Having worked in both semiconductor and internet companies for a while, I found there was a strikingly similar trend in both industries. In the early days of the semiconductor industry, every single electric component was designed using custom logic and many companies had assembly lines to fabricate CMOS chips by themselves. As the size of CMOS transistors kept shrinking and the complexity of integrated circuits increased, the cost and expertise required in fabrication dramatically increased and many companies had to resort to other large chip manufacturers such as TSMC, Samsung etc. for chip fabrication. All they needed to do was designing the circuits using a high-level hardware description language such as Verilog and using CAD software tools to synthesize the Verilog code into a binary file format called GDSII which is an open file format that is accepted by major chip manufacturers (just like JSON file to most internet companies today). Based on these files, the manufacturers could then fabricate CMOS chips that implement the desired circuit functionality. Those companies that only design but do not fabricate chips themselves are often called fabless design house.
Similarly, in the early days many internet companies built data centers by themselves. Some startups could even host their servers in private garages (check out the HBO show Silicon Valley if you’d like). Later on as the business grow, more servers would be required to support the scaling of the service. Maintaining the servers require a lot of expertise and man hours therefore cost ineffective and not efficient for scaling the business. As cloud computing became more approachable and affordable in the recent years, many small to mid-size companies started to move their data centers to the cloud and it will become less likely to see startups hosting their servers in some private garages.
Today, there are only two major chip manufacturers, namely TSMC and Samsung, in the semiconductor industry. If the similar trend also holds in the internet software industry, it will be interesting to see, which (likely be less than 4?) cloud providers will still be.in the market in the next 5 years.
