Alfidi Capital at REUSE 2017 Semiconductor IP

I could not close out my 2017 adventures without attending the REUSE 2017 Semiconductor IP conference in Santa Clara. I am a regular down at this convention center and nothing big in tech escapes my notice. I also rarely escape the tech sector's notice, which is why techies invite me to events. Gaze upon my badge selfie below so we can get to work.

Alfidi Capital at REUSE 2017.

The first keynote on IP theft should have opened the eyes of anyone in Silicon Valley who still thinks that authoritarian countries can still be friends of the United States. Just look at the People's Republic of China, for crying out loud, and see how their Communist government causes us problems. The US Commission on the Theft of American Intellectual Property (aka the IP Commission) reported that China has stolen up to $600B worth of IP from the US economy, including information critical to our defense industrial base. I started to see the potential for this kind of disaster years ago when I first started following the rare earth element sector. China's stated strategic desire to attract high value manufacturing to its territory is a long-term threat to democracy.

Our REUSE keynote speaker had solid recommendations for defenses against foreign IP theft, with the caveat that litigation after the fact is far more expensive than erecting cyberdefenses (like encryption) before it happens. I would add that any US company considering a high-tech joint venture with a Chinese company needs to abandon such a project immediately, before the inevitable ripoff happens.

Automobile IP will be a hot topic as automakers deploy autonomous vehicles. Get to know the Single Edge Nibble Transmission (SENT) protocol for sensors. The CAN in Automation folks hold their plugfests to see what kind of automotive tech will work as we move into self-driving cars. The proliferation of sensor tech in IoT and cars means there will be more pure-play IT possibilities for startup business models.

The Arm folks made their presence known once again. Their Arm Compute Library for developers now includes ML and AI enablement. The next step in architecture evolution is integrated encryption capability. Expect to see ambient energy harvesting for IoT devices via radio frequency (RF) or solar attachments. Arm's DesignStart program offers no-cost licensing up front for development based on Arm's core systems. I look forward to watching startups build hardware-infused encryption and energy processors onto Arm platforms. The bottom line for developers is that partner IP built on platform IP like Arm enables faster hardware product time-to-market.

I will offer a warning to US developers based on what we already know about Chinese IP theft. Many partners in some foundry support ecosystems have Chinese-sounding names, so they deserve a thorough review for any US partner concerned about IP protection or economic dependence. In case of a trade war, US companies would be cut off from Chinese supply chains, and I doubt they will have access to the WTO or other avenues for recourse in the event of IP theft.

I learned a few things from a keynote on how IP ecosystems evolve. Springer's "Security Assurance Guidance for Third-Party IP" is a start for developers who must verify their vendors' trustworthiness. Vendors must use a formalized ticketing system to track IP knowledge sharing. I get that there will be new opportunities for developers in subsystems, chiplets, and services. I also foresee new threats as inexperienced tech developers launch those startups without IP tracking or vendor vetting on day one.

I never pass up a chance to hear about anything from open sources, so of course I went to the panel on open innovation. I was very impressed with one business model empowering fabless product generation, and it may be very useful for one concept I have in development. Any FPGA circuit, programmed input/output (PIO) device, or electronic design automation (EDA) tool can now be developed from open sources. Microsoft's Project Catapult created a white paper "A Cloud-Scale Acceleration Architecture" that provides a decent road map for FPGA development. Google search results for "open source prototyping" show that open sourcing is harder and costlier for hardware than for software.

The closing keynote on semiconductor industry trends gave me some new food for thought on AI impacts. If you have not heard of those things yet, they are coming to a startup pitchfest near you after the wheels fall off this crypto ICO craze. Cheap open source development will become more prevalent now that only the largest semiconductor companies can afford to survive the long lead times between major nodes in tech shifts. Smaller design rules are part of the push against Moore's Law, and they increase the cost of conventional semicon development. Extreme ultraviolet lithography (EUV) is the next step in small measurement process development. The sector's drive for Design-Technology Co-Optimization (DTCO) pushes the simultaneous development of every step in the semicon value chain, including the foundry.

