Artificial Intelligence – The next big growth driver for the semiconductor industry

Tanjeff Schadt, PwC Strategy&

www.strategyand.pwc.com

Prepared for SEMICON Europa, TechARENA

November 13, 2018

2

Welcome

Tanjeff SchadtPrincipal

Munich, Germany

Biography:

• 8 years of industry experience in management positions

(R&D, product portfolio, strategy)

• 7 years of strategy consulting experience in Semicon,

Electronics and Automotive industry

• Lead various projects at semicon clients, esp. with

focus on innovation, R&D and operational excellence

• Leading member of PwC’s semicon and technology

strategy practices

PwC Strategy&

3

PwC’s semiconductor industry consulting experience spans the entire

ecosystem and is unparalleled among consultancies

PwC Strategy& – Expertise in semiconductor industry

• 50+ major semiconductor industry projects in the past two years alone

• Deep, global bench of >50 global consultants, with experience in all aspects of the semiconductor industry

• Extensive knowledge base of industry-specific best practices

Our Semiconductor

Sector Consulting

Expertise

Broad suite of offerings

Value streams

Marketing & sales

Supply chain

Product innovation & development

Strategy

Technology consulting

Capital project and infrastructure (PMC)

Project experience along the entire value chain

PwC Strategy&

We see that eight essential technology streams have emerged –

Artificial Intelligence (AI) is one of them

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The Essential Eight Technologies

• PwC is continuously tracking more than

150 technologies

• The most impactful technologies emerged

as the essential eight

• Each technology stream at PwC is

represented with dedicated teams

building a well-grounded foundation

of knowledge

• Artificial Intelligence is among our

essential eight technologies

Internet of Things

Augmented

Reality

Virtual

Reality

Blockchain

Artificial Intelligence

3D Printing

Drones

Robots

PwC

Essential

Eight

PwC Strategy&

The global semiconductor market will continue to grow –

AI is a major growth driver in the upcoming decade

5

Global Semiconductor Market [$ bn]

Source: PwC Strategy& analysis, IC Insights, JP Morgan *AI silicon market – foundry revenues, not exhaustive

Total global semicon revenue w/o AI

Total global semicon revenue

405

450

495

540

2021F2019F 2020F2017 2018F

CAGR 3.7%

CAGR 4.8%

Total market:

$ 530 bn

AI share*:

$ 26 bn

In the next decade we expect

AI share growing to > $ 100 bn

+?

...

PwC Strategy&

Most attractive growth opportunities for AI are Automotive and Financial

Services – however, edge-based devices offer a huge untapped potential

6

Artificial Intelligence silicon – Market Overview

Source: PwC Strategy& analysis, IDC, Allied Marker Research, Tractica

SELECTION

Cloud Edge

Market Overview AI Classification

Sample Use Cases

2021 Market Forecast ($ bn)

Training System

Inference System

Edge-based devices for consumer electronics

• Deep-learning wireless camera• Augmented human decisioning

Automotive • ADAS, Driver safety systems• Infotainment

Financial Services• Authentication• Portfolio Management

Healthcare• Disease Prevention• Diagnosis

Tech, Media, and Telecom• Network Security• Personal Assistants

Retail• Customer Insights• Pricing Analytics

Industrial• Manufacturing Automation• Proactive Failure Detection

Smart Buildings• Monitoring & Security• Energy Efficiency

1.0 2.0 3.0 4.0 5.0 6.0

PwC Strategy&

Semicon innovation will boost the market for AI silicon in Automotive

electronics to $5.3 bn until 2021

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Artificial Intelligence silicon – Automotive electronics

Source: PwC Strategy& analysis, Gartner, Allied Market Research ASIC: Application Specific Integrated Circuit ASSP: Application Specific Standard Product

PwC Strategy&

Comments

• AI use cases for Automotive will be centered around infotainment, driver safety andautonomous driving

• The ingredient devices that will drive the AI use cases will be mainly focused on sensing, compute and storage

• AI-focused silicon will gain ~20% share of overall Auto electronics market until 2021

AI silicon forecast within Automotive Electronics Market Forecast 2021 ($B)

