Changing Landscape Requires New Business Models - 7/15/2008 10:00:00 AM - Semiconductor International

September 1, 2008 at 3:52 pm | In Forecast | No Comments
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The semiconductor industry has reached a crucial turning point, and key players are reassessing the way they do business. Jim Clifford, senior vice president and general manager of Qualcomm CDMA Technologies (San Diego), discussed the need for the industry to adapt and how best to meet the needs of a changing market during a keynote address at the SEMICON West 2008 SEMI/Gartner Market Symposium yesterday.
Craig Addison, Senior Editor, Communications, SEMI, San Jose — Semiconductor International, 7/15/2008 10:00:00 AM
The semiconductor industry has reached a crucial turning point, and key players are reassessing the way they do business. Jim Clifford, senior vice president and general manager of Qualcomm CDMA Technologies (San Diego), discussed the need for the industry to adapt and how best to meet the needs of a changing market during a keynote address at the SEMICON West 2008 SEMI/Gartner Market Symposium yesterday
Jim Clifford, Senior Vice President and General Manager, Qualcomm CDMA Technologies
Jim Clifford, Senior Vice President and General Manager, Qualcomm CDMA Technologies

Clifford pointed out that technology drivers in the semiconductor industry have changed. In the past, “If you wanted to develop a new technology, DRAM was the way to shake out the bugs. What’s becoming even more important in driving technology is communications and consumer electronics,” he said.
One of the hottest end-product markets is mobile communications. The global handset market has reached about 1.2 billion units and is expected to grow to 1.6 billion by 2012, according to data cited by Clifford. Entry-level phones — those selling for ~$20 — will grow at the fastest rate, accounting for about half the handset total by 2012. “It is a huge market, and we need to service that market,” Clifford said.
At the higher end of the market are smart phones, which cost ~$300 and will account for about 400 million units by 2012. In the middle are the “enhanced phones” in the $100 price range.
The entry-level phone market is being driven by demand in China and India, and the market will continue to grow as those consumers move up the ladder to more feature rich phones, according to Clifford. He pointed out that there are currently about 800 million people in rural China who are not serviced by mobile phones, and each month 5-7 million phone subscribers are added in China.
India is a similar growth story. In that market, the price of handsets has come down from $99 to around $22, giving millions of new people access to information via the Internet. “They know what’s going on in the world. This is a societal transformation,” Clifford said.
Going forward, global growth prospects for handsets are still strong. By 2020, there will be 9 billion people on the planet, “so it’s a huge market for us,” he said.
Another industry trend identified by Clifford was the shift by IDMs to a “fab-lite” manufacturing strategy to reduce capital investments and lower manufacturing costs. In Qualcomm’s case, the company has adopted what it calls the “integrated fabless manufacturing” model. Clifford said this provides significant benefits for a wireless chip supplier. It allows design houses to focus on technology leadership in end-user markets with better use of design R&D; it leverages collaboration of supply-chain partners such as the designers, EDA companies, foundries, and packaging and test companies; and it enables all parties to focus on and invest in core strengths.

Clifford discussed the erosion of average selling prices (ASPs) in the industry, calling it “a big deal for us.” The challenge for companies like Qualcomm is to keep adding more features and more functionality to avoid ASPs eroding, according to Clifford.
On the technology front, Clifford discussed the push towards “More than Moore.” “We are doing a lot of development in 3-D packaging because we think its something we will need in the near future,” he said. A significant challenge will be to achieve lower power consumption at lower cost. Clifford noted that in new electronic products today, the low-power processes are typically introduced before the high-power performance versions are available, whereas in the past it was the other way around.
To deal with the technology challenges, Qualcomm has joined with IMEC in Europe to develop new packaging technology to drive the infrastructure required to enable More than Moore. Clifford said the solution to dealing with compressed cycle times is to collaborate closer with supply chain partners. “We are moving much closer to the foundries, much closer to the SATs,” he said.
Looking ahead, Clifford said he was excited about what he called the “holy grail” of semiconductor packaging; that is, being able to solve the issues in thinning wafers down to 25 µm and attaching them to one another in multiple stacks. This opens up the opportunity to approach customers about products that are not even envisioned today.
Prior to Clifford’s presentation, Dean Freeman, research vice president of Gartner Inc. (Stamford, Conn.), provided introductory remarks to open the symposium. He noted that 2008 will be the fourth worst downturn since 1982, which is when Gartner started collecting data on the semiconductor market. “Everyone is facing challenges…business models will have to be revised to deal with this going forward,” he said.

