June 3, 2010 -- The well known trend within communications is that over time bandwidth demand increases while selling price-per-bit decreases. If you think about your internet connection at home, I bet that the speed has increased several factors over the past 10 years and your bill has probably stayed roughly the same. Or, how about the revolution taking place within mobile devices these days where you can now watch videos or play on-line games on your smartphone at basically the same cost as you used to pay for just a plain voice service.

This overall picture sets the cost structure all the way down through the value chain from service providers to the silicon IC component vendors of application specific standard products (ASSPs).

The traditional way silicon vendors has accommodated this continuous cost-per-bit decrease is by integrating higher bandwidth and capacity per silicon area. Thus, ASSP vendors have to deliver higher and higher densities, i.e., moving from 130nm in 2000 to 40 and 65nm today and 20 to 32nm in the near future.

In this article I will argue that this model gets broken at some point in time due to the mis-match between the relative flat revenue potential and the exponential increase in investment required by component vendors.

Furthermore, equipment vendors have a hard time developing products with differentiated features if they all use the same ASSP device. For these reasons, you start to see a new model emerging – I call it Softsilicon - that can address these problems effectively.

By Lars Pedersen. (Pedersen is Chief Technology Officer at Copenhagen, Denmark.)