The Return of the ASIC
Once upon a time, ASICs (Application Specific Integrated Circuits) were one of the hottest topic in Silicon Valley’s VC community. Just cause I was curious, I Googled “ASIC” the other day and found 1) a manufacturer of athletic shoes, 2) the Australian Securities and Investment Commission, and 3) the American Society of Irrigation Consultants. To be sure, the ubiquitous Wikipedia site did explain what an ASIC really was, but there wasn’t much else to be found.
I bring this up because I think ASICs are on their way back up and will become an increasingly hot product category over the next several years. ASICs fell out of favor in some quarters because general-purpose processing chips got cheap enough so that they could compete price-wise. But using a general-purpose processor for a specific application wastes a lot of transistors, and, because it is not optimized for the application it purports to serve, it is inherently inefficient. But now we have electronic products like mobile phones and tablets being made in the millions of units. That is a significant economic driver change.
So, while I’m not forecasting Intel’s imminent demise, I am forecasting excellent growth opportunities in the ASIC business over the next decade. I found a forecast from a market research company (who will remain unnamed), stating that the ASIC compound annual growth rate over the next few years will be less than 3.8%. I haven’t done a formal study, so I’m not prepared to cite any numbers of my own, but I think that forecast is extremely low. As high-volume production of electronic devices proliferates (anyone want to argue that?), ASICs have got to be winners.