Freeman said all players will have to figure out how to do more with less. “The easy scaling has ended, so we have a lot of R&D to do to continue to stay on the Moore’s Law curve.”

Applied reports Q3 sales drop, reflects difficult semi industry environment - 8/13/2008 - Electronic News

September 1, 2008 at 3:48 pm | In Forecast, Manufacturing | No Comments
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Applied Materials third quarter financial results can be characterized as optimizing our company’s performance in a challenging economic environment with a semiconductor equipment market being particularly tough. During, the quarter we saw continued softening of world economies as oil prices spiked, credit tightened and then the US housing values fell further and unemployment increased,” commented Applied president and CEO Mike Splinter.
By Ann Steffora Mutschler, Senior Editor — Electronic News, 8/13/2008

Reflecting a difficult semiconductor industry environment, Santa Clara, Calif-based semiconductor manufacturing equipment leader Applied Materials Inc reported Tuesday afternoon that net sales for its Q3 ended July 27 were $1.85 billion, down 28% from $2.56 billion in Q3 2007, and down 14% sequentially from $2.15 billion in Q2.

Applied’s Q3 gross margin was 40.2%, down from 47.5% in Q3 2007, and down from 45% in Q2. Meanwhile, Q3 net income was $165 million, or 12 cents per share, down from net income of $474 million, or 34 cents per share, for Q3 2007, and downfrom net income of $303 million, or 22 cents per share, for Q2.

The capital equipment giant brought in $2.03 billion in new orders for Q3, which was an 11% decrease from Q3 2007 new orders of $2.28 billion, and was 16% lower than Q2 orders of $2.41 billion.Regional distribution of Q3 new orders was: Japan, 21%; North America, 19%; Korea, 17%; Southeast Asia and China, 17%; Europe, 16%; and Taiwan, 10%. Backlog at the end of Q3 was $4.74 billion, compared to $4.59 billion at the end of Q2.

“Applied Materials delivered financial and operational performance that was in line with our quarter forecast during a difficult semiconductor industry environment. While our silicon business was down, revenues increased in our display, service and solar businesses. We made significant progress in our solar division during the quarter, substantially increasing the number of crystalline silicon systems shipped and enabling start-up production on the first four SunFab Thin Film lines at customer sites. We are focused on operational execution, and we are taking advantage of opportunities to expand our leadership with next-generation innovations in silicon, display and solar,” commented Mike Splinter, president and CEO of Applied, in a statement.
Applied reiterated that effective in Q1, the company changed its management reporting system for services, with all service results reported in the Applied Global Services segment. Fiscal 2007 segment information has been reclassified to conform to the fiscal 2008 presentation.
During a conference call with financial analysts, Splinter said further, “Applied Materials third quarter financial results can be characterized as optimizing our company’s performance in a challenging economic environment with a semiconductor equipment market being particularly tough. During, the quarter we saw, continued softening of world economies as oil prices spiked, credit tightened and then the US housing values fell further and unemployment increased. It’s no surprise that US consumer confidence is at its lowest level in more than a decade.”
“Over the past few months forecast for 2008 wafer fab equipment spending moved in line with our view of down 25% to 35% year-over-year as memory prices weaken and investments were delayed. While, there were some signs of strength in the PC market that showed double-digit unit growth is not translated to investment broadly by our customer base. In this light our team executed every opportunity for orders and revenue in each of our businesses to achieve our results. The Silicon Systems Group remains focused on financial and operating results and the group performed well in the most challenging quarter since Q4 2003,” he noted.