4.5

13.1

72.5

10.6

6.9

12.5

8.3

5.8

7.2

3.6

EV/HEV

Safety

Infotainment

Body

ADAS

Aftermarket

Instrument cluster

Applications

Powertrain

Chassis

Device category

ASIC

Memory

Non-optical sensors

ASSP

Microcomponents

General purpose logic

Optoelectronics

Discrete

Analog

12.7

4.1

1.4

2.0

2.0

3.8

0.9

0.6

30.0

2.6

AI

AI forecast (ADAS, safety & infotainment)

5.3

Non-AI

26.7

21.4

The AI stack consist of multiple building blocks – innovation is brought across

the stack to various target applications and use-cases

The Artificial Intelligence Stack ILLUSTRATIVE

Stack Element Description Examples of Solutions and Vendors

Applications & Services

Software applications leveraging AI for “intelligence”

AI PlatformsReady-to-use building blocks and services thatprovide a host of AI capabilities (often proprietary)

AI Frameworks, Tools and Interfaces

Tools and frameworks to leverage underlyingML algorithms to design, build, and train deep learning models for specific applications

AI LibrariesA set of low-level software functions that help optimize the deployment of an AI frameworkon a specific target silicon

AI Hardware(Accelerator vs. Edge Processing)

Processor units and semiconductor logic circuits for accelerated execution of AI workloads / computations as well as adaptable AI processing on the edge

Alexa

Watson

TelsaNervana NNP ARM MLSnapdragon

NPE

Loihi

cuDNN

Tensor RT

MKL

DL SDK

Vision SDK

ARM NNSnapdragon

NPE SDK

Tools to optimize

deployment to hardware

architecture

AI-optimized silicon

architectures

Current

battleground: where

will AI be processed?

8PwC Strategy&

Target Appli-cations

DatacenterSelf-driving cars

AR/VRDrones

Surveillance

DatacenterSelf-driving carsRetail Analytics

Smart CitiesSurveillance

Computer vision

ADASDrones

DatacenterMedical

Vision Processing for ADAS

Computer VisionSmart Driving

Voice assistantsConsumer robots

Smartphones

AutomotiveSurveillance

DroneMobile / Wearable

AILibraries

MKLDL SDK

Vision SDKMyriad Dev Kit

cuDNNTensor RT

Snapdragon NPE SDK

reVISIONSDAccel Toolkit

S32 Design Studio IDEVision SDK

STM32STM32 Cube

ARM NNTensilica NN

mapper toolkitDSP SDK

AI Pro-cessingHW / Silicon

CPU Xeon PHICortex-A75 Cortex–A55

DSPHexagon 685 DSP (Snap-

dragon NPE)

Tensilica Vision C5 DSP

GPUPascal, Volta

Maxwell, Tesla

FPGA Arria 10Zynq

MPSoC

CustomNervana NNP

Myriad XLoihi NMP

ASIC – TPUS32V Vision Processor

AI SoC for DCNN

ARM ML

Most chip vendors are providing AI-specific acceleration to enhance their

existing product portfolios …

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Artificial Intelligence Stack – Current Status (1/2)

Training Inference Both

PwC Strategy&

EXTRACT

IP LicensorsChipmakers

Target Appli-cations

Facial recognitionText-to-speechSmart Assistant

Digital Transformation

Intelligent Assistant

Image searchVoice search

TranslateSmart Reply

SearchVoice AssistantComputer Vision

Facial recognitionAnimated emoji

Self-driving carsFace IDAnimoji

AILibraries

AWS DL AMIXilinx SDAccel

Bing APIFace API

Analytics API

Video APIVision API

Speech APINL API

Core ML

AI Pro-cessingHW / Silicon

CPU

DSP

GPU

FPGA

CustomAI chip for Edge

(Alexa)AI chip forHololens

Cloud TPUTPU

Neural Engine (Exynos 9)

Neural Engine(A12 Bionic)

… however, they face an unexpected threat from hyperscalers and product

companies, who are gravitating towards customized chips for AI processing

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Artificial Intelligence Stack – Current Status (2/2) EXTRACT

