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Jump Starting the System-in-Package Ecosystem with Venture Capital

In early February, Intel Foundry Services (IFS), in collaboration with Intel Venture Capital, announced a $1Bn fund to nurture a new ecosystem for modular chiplet architectures. Startups with innovative IP, backed by Intel Capital, can offer chiplets on IFS' advanced IC packaging platform. The goal is to build a mix and match modular chiplet library to "accelerate customers' time to market."

"Truly tapping the power of modular architectures requires an open ecosystem since the approach brings together design IP and process technologies from multiple vendors. IFS is enabling this ecosystem with its open chiplet platform, co-developed with CSPs (cloud service providers) to accelerate the platform and package integration of customers' accelerator IP. The platform will leverage Intel's leadership packaging capabilities with IP optimized for IFS' advanced process technologies, combined with services to accelerate customer time to market with integration and validation."

-Intel Foundry Services Press Release February 7, 2022

The beginning of Intel's System-in-Package (SiP) integration platform was DARPA's CHIPS program in 2017. The US DoD was looking to speed up IC design by re-using IP blocks built on a modular platform of silicon die. Since then, custom silicon designers (Google, Tesla, AWS) have been the leading voices supporting a platform to access modular chiplet functional blocks. Indeed, Intel basically executes what Google Fellow and Vice President of Systems Infrastructure Amin Vahdat described in his blog post almost exactly one year ago.

Instead of integrating components on a motherboard where they are separated by inches of wires, we are turning to "Systems on Chip" (SoC) designs where multiple functions sit on the same chip or on multiple chips inside one package. In other words, the SoC is the new motherboard."

-The Past, Present and Future of Custom Compute at Google, March 22, 2021

There was a second announcement in early March. Through a new industry consortium, Intel and others unveiled the Universal Chiplet Interconnect Express (UCIe) standard. Intel Corporation donated the UCIe 1.0 spec, ratified by the ten promoter members, including AMD, ARM, ASE, Google Cloud, Intel, Meta, Microsoft, Qualcomm, Samsung, and TSMC. UCIe is an open die-to-die interconnect standard supporting an open chiplet ecosystem.

Both of these announcements are milestones for SiP business development. Today, SiP solutions are custom, like the multichip ceramic modules designed for the military in the 1970s or the Cray supercomputers in the 1980s. Organizations like AMD can integrate processor cores, accelerators, memory, and other functions on a custom design. But there is no interface standardization, and functional blocks from one design could not replace blocks in another design.

Intel's foundry and venture capital collaboration, along with an open UCIe standard, change the game. It is the first attempt (by a prominent player) at building a SiP ecosystem. Intel is using venture capital to lure creative IP onto its foundry platform and build a network effect for silicon chiplets. At the same time, the company is backing an open UCIe to nurture the supporting EDA tools and infrastructure for the ecosystem.

This is great for startups and established companies with a potential chiplet IP offering. These organizations will have a much easier commercialization path because Intel is solving the underlying go-to-market channel for the physical layer.

Intel also benefits. As a new entrant in the foundry business, the chiplet ecosystem neutralizes other foundries' incumbency advantages in established process design kits.

The IFS and Venture Capital collaboration was announced around the same time as continued reports of Apple's App store issues with antitrust regulators. It begs for some unfortunate comparisons. Starting with the Epic Game's lawsuit in 2020, antitrust regulators worldwide have scrutinized the fees Apple charges developers on its App Store. As a result, even Microsoft felt compelled to announce ground rules on its Xbox platform to win regulatory approval for acquiring Activision.

A fledgling chiplet ecosystem in 2022 is a long way from a dominant app store market. Foundries already have high switching costs, and the IFS chiplet ecosystem won't significantly increase those barriers. Moreover, the new UCIe interface is unlikely to lower switching costs between foundries. A new chiplet ecosystem enables higher-value services. It won't alter switching costs for foundry customers.

But there is a fee to use the ecosystem and the underlying advanced packaging technology. By definition, ecosystems are gated communities. And if there is a gate, there is a gatekeeper. And if there is a gatekeeper, someone has to pay the toll. Apple invested in its App store ecosystem. Developers pay the toll to use it. Intel is investing in its IFS ecosystem. Silicon IP developers will need to pay the toll to use it too.

The problem with Apple's app store is that developers, with no other routes to market, perceive the 30% fee as gouging. It is an expense that is visible to developers every time someone buys an app. Intel's ecosystem toll is different. Intel exchanges some of the value on the investment side with the startups it funds. On the investment side, there is more discretionary assessment for the investment risks vs. return. One has to believe that Intel Capital will be able to negotiate much more favorable terms with an IFS chiplet platform opening the path to market. (Note, Intel has not disclosed any terms for potential deals).

Weaponizing venture capital and pairing it with an ecosystem is not new. The whole concept originated in Hollywood in the 1980s and 90s, with Michael Ovitz, Creative Artists Agency (CAA) founder. CAA integrated publishing infrastructure, writers, music, and investment sources around the artists they represented. The network (or ecosystem) improved the artist's bargaining position relative to the big studios at the time. Twenty years later, Andreesson-Horowitz adopted the same model for their venture firm. A16Z built a network of executive talent, engineers, manufacturers, analysts, investors, and acquirers to deploy around a startup founder. The idea was to increase the success rate by easing the barriers to scaling a company. Intel's budding partnership program is like the network of talent that A16Z and CAA assembled in their respective industries.

Hardware ecosystem is not new either. Many standardized platforms (PCI, USB, etc.) have developed around computing over the past thirty years. These ecosystems offer mix and match, plug and play capability using standard physical layer interfaces and protocols. But, none of these standards needed to provide seed capital to encourage participation. The end market was large enough to incentivize participation.

Bringing together venture capital to nurture a hardware ecosystem is a new take on an old playbook. And it has implications for the rest of the tech hardware value chain. For example, lower entry barriers for commercializing semiconductor IP will open up new oppurtunites for organizations in the tech hardware supply chain. But, on the flip side, as we have learned from software and web-based ecosystems, IP value diminishes if go-to-market channels narrow to only one or two choices.

TSMC, Samsung, and other foundry service providers may have to offer their SiP IP attraction program. If they don't, they could be sitting on the sidelines of a ~$25Bn assembly opportunity by the end of the decade.

There are other implications. As chiplet ecosystems mature, there will be less incentive for direct partnership developments like the recent announcement between etopus, QuickLogic, and OpenFive. Outsourced semiconductor assembly and test suppliers will need to be particularly careful because many have invested in SiP process technologies. Ultimately, an emerging chiplet ecosystem is a tide that lifts all boats. But OSATs may need to think differently about capitalizing on those investments. Fortunately, there is a wealth of examples from other industry ecosystems to draw inspiration.

An organization's response to Intel's SiP ecosystem will depend on where it sits in the semiconductor supply chain. It is worth planning for, and we can help. Please reach out to RCD Strategic Advisors if you are looking for an external and unbiased analysis on how to capitalize on this and other emerging SiP opportunities.

This post was updated to include the announcement about the UCIe consortium.


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