REUSE is an informal showcase for smaller companies. I got my trade show passport stamped at every expo vendor booth because I'm just that thorough. I will now offer some wrap-up wisdom for any techies considering a hardware startup. Secure your foundation IP, encrypt your data, investigate your vendors, and track your workflows if they connect outside your enterprise. Deny any potential Chinese partners access to any and all American tech, including napkin sketches, and erect impenetrable digital barriers to Chinese cyber intrusions. I would be happy to share these observations and more if REUSE offers me a speaking slot net year.

Alfidi Capital at Intersolar ees SEMICON West 2017

I attended the mighty tripartite conference of Intersolar North America, ees North America, and SEMICON West 2017 at San Francisco's Moscone Center. The south hall of the convention center is undergoing a massive renovation, so the SEMICON folks had to cram into the west building with Intersolar. The reduced expo floor area was tolerable given the action-packed schedule. It's action-packed from my perspective, because I love sitting through long seminars and briefings that lesser mortals lack the fortitude to endure.

The Intersolar opening ceremony is always the first shin-dig on my calendar for this colossal conference. The main Intersolar conference has lots of finance seminars on the first day but I am too cheap to pay. These people had better invite me to speak someday. Anyway, CALSEIA and NREL celebrate their 40th anniversaries this year. I did not see any cake but that's okay, we all need to stick to our diets. Expect to hear more about behind-the-meter consumer-driven storage, because that's the industry term for how building owners are installing their own systems on-site. Everything in capitalism is of course consumer-driven, but the twist in renewable energy is that smaller storage systems give customers a lot more options than utilities have ever provided before. I wanted to hear from California politicians about how the state's proposed Energy Storage Initiative would affect the market but the usual big shots were not on hand. Maybe our mayor and governor had something better to do than promote solar energy, one of the Golden State's biggest growth industries.

It's the Alfidi Capital badge for Intersolar, ees, and SEMICON West 2017.

The opening ceremony left me with more questions than usual. Do solar energy companies really have thin profit margins (compared to, say, fossil fuel energy generators)? If PV costs keep dropping and PV panel volume GW installation keeps rising, why would solar companies have thinner margins than the broader energy sector? Will the solar sector shrink if the federal government cuts spending on solar R+D? If the energy grid evolves past net-metering to accommodate location-based price signals, will this drive demand for beacons and other IoT devices in the grid? Can blockchain tech really enable both on-grid energy trading and PPA investments? I mulled these questions while I was chomping on free food after the opening ceremony. They served roast beef this year, a step up from the usual turkey.

The SEMICON West welcome keynotes and opening ceremonies were next on my hit list. The hits just keep on coming. The assumed CAGR of 5-7% for the semiconductor sector through 2057 is a long forecast, but it seems reasonable if IoT adds to a mature sector. Anyone who thinks IoT won't drive the next wave of semiconductor volume growth needs to read everything I've ever blogged about both IoT and semiconductors. I keep hearing predictions about AI making the singularity either a decade or two away, but there's no consensus among gurus. We all get to learn some new buzz phrases: edge computing (now with IoT and AR/VR) and fog computing (I've heard that one before). The progression goes from edge to fog to cloud, and into your brain at some point once we hit that singularity. One brilliant executive shared his insights into "Neumann and Neuromorphic" innovation to create intelligence that reminded me of Transhumanism.

I came away from SEMICON's opening presentations with a few original insights. I would post them on SemiWiki but I don't work in the sector. I think that when gross payroll grows faster than headcount at semiconductor enterprises funded as public/private partnerships, it shows the creation of high-income, value-added jobs. The semiconductor sector now uses more elements of the periodic table than ever, so materials sourcing will soon become a crucial "table stakes" factor. The entire tech sector needs to take supply chain security seriously, and that means not taking single sources in the developing world for granted, especially if those sources rely upon transportation links that will be at risk during geopolitical instability. Check out the South China Sea tensions for a glimpse of near-term supply chain insecurity.