Others (Product Companies)Cloud Player

In-car chip

GPUsGPUsGPUs

AWS EC2 F1Project

Brainwave Cloud Server

PwC Strategy&

Training Inference Both

Four main forces will shape the AI opportunity for semiconductor players in the

coming years

Main Forces shaping AI Opportunities

Ever broader accessibility

of AI

• Development of applications is

increasingly supported by

platforms, frameworks, libraries,

sensors

• Entry costs become increasingly

lower, but so is ability to

differentiate for application

makers

• AI is an open battleground

• AI features: a must in many

devices / applications

• Differentiation for application

makers becomes complex,

not pure AI-driven

Domain-specific

architectures

• Semiconductor node scaling

very expensive, and

increasingly so

• Fabs offer standard IP

• Proliferation of IoT outside

of PC and datacenter

• Winning horizontal solutions

very expensive to develop

• Pockets of value in

increasingly fragmented

industry applications

Proliferation of AI

at the edge

• Growth in edge devices and

applications

• Related pull in sensors

• Growth in intelligent device

testing and management

• AI becomes increasingly

feasible

in small form factors

• Cost of data transmission

to the cloud

• Latency becomes critical

• Data privacy concerns

Evolution of AI algorithms &

technologies

• The capability to understand

AI evolution and implications

holistically is critical

• Current AI technologies are far

away from enabling general

intelligence

• Ability to test and validate AI

behavior is a big question mark

• Evolution in AI algorithms will

continue, raising the need to

adapt silicon

11PwC Strategy&

Semiconductor players should define their distinct way to play in AI

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Pure-Play Archetypes SELECTION

Outsourcedsolutiondesigner

Horizontalsolution leader

Industry applicationleader

Examples

Core

differentiating

capabilities

• Customized silicon, based on standard or proprietary IP

• Application-specific integration and testing tools

• Possibly proprietary software and algorithms

• Standard silicon for the largest cross-industry application segments e.g. data center

• Broadly applicable software tools

• Focus on interoperability and compatibility

• Design and fabrication services

• Integration of customer requirements or standard IP, as required

• Multi-purpose packaging, assembly and testing services

Product portfolio

• Deep customer intimacy

• In-depth AI application stack understanding

• Solution integration & selling

• Application-specific customer support

• Ecosystem, partnership and alliance management

• Breakthrough innovation in R&D and fabrication

• Channel management

• Customer requirements understanding& relationship management at scale

• Customer segmentation and selection

• External R&D integration

PwC Strategy&

In recent years the AI start-up landscape gained momentum –

funding of semicon start-ups is back again

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Semiconductor AI Start-up Landscape

Source: Strategy& research, Crunchbase

EXTRACT

Start-up Founded HQ (GEO) Stage Funding to Date ($ m) Strategic Investors Technology

Cambricon Technologies n/a China Series A Alibaba Deep learning processor

CyberSwarm n/a San Mateo, CA Seed None AI-assisted cybersecurity CPU

Graphcore n/a UK Series C Samsung, Dell Deep learning processor

Horizon Robotics 2015 Beijing, China Series A Intel Vision DSP

KnuEdge n/a San Diego, CA n/a None Neuromorphic processor

LightOn 2016 Paris, France Seed n/a Optical/quantum AI computing

Movidius n/a San Mateo, CA Series E Intel Neural Compute Engine Accelerator (Appl: Vision DSP)

Mythic n/a Redwood City, CA Series A n/a Neuromorphic processor

Nervana n/a San Diego, CA Series A Intel Deep learning processor

Reduced Energy Microsystems 2014 San Francisco, CA n/a n/a Deep learning processor

Rigetti Computing 2013 Berkeley, CA Series B n/a Optical/quantum AI computing

Tenstorrent 2016 Toronto, Canada Seed None Deep learning processor

Vayyar 2011 Yehud, Israel Series C n/a Vision DSP

Vicarious 2010 San Francisco, CA Series C Samsung Neuromorphic processor

Wave Computing 2010 Campbell, CA Series D Samsung Deep learning processor

Xanadu 2016 Toronto, Canada Seed n/a Optical/quantum AI computing

Cerebras 2016 Los Altos, CA Series B n/a Deep learning processor

ThinkCI n/a n/a n/a n/a n/a

Knowm 2015 Santa Fe, NM n/a n/a Neuro-memristive processors (Thermodynamic RAM)

ThinkForce 2017 Shanghai, China n/a No AI Acceleration Engine

Groq 2016 Palo Alto, CA n/a No n/a

Gyrfalcon n/a n/a n/a n/a n/a

101

1

110

100

47

56

9

25

2

70

80

137

117

3

112

0

0

0

0

0

0

0

PwC Strategy&

Innovative chip architectures in AI compute are increasingly VC funded –

majority of early stage funded start-ups are headquartered in China

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The AI Start-up Scene

Source: Strategy& research VC: Venture capital

PwC Strategy&

VC funding in Semiconductor AI start-ups, $M (2012-2017) 2017 Funding Breakout by Stage and Region