In terms of its energy and environmental solutions division, Applied’s revenues doubled and orders were up 25% in Q3. Splinter explained, “Our focus in crystal and silicon over the past several months has been the bill production capability to meet the rapid expansion of product demand in our precision wafering systems and Baccini’s cell systems business units. Delivery performance is improving and we expect to be current to backlog by October.”

“Products from PWS and BCS are market leaders and we expect to expand operations and move along the road map to reduce costs for solar cell production. A key component in reducing these costs is the use of fewer grams of silicon for each watt of output produced and Applied Materials is leading the industry in that challenge. In fact, our entire crystal and silicon product portfolio is now capable of producing wafers as thin as an average sheet of paper, only a 120 microns thick. That’s 60% thinner in today’s industry standard wafer,” Splinter continued.

The company is pleased with the progress in Q3 in the SunFab business and said it is in the investment cycle in the business with focus on the successful start up of customer factories, he explained.

“We’re simultaneously starting up multiple SunFab lines while integrating an end to end suit of newly developed process tools. The scale and operational complexity of these lines presents a tremendous challenge, but this is just the kind of challenge that Applied Materials excels in and our teams have performed exceptionally well by drawing on the overall resources throughout the company and from among our partners to support these new factories. We now have four customers that are producing solar panels. If you saw one of these panels at inter solar in Europe or in California, you understand how overall cost efficient our 5.7 square meter form factor is for large scale solar applications. We expect to get our first SunFab signed off this quarter with more to follow in the first part of fiscal ’09,” Splinter said.

Further, Applied said its SunFab technology platform made dramatic progress in the quarter as its tandem junction process demonstrated production feasibility. “We were pleased to learn that the European patent office just issued a provisional opinion finding invalid to key claims of a patent related to tandem junction solar technology that is the basis of a law suit recently filed against one of our solar customers,” he noted.
We are watching bid growth, pricing and inventory indicators in the minimal area to help judge when we will see the next wave of investment in either DRAM or Flash. Our expectations are for the industry to start adding additional NAN capacity for solid state drive applications in 2009 and beyond.

Growth rates for 65-nanometer foundry capacity have been slower than expected due to design complexities. Foundries are now seeing growth in 65-nanometer revenues as the ramp gained strength and utilization exceeds 90%.

In 2008, we see capital and intensity down to 15% to 16% which is below its typical range of 18% to 22%. This represents a near term correction from memory overspending, longer term we see capital intensity going back to approximately 20% over the next 1 to 2 years.

After reaching historic levels in the first two quarters our orders for display products was strong at $374 million, but down 25% over Q2, we believe this represents the end of the first phase of the GEN8.5 order cycle and we should expect orders in display to be down significantly for the next few quarters until the GEN10 technology and capacity cycle begins. Meanwhile, we see the major capital projects moving ahead, the top panel makers are expanding capacity to meet demand for large TVs over the next few years despite signs of the TV market softening in a short term. We expect revenue to continue at a high level for the next few quarters.

In our service business, we see much less volatility than experience in the capital equipment businesses they support. AGS has weathered the downturn in silicon and shown solid revenue and financial performance. Our service group has developed a strong proposition for expanding in Asia, signing five major contracts for silicon service and three for display in the period. Applied SunFab performance service program has strong momentum at leading solar manufacturers in Europe and in Asia. We have now exceeded a $100 million in the service contracts for both single and tandem junctions SunFab lines.

In order to capitalize on growth opportunities, we are making significant investments in infrastructure to enable the company to be more cost effective and efficient and expanding capacity to meet customers’ needs. During the quarter we announced our new Asian operations center in Singapore that will primarily focus on SSG products. The expansion of our Thai None manufacturing center focused on display and solar products and we continue to invest in developing our solar reliability lab and other capabilities in Xian, China.

