Extinction Level Event

Posted by: Dave Vandenbout 11 months, 1 week ago

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Well, there are rumblings that Xilinx is going to be bought.

As everyone already knows, Intel bought Altera last year, looking at integrating FPGAs with CPUs for the datacenter market. That removed a company that serviced roughly 40% of the FPGA market. If Xilinx is also bought by someone looking to compete in the datacenter, then the suppliers of more than 80% of the FPGA market will have vanished. That's the equivalent of an extinction level event.

So what happens next?

High-end FPGA development stalls.

First, high-end FPGA development will stall. This was bound to happen once Intel bought Altera because that removed Xilinx's main competitor. Much of the increase in FPGA capabilities was due to that rivalry. If Xilinx also becomes a captive supplier to some other company with eyes on the data center, then that removes the apex innovator of the FPGA market. So you can forget about getting denser, cheaper discrete FPGAs every year for the immediate future.

The traditional FPGA market is abandoned.

Won't the purchasers of Altera and Xilinx keep servicing traditional FPGA markets? Why would they walk away from all that money?

Because it's not that much money. Currently, Xilinx and Altera were both around $4B in yearly revenue and each made around $500M in profit. And the projected (and historic) growth rate has only been 7%. Meanwhile, Intel's revenue from the datacenter alone was $16B last year and it's growing at 11%.

FPGA market trends

Why would Intel spend $16B to buy Altera and then use any of the acquired resources (i.e., Altera FPGA engineers) to service a slower-growing market where the potential profit is a tiny fraction of what they can make in a faster-growing market? It doesn't make sense.

Plus, the FPGA market is highly fragmented. It takes a lot of expertise to service each one of those segments. It's just plain easier to handle a single, large segment like the data center.

That said, Intel will probably keep selling to the telecomm guys because they have similar characteristics to the datacenter: a few major customers building base stations or networking hubs where performance is king and chip costs are secondary. And networking is an integral part of any data center as well.

Anybody that purchases Xilinx will have these same market forces affecting their decisions. They'll abandon the traditional FPGA markets (consumer, industrial, automotive, aerospace) and concentrate on the datacenter and telecomm. (Although telecomm will have to get used to not being in the driver's seat as far as setting the direction of FPGA development.)

More innovation and consolidation occurs.

Lattice is the only pure FPGA company that will be left. They have less than $500M in annual revenue. The Actel portion of Microsemi is roughly that size as well.

And with 80% of the FPGA market up for grabs (if Xilinx is purchased), then that makes Lattice an attractive purchase for a larger semiconductor company that finds an $8B market attractive (because not everybody is Intel).

It also opens the market for a lot of innovation. Previously, companies found it hard to penetrate with customers against Xilinx and Altera. Once they were starved of revenue, Xilinx and Altera purchased the remnants. Now there may be a more open playing field.

So what happens to me, the individual FPGA developer?

You'll live in interesting times.

You'll still be able to buy existing Xilinx and Altera FPGAs. All the development is done, it's just a matter of having them cranked out by the fabs. That's easy money. But the yearly improvement of these discrete chips that we've come to expect may cease as the engineers devote themselves to the wishes of their new masters.

And you'll still have the Quartus and Vivado FPGA programming environments, but further development and dissemination of those is questionable. Of course, nobody really loved them (because nobody loves any EDA software), but they are necessary for programming the current chips. So they'll still be around.

But there may also be new FPGAs that are made widely available. As Intel injects the FPGA into the data center, some of the developments will make their way to the desktop. That will make FPGA programming a possibility for a much larger audience. And just as compilers massively improved when PCs became widespread, maybe FPGA tools will also. And there would be a market incentive for that if multiple companies are struggling for control of the data center: ease of programming will be a big incentive for customers.

Meanwhile, there will be new FPGA architectures and programming environments springing up in the decimated ecosystem as a diaspora of FPGA engineers leave Intel and other megacorps to try it on their own. But that's a tough business given the level of technical expertise needed and the number of places where it's easier to make money (e.g., social networking, VR). Which of these will grow into the new apex innovator is anybody's guess.

In the end, it's not all good and it's not all bad. It's just going to be different. Kind of like 1985 when FPGAs first started to appear.

So if you like change, you're going to get it. Lots of it.

Current rating: 4.2


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