The ees people gave us a look at their market, regulatory environment, and some business policies. I would like them to explain why they don't capitalize themselves as EES, but I don't run their part of the show. It's their world of batteries and I just live in it. There should be little concern about backsliding if one speaker is correct about state governments doing 80% of the policy work in renewable energy. I just wonder how they measure that impact, and whether the remaining 20% is crucial stuff like the DOE SunShot Initiative. There is no policy initiative imaginable that will force solar power into the baseload category, because it is physically impossible for the sun to shine at night. Policies favoring storage linked to solar and wind power do not change nature. Power grid management with distributed storage will require revisions to the standard installed capacity (ICAP) the ISOs calculate for their markets. Adding BIPV and and other new tech to generation reduces the ICAP demand-related charges, thus adding value to a property owner's business model.

I want to throw some more red meat buzzwords out there to show the ees people that I paid attention. Electric energy storage used for load leveling is "energy arbitrage," using time shifting to make stored energy available during higher demand periods. Its corollary is "peak shaving," encouraging reduced energy consumption during high-demand periods. California and New York are among the states pushing "distributed resource tariffs" that enable utilities to install more generating capacity on their customers' sites. Virtual power plants will aggregate these distributed generation resources into a cloud-based management model. Anyone making or selling distributed generation or storage solutions must know the NERC critical infrastructure protection (CIP) standards and FERC guidance for CIP implementation. The US Midwest's wind corridor is an underserved market for storage solutions and grid connectivity. Cogeneration (CHP) and trigeneration (CCHP) present a wide array of product choices that storage solutions vendors can adapt into sales pitches.

The ees finance and bankability sessions built on the above policy topics. Vendors who get on a project finance company's pre-approved list of trustworthy service providers have a big leg up in getting customer referrals. Refer to my blog articles on previous Intersolar conferences for PACE explanations, and know that PACE applies to both residential (RPACE) and commercial (CPACE) properties. Storage systems with a useful life less than the typical PACE payback period are probably not worth selling. The bottom line from banks authorizing loans and leases for energy products is a provable revenue stream; no stream means the project developer must seek equity investors rather than issuing debt. Energy storage is now considered a "front of meter" function requiring new metrics for assessing charges, compared to "behind the meter" generation's demand charges.

One dude from a leading semiconductor equipment supplier had a free e-book for those of us attending his talk. I didn't sign up for his e-book because I have way too much stuff to read through already. Early concern among SEMI manufacturers that Moore's Law would stop at one micron no longer applies. He shared a few platitudes on good management and organizational culture. The dude needs to go work at Uber where those factors are deficient. SEMI held their annual awards presentation afterwards and someone mentioned the Hybrid Memory Cube Consortium pushing the next big thing in DRAM design. I'll have more to say about that consortium if they have events offering free food.

The SEMICON keynotes tend to be slick sales pitches from major sponsors, but once in a while some worthy tidbits appear. Leading IoT and cloud providers have latched onto autonomous vehicles as their next big cash cow target because those cars generate continuous large data streams. Expect services and advertising focused on consumers sitting passively in self-driving cars for hours. I expect these cars to converge with the sharing economy, whose consumers are too poor to own their own cars. Most ads they will see will probably be for other sharing services, like grocery coupons. You heard it here first at Alfidi Capital.

I went back to the ees stage to see what tech advancements are maximizing ROI. Track the GTM US Energy Storage Monitor for the latest industry developments. I mentioned peak shaving above, and storage capacity determines its flexibility. The industry claims that storage manufacturing costs have fallen in recent years, similar to PV manufacturers' cost trajectories, as delivered units have risen. Utility tariff structures and time of use (TOU) policies determine use cases that demonstrate demand charge management that storage system vendors can offer. Most states allow net metering of solar but not storage, so using storage means time shifting, peak shaving, and load balancing to manage power costs. Residential HVAC activation and EV charging are primary drivers of daily household power use spikes. It is clear to me that distributed generation and storage will severely threaten the business models of utilities that do not rapidly move to adapt. Utilities that survive should evolve to finance, install, and manage residential generation and storage, just to capture part of those revenue streams.

I enjoyed attending the Intersolar Orange Button Software Launch, and not just because they had free coffee. The SunSpec Alliance Open Solar Data Exchange (SunSpec oSDX) sponsored the launch because it is part of DOE's Orange Button initiative for standardizing solar bankability data. Getting Alfidi Capital into this program is a bonanza for name recognition. I don't offer financing or provide any other client services to program participants. My interests include knowing which tools programmers must use to be compatible with Orange Button APIs.