Overall, Applied Materials is executing to our strategy in today’s difficult economic environment focused on our core businesses and silicon and service making significant R&D investments in new products and technology for the next node of integrated circuits. The display team is executing at the top of revenue cycle and expanding their product lines. Solar organization is rapidly developing capability on the two fronts of crystalline and thin film silicon products and at the same time we are investing in the right infrastructure for the future.

Looking ahead to Q4, George S. Davis, senior VP and CFO of Applied noted that some of the key market issues impacting the outlook include semiconductor capital equipment demand expected to remain flat and any revenue increase over the prior quarter appears to be modest, with orders expected to strengthen somewhat based on customer forecasts.

Also, Applied believes flat panel display shipment demand will remain strong as customers add capacity although the order cycle but that is expected to decline sharply in Q4. “We expect further progress integrating our crystalline silicon solar businesses which will bring revenue rates closer in line with shipment rates,” Davis said.

Applied also expects services markets to be relatively flat with movement around last quarter’s level being a function of demand for spares and used equipment from our semiconductor customers.

That said, Davis said Applied expects Q4 orders to be up in the range of 5 to 10% overall with increased DES and silicon orders partially offset by a sharp decline of about 75% in display. “We expect revenue to be up in the range of 2% to 10% overall driven by revenue from crystalline silicon and thin film solar products. As we previously forecasted, we expect to recognize our first SunFab revenue in Q4,” he said.

Q4 EPS is expected to be in the range of 12 to 15 cents per share, up in line with revenue overall. Operating margin will continue to be impacted somewhat by investment in the solar build out and investment in SSG R&D to position its silicon products during the downturn. Finally, Davis said the company believes there will be substantial upside in earnings over time as silicon recovers and increased profitability happens in solar.

Following the results, C.J. Muse, semiconductor equipment/display technologies analyst at Lehman Brothers Equity Research noted that Applied’s order bottom call combined with the uplift in solar is likely a positive catalyst for shares, but said he has reservations about true earnings power of solar and with shares trading more than 17x the firm’s CY09 EPS estimate of $1.05, and therefore was hard pressed to be more aggressive.

Muse added that while the call for order bottom combined with uplift in solar and a relatively solid order outlook across the board in all segments likely a positive catalyst for shares near term, however, his reservations about true earnings power of solar are still not addressed, and, are most likely a 2H09 story. Muse reiterated his 2-Equal Weight rating, meaning that the stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon, with a $20 price target.

Sitronics Plans 300 mm Fab at Zelenograd

September 1, 2008 at 3:45 pm | In Manufacturing | No Comments
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Sitronics Plans 300 mm Fab at Zelenograd

David Lammers, News Editor — Semiconductor International, 8/27/2008 9:58:00 AM

Sitronics Inc. (Moscow) will receive more than a billion dollars from a Russian governmental investment fund to build a 300 mm wafer fab at Zelenograd, near Moscow, according to a government ruling signed last week by Prime Minister Vladimir Putin.

Sitronics reportedly will build a 300 mm fab near Moscow, using licensed 65 nm and 45 nm technology.

Sitronics spokeswoman Irina Lanina told the Russian business daily Vedomosti that in addition to the competition for a process technology provider, a bidding process will be established for the equipment and fab construction vendors.

Sitronics reportedly will build a 300 mm fab near Moscow, using licensed 65 nm and 45 nm technology.

Sitronics, which operates telecom and microelectronics production facilities in Russia and other former members of the Soviet Union, will invest a total of 31.5 billion rubles (~US$1.28B) in Sitronics Nanotechnology over the next few years, the reports said. The total project will cost 58.427 billion rubles (US$2.371B) of which the government investment fund will provide 26.923 billion rubles (US$1.092B)

Sitronics President Sergei Aslanyan told Russian reporters that the new fab will use licensed 65 nm and 45 nm technology, chosen from among IBM Corp. (Armonk, N.Y.), Intel Corp. (Santa Clara, Calif.), and STMicroelectronics (Geneva). The 65 nm technology will be used to make ICs for digital televisions and global positioning systems, he said.

