing semiconductor manufacturers and joining us today is David Anderson at the time of this recording.

David was president Semi Americas. His responsibilities covered all the programs in the region, but more important. He managed and nurtured relationships with semi as well as the local association and constituents in industry government and academia. David came to semi with lots of experience having held positions at Fairchild, semiconductor national semiconductor, the semiconductor industry suppliers, association, and SEMATECH.

He helped launch their global initiatives. David has now moved on to a new position as president at NY Creates and we wish him well.

Dave. Welcome to Austin next. Thank you. It's great to be here now. I know semi is the industry trade group. Can you describe the organization and its goals?

David Anderson: Sure. You know, SEMI is a global industry association for the microelectronics ecosystem.

We have about 2,500 companies worldwide. We were founded in 1972 originally to represent the semiconductor manufacturing equipment and materials. But somebody today represents the full semiconductor ecosystem and the broader electronics design and manufacturing supply chain. So in addition to the more traditional semiconductor companies like Intel, Texas instruments, applied materials, Tokyo electron members now include companies such as Amazon, Facebook, Google.

Ford, Eli Lilly. IBM, Siemens, Sony, and many other top brands who want stronger connections for the semiconductor supply. So our goals are really to advanced the growth and prosperity of our member companies and the micro electronics ecosystem. Overall, we want to help support the industry of just address challenges and opportunities and enabled technology innovation that delivers social and economic benefits worldwide.

Michael Scharf: That's great. Appreciate the background, I guess we'll start with the 800 pound gorilla in the world. The chip shortage is here. I've got a company that I'm on the board of. That's had to slow down some of their development process because they can't get the semiconductors. They need it's in the news all the time.

What is going on? And what is the great ship shortage.

David Anderson: Well, chip shortage has been an interesting one for us. It breadth Semicoductors in supply chain, into daily household conversations and really on the, on the demand side. COVID-19 the pandemic has spurred a huge acceleration in digital transformation and this.

Robust increases and the demand for home computing, networking equipment and semi conductor manufacturing, plants had already been operating at full capacity and continue to do so to try to keep up with this demand. On the supply side, the chip manufacturing process is an incredibly complex process and it takes several months.

To set up a new product in an existing fab, and it takes a couple of years to bring new capacity online. So when capacity is already paid, increasing, that is quite different. The impact of other challenges that convince rep with supply chain, such as restrictions on chip manufacturing in China, for instance, or even natural disasters, which can disrupt tab operations.

Like during the extremely cold weather we had last year in Texas, for example. So while I don't believe this is a structural short. Forecast project ship demand to remain high. As the economy has continued to reopen from a pandemic, but barring any significant shifts in geopolitics or micro economics, I expect that a gradual natant of the shortage will happen over the next year.

But during this present chip shortage, one of the major benefits for industry has been the broader realization that summit conductors are big roots building blocks in all electronics devices and are critical strategic technologies for national and economic security.

Michael Scharf: Clearly we've seen a growth in the use of semiconductor.

My first car had none. My second car had three. Now there's probably hundreds in the car that sits in my garage. And that's true. And you mentioned the the pandemic and we saw everybody needed to go out and get whether they were iPads or Chromebooks or computers for the house. Not only one, but one per person kind of thing.

What happened? How did this take us all by surprise?

David Anderson: Well, I think we expected a digital transformation to occur over time. Clearly it was happening more and more rapidly, but I think when we got forced to work remotely people began needing that networking equipment, new computers, new home entertainment, because they're home more often than they were.

And all of those impacted on a global basis the demand for those products. So I w I would venture that. We accelerated the digital transformation by five to seven years of where it might have been otherwise. And so, you know, I've even seen people say, you know, welcome to the 20, 25 we're we're already here because of that, that transformation.

But today I think, you know, we're seeing, seeing an acceleration of that even coming out of the pandemic. Coupled with the convergence of artificial intelligence ubiquitous internet of things, sensor devices, augmented reality and virtual reality. Quantum computing, autonomous machines, autonomous driving.

And so many other emerging technologies that touch virtually every end market and everything that we do on a daily basis and this results in tremendous opportunities ahead for the semiconductor industry, but really a challenge for bringing on new capacity to support. As a result. I think so I connected mark, is it expected that doubling in size in the next decade over a trillion modelers and that, you know, this technology has really transformed society and hold huge potential for growth.

Michael Scharf: So we've seen here in Austin, Samsung their, new plants and Taylor there's discussions about Micron and, and a new plant here in Austin. Intel just announced two plants, one in Phoenix and one in Ohio. Is that what we have to do to get out of this is just build more fabs.

David Anderson: And, you know, the short answer is essentially yes.

