The Economics of Custom Semiconductors

July 27, 2017

Traditionally cost-prohibitive, recent market developments have made custom chips an option for even low- and medium-volume OEMs. These days, custom mixed-signal SoCs (system on chips) are possible for many system houses and device makers who previously found such designs outside their budgets.

For these OEMs, the bill of materials (BOM) savings that can be achieved with a custom, integrated SoC design means it often pays for itself quickly. In addition, the custom approach can bring performance and space improvements, allowing OEMs to differentiate their product from those of competitors. Along with the increased IP security, it’s starting to make more sense to go custom.

Costs Have Come Down

Custom silicon is every device maker’s ideal – a highly optimized, efficient system designed exactly to your application requirements. Until recently the idea has been out of reach, but the fact is that custom SoC designs today are more affordable than ever before. While consumer products constantly push the cutting edge of advanced process nodes, foundry capacity at mature process nodes is being freed up, making it more affordable than ever to fabricate custom chips.

Driven by the need for higher integration and lower unit costs, designers of consumer electronics have constantly sought the most advanced process nodes, from 28nm, to 22nm, to today’s 14nm processes. As the high-volume markets moved down to smaller processes, they left foundries at larger process nodes running idle. In the interest of maximizing fab utilization and getting the best return on the considerable investments, manufacturers have lowered mask costs significantly to attract new customers.

For analog and mixed-signal systems, this presents a great opportunity. For these use cases, the analog component does not scale as well to advanced nodes. That means large cost savings can be achieved using mature process nodes such as 0.18um and 65nm without sacrificing analog performance.

While the lower mask costs from the foundries reduces the up-front non-recurring engineering (NRE) costs, the high level of integration made possible by custom chip design can generate huge BOM savings. Even at low to medium volumes, custom chip designs can often end up paying for themselves in 12- to 18-month timeframes.

Custom Benefits

As the number of discrete components in a system increases, the potential BOM cost savings of integrating those components into a single SoC grows as well. Besides cost reductions, these custom chip designs often also achieve space savings and efficiency improvements, allow product differentiation, and offer IP security that can’t be achieved in systems using standardized components.

With a custom design, systems can often be made smaller, lighter, and simpler. The space savings translate into smaller form factors that often enable products to enter new markets that were previously inaccessible. As a custom design eliminates unnecessary components and functionality, it also results in simpler designs that are easier to assemble and test. The reduction in components also means better transparency and control over supply chain and lead-time.

Finally, custom chip designs allow OEMs to include unique features that may not be available using standardized components, and to do so in a way that’s difficult for competitors to emulate. Along with the space savings that allow for novel form factors, this gives brands the ability to differentiate their product in a competitive marketplace. Best of all, unlike systems built with standardized components, custom silicon achieves all these benefits while making it almost impossible to reverse-engineer the design.

Custom Challenges

While custom chip designs are finally becoming feasible at lower volumes, producing them still requires unique relationships with foundries, strong mixed-signal design expertise, and experience in low- to medium-volume chip production.

Whether it’s IIoT, wireless or wired communications, or satellite communications, today’s designs almost always incorporate either significant analog or mixed-signal circuitry along with digital components. This presents significant challenges for many design houses that usually specialize in analog or digital design, but not both. In addition, small- and medium-volume chip production inherently presents challenges, especially when working with large, Tier 1 foundries.

S3 Semiconductors expertise in chip design, along with more than 20 years’ experience managing production logistics, allows us to deliver strong custom chip designs to production even at small to medium volumes. Chips are designed based on a comprehensive analysis of the application, maximizing the advantages of on-chip integration and resulting in a unique solution optimized to customer needs.

Utilizing the capabilities of the world’s biggest semiconductor factories and assembly and test houses, chips are supplied to world-class quality standards, while we also provide the customized service of a design house. This allows us to deliver a comprehensive design-to-production service for our customers.

A Better Way

For most OEMs, cost is a main concern. Designing using standardized chips means compromise, as external components inherently add cost to the system. Using custom chips designed for the application is ideal, but used to be prohibitively expensive and difficult to achieve.

Thanks to changes in the semiconductor market and our 20 years of experience in analog and mixed-signal chip design, S3 Semiconductors is allowing OEMs to gain the benefits of custom chip designs built in Tier 1 production facilities. For many customers, this can result in BOM savings of 50% or more, along with the many other benefits of a custom chip such as IP security, performance and efficiency benefits, and product differentiation through unique functionality and smaller form factors.

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