Sitronics has an existing licensing arrangement with STMicroelectronics for 0.18 µm technology, which Sitronics has used since 2007 to make chips for passports, cellphone SIM cards, transportation debit cards, and RFID tags. The company will move to 130 nm technology this year, and plans to begin making 90 nm chips in 2009, processing ~10,000 200 mm wafers per month, the reports said.

With a total staff of >10,000, Sitronics produces telecom equipment and software, ICs and other components, and consumer electronics. Sitronics Microelectronics operates production fabs in the Ukraine and at Zelenograd.

Profitless Prosperity

September 1, 2008 at 3:44 pm | In Forecast | No Comments
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9/1/2008 - Semiconductor International

The semiconductor industry may be heading into an “era of profitless prosperity,” according to Stephen Newberry, president and CEO of Lam Research Corp. (Fremont, Calif.), in a recent SEMI Industry Strategy Symposium presentation.

Tom Mariano, Vice President, Industrial Equipment Practice, Foliage, Burlington, Mass., www.foliage.com — Semiconductor International, 9/1/2008

The semiconductor industry may be heading into an “era of profitless prosperity,” according to Stephen Newberry, president and CEO of Lam Research Corp. (Fremont, Calif.), in a recent SEMI Industry Strategy Symposium presentation. Since 2003, the price per bit/function has been declining faster than the cost per bit/function, creating a situation of widespread profit erosion in the industry. This would seem to be an untenable market situation that is bound to correct itself over time.

To the equipment companies this means a tangible reduction in the total available market. Lack of profits in the industry puts downward pressure on capex by the chip companies, which results in a market size decrease for equipment and, of course, increased competition among equipment suppliers. In fact, Gartner Inc. (Stamford, Conn.) is estimating a 19.8% reduction in capex for 2008. Equipment suppliers will need to cut costs because of the shrinking market while still continuing to get new, differentiated products to market to compete. Essentially, they will need to do more with fewer R&D dollars. But isn’t doing more with less exactly what the equipment companies have been doing for the past five years?

We believe that there are as-yet unexploited areas of R&D efficiency to take advantage of. Here are several areas of untapped potential:

  • Automated testing — Testing by equipment suppliers tends to be a very manual process. This applies to all phases in the product lifecycle. The main benefit of automating the testing at these various stages is not, as many would think, to reap the savings of the labor associated with the testing. Rather, the main benefit of automated testing is finding problems sooner in the development process. It is commonly understood that the cost to fix a problem in the field is on the order of 10–100× more expensive than fixing it earlier in the development process. In many cases, the savings that result from the implementation of an automated test initiative dwarf the initial upfront investment, resulting in a much more productive use of R&D funds.
  • Agile development methods — Most equipment companies have adopted some form of a phase-gate product development process. This lock-step process strives for close coordination between functional areas and controlled management checkpoints to tame the product development process. Phase-gate development processes offer high levels of predictability and control, but they are also fairly rigid and can be very inefficient and slow. Borrowing from lean manufacturing concepts, the software development world has been embracing agile development methods that apply an iterative and more flexible approach and are achieving some success. Momentum is building for the adoption of lean methods for mechanical, electrical and system design as well. Breaking the mold of the phase-gate process and allowing more flexibility with lean/agile approaches may offer significant opportunities to improve R&D efficiency.
  • Product line architectures (PLAs) — With the promise of PLAs comes the promise of rapid new product development. Consolidated PLAs mean that the underlying structure and technologies stay the same from product to product, and only the higher level product “personality” needs to change. PLA is the embodiment of doing more with less. Unfortunately, the reality of our industry is that the vast majority of equipment products were designed without consideration of a PLA. In most cases, the architecture that acts as the foundation of the product is too specific to the product and too intertwined with the rest of the system. Creating a new product all too often means major rework of the architecture. Investment in implementation of PLAs in the early stages of a product development effort can pay huge dividends down the line, especially in the current economic environment.
  • Product lifecycle management (PLM) — PLM systems provide the tools and processes for control, communication and coordination of all product-related information and tasks in the organization. The potential to streamline the product development process and reduce cycle time and efficiency is substantial. But, few senior executives seem to understand the substantial investment in time, management focus and cost required for proper implementation and rollout of a PLM system. Perhaps the most misunderstood aspect is the major culture change needed for the organization to embrace the system. For companies that can effectively deploy and leverage a PLM system, substantial efficiencies across the organization can be achieved.