And I think you see that fabs are being built. Being announced to be built nearly every, every region not just around the country, but around the globe. And you know, those fans take a long time to come online. Each is specific to a specific type of technology to be built. And so they, you know, one single fab can't do everything for everybody.

So it requires those types of investments from companies across the globe.

Michael Scharf: What are the other challenges right now in the semiconductor industry? That we should be aware of?

David Anderson: Well, I would say clearly, you know, that the geopolitical challenges that we've seen are difficult to navigate and becoming more challenging.

We've seen unprecedented challenges with this COVID-19 pandemic and the increasing geopolitical tension over the past few years. But, you know, summit conductor industry as a critical industry has continued to operate it and show strong resilience and growth throughout that. But you know, while these are still challenges that are in front of us, I think the most serious obstacle we face as an industry is the widening talent gap.

That we have, the industry is expanding operations that you just mentioned across the globe and across the country. And the production capacity is to address the chip shortage as well as prepare for the growing demand. But the workforce shortage is more difficult to overcome in a short period of time.

So semi is working with our member companies with partners, from across industry government and academia to build workforce development programs, to address stem education, university curriculum. That dreams return to the workforce and even industry workers, career paths to try to address the workforce requirements at all levels.

Michael Scharf: So there's some news about Congress passing a new bill. What are they doing? And how do you think it's going to affect the industry?

David Anderson: Well, you know, as I mentioned that, you know, the chip shortage has really brought a supply chain in general, but really semiconductors to light. And I think that's also driven a realization that semiconductor technology is a critical technology for national and economic security for the time.

And so the chips act is what it's called chips for America act. And other legislation are in motion today promising about $52 billion to over the next five years to boost domestic semiconductor manufacturing industry. And, but it's not just manufacturing it's for research and development as well, and as well as talent development.

So this money is geared to re-establish the semiconductor industry. As a major player globally. And I think if you look at where we were 20 or 30 years ago, we manufactured 30% of the global supply of chips today. It's down to 12. From a manufacturing basis, so relate to, to maintain our leadership, to maintain the capabilities we need in this country for economic security, national security that money is to help spare investment and, and particularly drive the R and D sector forward.

Jason Scharf: So we were talking a lot globally. The biggest picture here is Michael mentioned, you know, Samsung coming and there's new $17 billion plant was a big deal here in Austin. Clearly we're becoming more and more of a nexus for semiconductors. And I think that's not something new. We have a rich history of that.

Can you briefly kind of describe the history of the industry in Austin?

David Anderson: Sure. You know, Austin, the state of Texas really has been home to many semiconductor electronics made it factoring companies since Texas instruments was formed in Dallas in 1959. But really in Austin technology really began to blossom during the 1960s with Treycore IBM and Texas instruments, all buildings, significant operations here.

And then while Silicon valley is the home and historically the location of many of the chip makers, major companies expanded their operations in Austin. So Motorola came on soon in 1974 when they entered the chip business and that business evolved over time to become Freescale. And now NXP still operating in Oak Hill.

In 1979, AMD built their first fab outside of Silicon valley and continue to grow here, producing CPU's and flash memory chips, and fabs that auto ultimately transitioned to Spansion then Cypress and now Infineon and AMD remains headquartered here today and still one of the fastest growing semi- conductor companies in the world.

But I would say a major milestone for the industry in Austin was when the SEMATECH consortium selected Austin for its operation in the late eighties, this created a step function and activity in the area, and really put Austin on the international map as a semiconductor technologies. With this came the broader ecosystem, such as applied materials, Tokyo, electron, and many other equipment and material suppliers, and ultimately Samsung in the late, late nineties.

And this was a key factor in the semiconductor industry and spindle ecosystem building up in and near on. And I would say, you know, while they're sitting gets good operations and other cities across the state, particularly Dallas and Lubbock and everywhere, Austin still remains that nexus of Texas and semiconductor industry.

Jason Scharf: So it's an interesting thing. I want to dig into that across Texas. One of the things that we have started to explore and think about as. Austin superpowers is the fact that we are part of this Texas triangle super region. Right. And you said, you know, the Texas instruments started in Dallas. So what would you say is the kind of interconnectivity.

Of the semiconductor industry through Austin. Is it, you know, is it different companies in different locations? Is it more, Hey, we've got manufacturing here, R and D there. How is it being kind of deployed across the state?

David Anderson: I think it's, it's a mix of all of the above. I think the companies are linked. T I has R&D and manufacturing in the Dallas area.

They also have some R and D scattered in other locations as well. Many companies have design facilities in Austin and manufacturing elsewhere, including manufacturing. But the types of companies that are across the state vary from, you know, small design companies to the very largest manufacturers in the world and they are quite lengthen, you know, the ease of transit between the inside of that triangle, as you mentioned, and the workforce and the educated workforce that we have in this area really has contributed to that.