The SEMICON West Bulls and Bears Industry Outlook was something I could not miss. I would be perfectly willing to present my own sector views at this forum someday. I just don't want other analysts stealing my work. Gartner and other research purveyors still forecast semiconductor sector growth. There's a widespread expectation that IoT will be part of that growth; you know, maybe these analysts have been stealing that insight from me since I've blogged it for years. I believe the IoT automotive apps driving chip demand are also enabling other value-adding services like fleet management and stolen vehicle recovery (tied to insurance coverage). The semiconductor content in AI is hard to predict, with analysts uncertain about higher CAGR forecasts, and they have no idea which processing architecture will win AI. Hey analysts, I'll do you a favor and point you in the direction of the Hybrid Memory Cube Consortium I mentioned above. Now that I've said it, I will fight any lazy analysts who try to steal it. Fighting begins at a time and place of my choosing.

The last major conference event for me was the Joint Forces for Solar 16th PV Briefing. I learned a ton of stuff at past events thank to heavy participation from industry association leaders and DOE subject matter experts. This year was disappointing due to their absence. The solar market's dynamics show tons of solar installed here in California, not including municipal utilities. I asked a question about how geospatial analysis tools would be good sales prospect generators for installers, especially when used together with Orange Button financing data. Whoever answered me said that utilities are indeed building such tools to show customers where they can install distributed generation assets. I thus contributed some massive genius to the briefing that day. One final insight I gleaned from a presenter is that good accountants specializing in solar policies and incentives can add value to business customers installing large energy assets through off-balance sheet financing.

I did prowl all of the expo floors but I did not have time to query enough exhibitors on their business pain points. I did score an armload of free reading material, a handful of free candy, and a brain dump of interactive tech experiences. I even met a local steampunk enthusiast working for one of the exhibitors. Those folks must be all over the tech sector. They go into hibernation when they're not at the Maker Faire or big hackathons.

Intersolar and SEMICON West are always winners for me. I also like ees, and I would like them even more if they adopt proper capitalization. I shall return next year to see if that happens.

The Limerick of Finance for 11/02/16

Broadcom has a plan for Brocade
Seeking data hardware it has made
The back end of networks
Where a merger adds perks
Have to see if buyer overpaid

The Haiku of Finance for 09/04/15

Optical circuit
Silicon with photonics
Some kind of bandgap

POET Technologies Has No Poetry

POET Technologies has been sitting on my radar screen for a few months. I had to let it percolate to figure out where it fits because it used to be known as Opel Technologies. Their main technology claim is that some integrated circuit with optics will extend Moore's Law. I am not convinced this is the path of least resistance for computing. All of the guru talks I have attended at many tech conferences attest to quantum computing as the next step. Anything that's not quantum can add marginal capabilities but will not be a quantum leap.

The company website's investor relations page talks a lot about several directors but little about management's background. I am not in the habit of giving managers the benefit of the doubt once their company migrates to manufacturing. POET's Yahoo Finance page shows the management team receiving very large compensation packages with no recent revenue.

Photonic integrated circuits (ICs) have been around for a while. Search the IEEE Xplore archive for the article "Optical Integrated Circuits: A Personal Perspective" for a discussion of the difficulties in moving the photonic Moore's Law curve. POET's tech uses gallium arsenide, but a simple Google search of "optical integrated circuits gallium arsenide" reveals articles dating from the 1980s on the promise of such technology. Basic descriptions of gallium arsenide (GaAs) indicate its value as a substrate material in ICs but it is not amenable to the same economies of scale that favor silicon. Light Science and Applications offers a selection of articles on photonic ICs, several of which describe competitors to GaAs tech.

You'd think that something with such a long development history would show some marketable results by now. I had to examine POET's unaudited financial statements and MDA for the six months ended June 30, 2015. They had over $15M in cash on hand with a burn rate of about $1M per month, so they should be around for at least another year. The tough pill to swallow for investors is the negative retained earnings of almost -$79M. All of that capital went to develop a 30-year old tech that has yet to match the performance of silicon in ICs. I did not see anything in the MDA describing a detailed strategy for generating revenue. Rearranging royalties and obtaining SBIR grants are no substitute for revenue.