90

214

748

<2014 2015-2016 2017

4x

3x

43%

9%

35%

13%

By Funding Stage

Series D

Series C

Series B

Series A

Seed1%

80%

20%

APAC

By Stage and Geo

AMER

65%

35% EMEA

AMER

La

te S

tag

eE

arl

y S

tag

e

Rising number of start-

ups are targeting new

silicon architectures that

are optimized to meet

the unique processing

requirements posed

by AI workloads

Start-ups founded in

EMEA and AMER

continue to show growth

and promise based on

funds awarded

A vast majority of early

stage funding in 2017 was

awarded to start-ups

headquartered in China

The silicon required for Level 5 autonomous driving is likely already available –

power consumption and form factors still evolving

15

Evolution of relevant IC Alternatives for in-car AI Inference

* Based on Google estimates (2016) – estimate of 50 TOPS at floating point 16 bit precision, i.e. approx. 25 TOPS at floating point 32 bit precision

** Illustrative based on current Intel press releases. Exact performance and power consumption not announced

*** Representative example of Intel Xeon family

Source: Strategy& desktop research June 2017; some devices incorporate multiple dies, e.g. Google TPU 2.0

EXAMPLE: AUTONOMOUS DRIVING

2013 2014 2015 2016 2017 2020

1

2

4

8

16

32

64

128

256

Intel Xeon E5-2697 v4***

Intel Xeon Phi 7250

Google TPU 2.0

Nvidia Tesla V100

IBM TrueNorth

Nvidia Tesla K40

Nvidia Tesla P40Nvidia Tesla P100

MobilEye EyeQ3

MobilEye EyeQ4

MobilEye EyeQ5

**Intel Nervana

Lake Crest 2.0Tera-operations

per second (TOPS)

in 32 bit floating point precision (fp32)

Claimed to be able

to support SAE L5

by 2020

~25 TOPS @ fp32

Approximate computing power required for

inner-city autonomous driving with current algorithms*

Inference only – AI training in the cloud

present

Intel Nervana

Lake Crest **

GPUCPUSpecialized

GPU/VPU

Specialized AI processor /

Neuromorphic chip

Circle size indicative of relative power consumption

PwC Strategy&

AI is THE opportunity for European semicons

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European semiconductor companies have the know-how and a right to win –

you better have a strategy!

The opportunity

is big!

There are plenty of

growth options!

Don‘t forget

the ecosystem!

• What is your strategy for

Artificial Intelligence?

• We are in an early phase –

core is still an opportunity

• European semicons can

build core AI in Asia

• Edge is core capability of

European semicons

• What is your answer on how to

play in the ecosystem?

PwC Strategy&

European semicon players shall take advantage of AI in cooperative mode

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Cooperate

Forget what you can do on

your own:

What can you achieve

together in the European

semicon industry?

Way to play?

You better have a strategy!How to play?

What is the right

spot in the AI

ecosystem? ?

Where to play?

AI is application driven –

what are the most relevant

applications for you?

PwC Strategy&

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Outlook: Global Semiconductor Report 2018 coming soon

PwC Semiconductor Report Series

• The PwC Semiconductor Report Series provides an overview of market

developments, growth opportunities and success factors of the global

semiconductor market

• It includes a forecast on global semiconductor billings by component,

region and application

• The reports also covers highlight topics and their implications on the future

of the industry – past topics included the Internet of Things (2015) and a

spotlight on Automotive (2013)

• The two highlight topics in 2018 will be:

Artificial intelligence – the next big growth driver

Digitization of semiconductor companies

PwC Strategy&

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www.strategyand.pwc.com/strategythatworks

PwC Strategy&

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Contact

Tanjeff SchadtPrincipal

Semicon expert

Phone: +49 89 545 255 21

Mobile: +49 15 167 330 436

Email: t.schadt@strategyand.de.pwc.com

PwC Strategy& (Germany) GmbH

Bernhard-Wicki-Straße 8

80636 München

www.strategyand.pwc.com/de

PwC Strategy&

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