Jason Scharf: And you say, we, you know, there's this, there's the large multinationals, such as Samsung and Intel, and then the small design. What is the kind of makeup in Austin? Is it really just these large companies or is there a growing startup chip or adjacency kind of industry growing as well?

David Anderson: No, it's not just a large company and you know, Austin has been nicknamed the Silicon hill.

And, you know, it's a major tech hub with more than a, more than a thousand established companies and startups that compete from across the microelectronics ecosystem in the hardware and software industries.

Jason Scharf: Wow.

David Anderson: So while we have the large name brand companies like AMD Sam's on an IBM. Freescale and NXP on semiconductors, Cypress now in Virginia Maxim now analog devices Al Tara, and then.

You know, we have Cirrus logic. We have ARM which is largely an IP company, Silicon labs. We have those companies all here and in Austin along with ambit micro Silicon space technologies, MTP V tempo semi-conductor move, which just looked located in Austin and so many more startups. So we really have the entire ecosystem.

Jason Scharf: So from a functional perspective, it sounds like we've got, you know, you've mentioned AMD actually has like their executive leadership. So it really is. It's not just manufacturing or R and D is it commercial? What are all the various activities that are kind of occurring here in terms of a functional.

David Anderson: Well, I think we have nearly everything as you, as you mentioned, AMD is headquartered here, so are a lot of other companies, so that that's the executive management, the corporate strategy elements. We have the design companies that are designing chips. We have the design on. So the large companies like Intel.

And micron here. We have the manufacturing and the likes with NXP and Samsung and Infenion and TI in Dallas for example. So, and, and then the startup network, we have tremendous capabilities with the University of Texas and Texas, A and M and Texas State in various aspects of semiconductor technologies.

And that spawns a healthy. startup market along with the venture capital that's come to the state over recent years, that keeps that going forward. So I would say there's no core strength if you will such as manufacturing, but rather the entire ecosystem that is required for the industry to stay healthy and to grow..

And that includes not just the device companies, but the equipment and materials, suppliers that support. Such as applied materials, Tokyo electron, and many others.

Jason Scharf: You mentioned earlier that there was the kind of workforce talent issues at a global level, you know, earlier in the show we had on Garrett Groves from ACC talking about, workforce solutions with companies like Samsung.

Where do you see in Austin, the particular talent issue? Is it from an experience level is at the early stage, the mid, the executive. Is it more of a functional where we having kind of that bottleneck and how has the things being approached to deal with?

David Anderson: Well, that's an interesting question because it covers virtually all areas of the workforce, you know, as Samsung and others continue to expand and build the fabs that requires a construction workforce that is has expertise in clean room construction and things like that, which is a very unique set of talents per those aspects.

But bringing a new talent into the industry out of the university, you know, we're competing with Google and Facebook and, and, and all the tech giants for that workforce, both from an engineering perspective, as well as data scientists and things, we need to improve our operations. And so that workforce and, and Tokyo electronic started a program that now the industry has embraced and is trying to expand a brain that turns out that are exiting the military into the workforce because they're already trained and, and you know, have that discipline that we need in our operations.

And that's a kind of a mid career type person. So it really does touch all aspects of the work.

Jason Scharf: So when you described how the evolution of Semi and it's not just the chip manufacturers, but now you have Amazon, you have a lot of the, kind of the consumers of those chips coming into it here in Austin, we have such obvious, we said this such large semiconductor industry, but how does it actually on a day to day connect with the broader innovation ecosystem here?

David Anderson: Well, as I mentioned, you know, it was trendless amount of talent in, the university systems that we have here in types and some of the best in the world, as well as I, you know, the venture money that supports the, the innovation and innovation largely comes from small companies that then ultimately have an exit as you know, Being acquired by a larger company or becoming a larger company themselves.

But as we see the likes of Facebook and Google and Tesla, as a great example, moving their headquarters to Austin, there's a direct semiconductor, you know, for example, Tesla it's beginning design its own chips to power its self-driving vehicles. And these compliments are sent central to their AI based plans.

And this holds true for Google and Facebook and other type giants that are designing their own ships today. Even Facebook has their own development pad you know, to develop chips. And so, you know, the larger companies are realizing that The semiconductor technology that they work on is the key to their success.

We joke sometimes Google and Facebook and, and you know, those companies, they would not exist without semiconductor technology. So while the media, like I run like the call them, they tech, they're not tech at all. They're just code that operates on the big tech summit. Can I for him this? I love it.

Michael Scharf: I want to take a look and pivot a bit towards the future.

By looking back at something that you said, you talked about SEMATECH and the consortium that was formed here in Austin. And when we've been here and we've looked at the Austin culture, that kind of collaborative spirit has made such a big difference here in the area. Is there room for another. super collaboration like SEMATECH to come in and, and boost the industry here in Austin and boost the, all the related pieces that you just described.