I am hard-pressed to understand this company's rationale for existence. The IC market is broad but it is not at all clear how POET will capture any revenue once it irons out the kinks in its production process and has a viable chip to sell. I prefer not to bother with long-shots in circuits, especially when quantum computing offers so much more potential.

Full disclosure: No position in POET Technologies (tickers PTK.V and POETF) at this time.

Synopsis Of Intersolar North America And SEMICON West 2015

I attended Intersolar North America and SEMICON West once again.  These shows are shaping up to be my favorite mega conference every year and they delivered the goods in 2015.  Other meetings took me away from some of the symposia but I had the main events covered.

The Intersolar Opening Ceremony only had one politician this year.  The local politicos couldn't make it so a New York state legislator talked about the Empire State's energy programs.  No one can touch California, folks, so I don't know why these other states even try.  They may as well just throw in the towel.  I was shocked to hear one of the lead presenters state that multi-junction solar cells are now getting 46% conversion rates.  That is about three times the long-term historical sunlight conversion rate that PV panels typically yielded for decades.  Solar's levelized cost of electricity (LCOE) is also getting more competitive.  In case anyone is curious, EIA describes LCOE for 2015 and NREL provides an LCOE calculator.

Tesla Motors' CTO and co-founder tied the Gigafactory's Li-ion battery tech to the pending launch of Tesla Energy.  I believe cheap lithium producers will have a major advantage if materials costs truly have the storage sector concerned.  Tesla's full rollout targets both home storage for Tesla car owners and microgrid buildouts for demand clusters in emerging markets.  One big concern among Opening Ceremony attendees like CALSEIA is the continuance of pro-solar policies like net metering, the federal solar investment tax credit (ITC), and Renewable Portfolio Standards (RPS).  Absorbing all that urgency was enough to give me an appetite for the free food at the Opening Ceremony's reception.  I always get my fill of grilled turkey and vegetables.

SEMICON West held their opening press conference and analysts like yours truly are sure to be there.  I grabbed my coffee and listened to SEMI's market outlook.  Gartner and other sector analysts are lowering their revenue forecasts for the semiconductor industry.  I noted how a weaker euro and yen are reducing billings reported in US dollars.  SEMI is still forecasting decent growth in both material cycles and equipment.

The SEMICON keynote on sub-14nm manufacturing was pretty technical but I tried to follow it for investment insights.  Physics allows innovation to march on and fixing bugs always means lots of manual work.  I am not clear on the relationship between lower voltage and higher efficiency, especially if huge efficiency improvements are needed to get HPC capabilities into smaller form factors.  I am much more clear on the need for databases to communicate in the same language.

The session on EES storage and large-scale grid integration reminded me of something I probably forgot from a previous Intersolar, namely that batteries are less efficient in high-temperature climates.  Li-ion batteries have high efficiency and will charge for a large number of cycles, but they also have a higher cost per kWh than other storage technologies.  They also have a safety disadvantage of "thermal runaway" if overcharged or crushed.  The CAISO duck curve and NREL volatility chart show how storage adds to the capacity of PV systems.  Feel free to look those up yourselves, as I suspect their URLs will change.

I went over to SEMICON's Silicon Innovation Forum (SIF) investor panel to learn that the National Science Foundation's (NSF) Industrial Innovation and Partnerships (IIP) office has SBIR funds available for startups.  The investors had major takeaways for those of us who track these things.  Corporate VCs have discovered they must provide more capital to semicon startups that need cleanroom work or data development.  Huge capital requirements for new ventures will eventually deter startups from entering semicon.  VCs' recent focus on unicorns further deters interest in startups that can more reliably deliver smaller returns for strategic investors.  The corporate VCs would rather hit lots of singles and doubles than invest in one big successful home run.

