ONE kind of hardware will probably never be virtualised: processors. After all, these are the brains of every digital device. Yet chips, too, are becoming more malleable. Demand is growing for processors that are not just made for a single purpose but can be reconfigured with a special programming tool, a bit like rewritable DVDs. The research arm of Deutsche Bank predicts this segment of the semiconductor market will grow by an annual average of 14% in the next few years.
“Programmable logic devices” (PLDs) help to solve a pressing problem in chipmaking. Developing a custom processor is becoming ever more pricey. Firms may spend up to $40m before the first chip is made. The risk of a design flaw is high, as are the costs of fixing it. PLDs lower both the upfront expense and the cost of getting things wrong.
Programmable chips are unlikely to replace conventional processors for mass-market products like personal computers. They are more expensive to make than ordinary chips, not as speedy and consume more energy. But as technology improves they may take market share from other kinds of custom-made processor.
Perhaps most important, PLDs are more profitable. Gross margins average about 65% compared with 50% for standard custom chips. Most of these profits have so far gone to Altera and Xilinx. These two American firms, which manufacture in Taiwan, are reckoned to have shares of 40% and 48%, respectively, of the market, which should reach nearly $5 billion in worldwide sales this year.
These fat margins are luring other firms. One is Achronix. It wants not just to make PLDs cheaper and less energy-hungry, as Altera and Xilinx have done, but to improve their performance so they can power the latest networking equipment, says John Holt, the firm’s boss. It may reach this goal, not least because of an unusual partner: Intel. The world’s biggest chipmaker will produce Achronix’s chips in its most advanced fabs, as semiconductor factories are called—a first for the firm.
Some industry experts wonder what is in it for Intel. A few think it is doing its patriotic duty because American authorities do not want makers of weapons and telecoms gear to rely on PLDs made in foreign foundries, out of concern that spooks could program in secret backdoors. Other analysts say that Intel is just making a low-risk bet on a promising market and will acquire Achronix if it is successful. Yet others argue that Intel wants to gain some experience at being a foundry should it no longer be able to fill its ever bigger and pricier fabs with its own products. The truth may be a mixture of all of the above.