David Anderson: I would say the short answer to that is absolutely. Yes. One of the interesting things about SEMATECH and Austin is. I actually came to Austin as part of the startup team of SEMATECH. So you know, when I came here and realized that that, that tight knit business community that exists in Austin does not exist in many other locations.

And that, that common shared interest and collaboration as a business community is really what attracted SEMATECH and made SEMATECH successful. So SEMATECH as a consortium learn, you know, originally brought 14 companies together with completely different cultures and fierce competitors in the marketplace, but was able to bring them together to collaborate and drive the industry forward today.

As we look at the chips. And that I mentioned earlier in the funding associated with that, that presents new opportunities, not just for manufacturing, but research and development. Part of that funding includes and national semiconductor technology center, internet bat danced, packaging center, both of which on spin and Texas in general has the capabilities to support.

And Governor Abbott has already convened a task force on semi-conductors to help address. this and help bring some portion of that collaborative group of network to a hub in Austin in support of national semiconductor technology center. So you know, as we move forward, you know, and wait for a request for proposals on, on any of the chips act or other legislation funding, Texas will certainly be an Austin.

It's part of that, a contributor to that.

Michael Scharf: Dave, we've talked about talent shortages. We've talked about chip shortages. We've talked about now the chips act. What are the other challenges that you see facing the semiconductor industry?

David Anderson: Well, I think, you know, I mentioned that there's geopolitics in the industry and you know, so clearly we're competitive with China and it's not just in semiconductors, but future technologies, artificial intelligence, quantum computing, and so forth.

And so the geopolitics that had come in and out are coming to play. Could have hurdles existing with them that make it difficult to either enter a particular market or receive a supply from a particular market. And those are uncertainties that we navigate as they come up. We certainly, know, advocate for free trade and open borders and, and that sort of thing that we can't always do that.

So we live within the, you know, the guidelines that we need to, you know, in a, in addition to that, you know, there's always disruption from things that are forced measure such as the weather cold weather snap in Texas that shut down in NXP and Texas instruments and a few other fabs for a few days

There's been fires and batteries. There's been floods and things that have disrupted supply and other regions that have impacted the supply chain. And so, you know, all of those are potential potential risks as we move forward. But, you know, I think the workforce issue is one of the major issues that we face, particularly as we continue to grow.

You know there is, we're all, we're at an inflection point in this industry where we'd never had the opportunities in front of us that we have. You know, historically we'd go through cycles and always be waiting for the, the next big thing, you know, the next computer to come out or the next cell phone or something factors are so ubiquitous across all, everything, as you can see, the automotive industry is driving semiconductors, you know, that cell phone industry communications, homeworking, networking computer equipment.

 Whirlpool, as an example, as a member of semi, because there's chips that are washing machines. And so, you know, it's so ubiquitous across all products that the growth opportunities are tremendous. So matching capacity to that growth becomes a challenge. Because as you see from Samsung's investment in Austin, they went out $17 billion.

That's a pretty sizable investment and bring on a new capacity. And you want to time that correctly. You don't want to bring it on too soon, or you don't want to bring it on too late. And so, you know, timing, the capacity adds with the market is always been a major challenge.

Michael Scharf: Well, timing's a major challenge for everybody and we always want to end with the central question.

Dave Anderson. What's Next Austin?

David Anderson: What's next Austin, the future semiconductor production and research in Austin is promising. It has a mix of existing and prospective advantages, Austin and Texas in general, boast, a climate of highly business friendly. And a strong economy and they would rank Texas ninth internationally as a country, but more importantly, Austin has the talent base necessary for business success.

So as we've talked about some of the workforce issues, really Austin and the central Texas area, as universities systems that are developing the talent that are necessary for the businesses to thrive, Texas is big. And much of the land is shovel-ready for corporate expansion. And so foundries and summit connector facilities are also signs upon their own, right?

So the location and infrastructure here are conducive for serving both the domestic and global customers with large numbers of sea ports, airports, railway, it's, everything we need to get that product to market. And of course, I'd say with 300 days of sunshine a year, No personal income taxes. It has the quality of life that, that young talent.

And then I'd say finally with the chip acts and other legislation that are in motion promising $52 billion to boost the domestic industry. Austin stands pretty strong in being able to be one of the hubs for that semiconductor technology future. And so I think there should be many opportunities to grow the industry in Austin well into the future.

Michael Scharf: Dave Anderson president SEMI Americas. Thank you so very much for being on Austin next.

David Anderson: Thank you. Enjoyed it.

Jason Scharf: So, what's next Austin. We're glad you've joined us on this journey. Please subscribe on your favorite podcast. Catcher, leave us a review and let your colleagues know about us.

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