GTM Research debuted their white paper on solar and the storage market.  I like conferences that give me free stuff to read.  Less than 0.1% of US solar assets have associated storage capacity, implying there's room for growth.  Okay, I've been hearing about storage's huge potential for growth for three years now.  It still hasn't grown.  I guess Tesla Energy has its work cut out.  Good luck selling storage with Tesla cars as a total package given Tesla's tiny share of the auto market.  I guess utility incentives will have to drive home storage adoption; EVs can't move the needle until they become much cheaper.  Combined savings in commercial costs over a storage product's lifetime are supposed to greatly exceed the initial investment outlay, but I wonder whether that factors in any periodic maintenance cost or insurance cost for the storage unit.  One big claim for storage is that it should add a revenue stream to a household by feeding excess energy back to the grid for sale.  I will review the sector's numbers to see how that works, and how storage adds value to a solar power purchase agreement (PPA).  I also would like to find out whether solar and storage growth curves differ by regions covered by different independent system operators (ISOs).

The US Commercial Service was on hand to talk trade promotion.  I have heard them talk before in Silicon Valley so I don't think I need to rehash their many services here.  I do expect Congress to eventually reauthorize the Ex-Im Bank, because a big plank of our foreign policy depends on trade finance tied to development in emerging markets.  Using "soft power" wisely means keeping US development commitments to Africa that will counter China's influence.  The US should probably merge its Trade and Development Agency with its International Trade Administration so businesses have one less block to check when planning foreign trade partnerships.  Kudos to the Obama Administration for using StopFakes to support American intellectual property.

One SEMICON keynote from Intel connected IoT to the next 50 years of Moore's Law.  You just have to love corporate sponsorship for a keynote.  I would do it too if I thought it would make me serious money.  Intel is betting that its new module's IoT applications will solve problems in four megatrends:  aging populations, carbon footprints in the environment, urbanization booms, and feeding the planet.  I would tell any semicon startup to study the standards of the Industrial Internet Consortium and the Open Interconnect Consortium to ensure their IoT solutions are compatible with emerging norms.

I missed the SEMICON "Bulls and Bears" panel due to a schedule conflict, which is unfortunate because other financial firms track the semicon sector more closely than me.  I will have to study the sector's capex, inventory, capacity utilization, supply chain, and technical challenges on my own.

The Joint Forces for Solar forum is always the highlight of Intersolar for me.  The New York state politician was at it again, making good points about his state's energy market.  I like the idea of a state Green Bank, and I wonder whether some of the state's models will work elsewhere.  The California PV market review was more relevant to my interests.  Rate differentials for high-end and low-end users will get more complex with the addition of a Super User Electricity (SUE) surcharge as a third rate tier.  Net metering will be uncapped and unlimited.  California's RPS goals don't include rooftop solar, which is just too darn bad.  The sector lobby needs to fix that and push for its inclusion.

The final SEMICON SIF keynote was all about transformational innovation and market readiness.  I literally did a "whoa" at the academic speaker dude's career history full of hundreds of patents and scientific articles.  I take geniuses very seriously.  He reminded his audience that there are no shortcuts to building a company and each day brings a "dragon" threat to be slain.  I concur with his endorsement of a "sustainable innovation ecosystem" that successfully engage academics in commercializing their university research.  Academics deserve better royalties and recognition when they do something entrepreneurial.  The decline in US government research spending and the erosion of the US manufacturing base are not coincidences.  I agree with our SIF speaker that US industry has a hard time tapping the leadership skills of government and military leaders if the public sector is isolated from industry.  Well, duh, really?  The finance sector sure kept my military expertise isolated by refusing to hire me and treating me badly.  Anyway, our expert said he expects the electronics industry to consolidate as the end of Moore's Law approaches in a decade, but the coming quantum and optics tech will change the sector's economics all over again.  He also expects entrepreneurs to lead this newly fragmented next-gen industry, with government and university research playing a critical role.  I like that he ended with those optimistic predictions.  I also liked the reception afterwards, with plenty of shrimp kabobs and cheeseburger sliders.

Intersolar and SEMICON West always blow my mind.  I came away this year with plenty of data sources to use when mentoring startups.  I even noted another incubator, the Silicon Catalyst, whose startups will likely need my wisdom.  Startup founders who read the Alfidi Capital Blog have a natural advantage when building businesses in solar energy and semiconductors.  The genius-level knowledge here literally flies off the page.

Pain Points in the Semiconductor and Solar Sectors

I mentioned in my report from Intersolar / SEMICON 2014 that the semiconductor and solar sectors have some unmapped pain points.  I took it upon myself to identify those pain points in brief CustDev interviews with vendors on the expo floors.  I was not there to sell them anything, so I had more credibility than a vendor.  That's how I obtained the insights I'll share below.

I'll start with the semiconductor ecosystem.  The SEMICON exhibitors were all kinds of trinket makers that large semiconductor manufacturers would find in their supply chains.  The most frequently mentioned pain point for them was production cost.  Equipment makers don't always know what drives the cost of producing a complex product, which in turn determines price.  They don't even know if the problems reside in their designs or their supply chains, even after analysis.  Longer lead times add costs and customers don't always forecast their needs very well.

Other pain points in semiconductors seem to be hostage to production costs.  Addressing marketing channels is complicated by tight resources (making it difficult to address a changing market segment) and the difficulty of getting product release information into the hands of the appropriate technical audiences with purchasing authority.  One frequently mentioned pain point was the gripe that human resources were a recurring irritant.  Hiring the right people was always difficult and many of the company leaders I interviewed said "people cause problems."  They never said what kind of problems; I suspect those problems are really from lack of knowledge about how to solve marketing and production problems.

I have concluded that the relationship between production costs and marketing costs is a strong source of pain for the upstream parts of the semiconductor sector.  The mismatch between market knowledge and the ability to adjust capacity is costing the sector money.  This is an underexplored area that is fertile ground for solutions in codifying manufacturing knowledge, material costs, and business process maps.  I believe that startups can deliver disruption in this market by deploying enterprise Big Data analytics solutions addressing those knowledge gaps.  There is money to be made in solving manufacturing problems.

I'll continue with the solar sector.  Three very different pain points emerged under the broad topics of regulation, project knowledge, and financing.  Regulation poses unexpected problems for installers unfamiliar with local fire codes or national safety regulations.  This is particularly costly for inverters that must manage fault detections and shutdowns.

Project knowledge is a challenge for solar installers.  Project developers often ignore monitoring until the end of a sales cycle, and this is not weighted in system design until after funds are spent.  Each solar project is unique to a specific architecture and geography.  Developers stumble when they ignore the costs of grid access where transmission lines are inadequate.  I had a hard time believing some solar component manufacturers have difficulty sourcing basic materials like steel and silicon, so perhaps I spoke to at least one operator who was incompetent.

One very knowledgeable solar person made my day by addressing the cost of a typical installation.  Soft costs are a big factor in residential PV.  The expected lifetime of durable modules in commercial PV are still too much of an unknown.  These random costs make the perfect segue from project knowledge to financing, because uncertainty in estimating project cost means financing must be flexible.  The ease of obtaining customer financing would sell more solar PV systems.

I have concluded that the challenges facing the solar sector are more diverse than those facing the semiconductor sector.  Entrepreneurs can't solve the regulatory pain point, but utilities may be an untapped source of support in pushing reform.  There may be a market for apps that help installers navigate local, state, and national regulatory mazes.  DOE has made strides in reducing soft costs and making project planning more transparent.  Solving the project knowledge pain point is an open field for startups developing Hadoop-based knowledge sharing architectures.  Finally, the financing pain point has a plethora of solutions at the federal and state level but consumers may not know about all of the tax incentives they can use.  Yield cos and tax equity are financial solutions for commercial projects but offer little relief for single-unit residential installation.  Once again, apps may help the real estate sector arrange financing for home improvements that incorporate solar, wind, and storage installations as home improvements.

I only had time to hit up a few dozen vendors so my impressions are not as robust as what a startup would need for an actionable marketing plan.  Oh yeah, the funniest part of my CustDev exploration was when I asked one SEMICON guy to name his biggest pain point.  He rolled his eyes and said, "People like YOU!"  I knew when to back off but I was not deterred from gathering anecdotes.  I make it my mission to understand how to make money from disruption.  Someday a startup will catch my eye because it can solve the problems I identified here in bold type.  I'll be ready to commit my knowledge as sweat equity.