These areas of untapped potential represent significant opportunities for improved R&D efficiency. Of course, not every one of these is appropriate for every company. But in their own right, they are all certainly worth some consideration. Now, while the semiconductor industry faces an era of profitless prosperity, what’s an equipment company to do? Answer: Even more with even less by taking advantage of ways to maximize R&D dollars that make the most sense for their company. For the rest, there is always the solar industry.

Semiconductor equipment sales to fall 20% in 2008, SEMI reports

July 17, 2008 at 8:55 am | In Forecast | No Comments
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7/14/2008 - Electronic News
While this drop follows 6% market growth in 2007, SEMI believes the semiconductor manufacturing equipment industry will experience a rebound with annual growth of 13% in 2009, and 6% in 2010. By Ann Steffora Mutschler, Senior Editor — Electronic News, 7/14/2008

SAN FRANCISCO–Semiconductor Equipment and Materials International (SEMI) President and CEO Stanley T Myers today reported at the Semicon West trade show here that the industry association expects 2008 semiconductor manufacturing equipment sales will fall approximately 20% this year to $34.12 billion.

While this drop follows 6% market growth in 2007, SEMI believes the semiconductor manufacturing equipment industry will experience a rebound with annual growth of 13% in 2009, and 6% in 2010.

“We began to see equipment spending declines during the second half of 2007, driven by lower spending in the memory sector and a less than favorable device pricing environment. However, expectations for 2009 are leaning toward a solid industry recovery and subsequent growth in the low double digits,” Myers (pictured) commented in a statement.

Wafer processing equipment, which is the largest product segment by dollar value, is expected to contract 21% this year to $25.4 billion, while the market for assembly and packaging equipment will decline by 14% to $2.44 billion. At the same time, SEMI expects the market for semiconductor test equipment to decline by 20% to $4.04 billion this year.

On a geographic basis, SEMI said growth is expected to be negative in all regions, except China, where equipment sales are projected to increase 1% over 2007, with the new equipment market in China expected to surpass both the European and Rest of the World markets this year.

Meanwhile, SEMI predicts the Japanese market will reclaim the number one spot from Taiwan, thanks to significant capital expenditure cutbacks in Taiwan this year. According to SEMI’s data, Taiwan is expected to fall back to the number two spot, followed by South Korea at number three. The North American market is expected to shrink by 13%, resulting in the fourth largest market for new semiconductor manufacturing equipment, SEMI concluded.

Intel’s Gargini: Semi equipment makers overestimating cost of moving to 450-mm wafers

July 16, 2008 at 8:56 am | In Manufacturing | No Comments
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6/13/2008 - Electronic News

The move to the 450-mm wafer size has garnered an increasing amount of interest in the semiconductor manufacturing industry as many suppliers have pushed back at making the shift, arguing that there is still much to be gained in terms of efficiency from the 300-mm wafer size, as well as high development costs.

By Ann Steffora Mutschler, Senior Editor — Electronic News, 6/13/2008

SAN FRANCISCO — During a Semiconductor Industry Association (SIA) roundtable on the future of Moore’s Law held here Thursday, Dr. Paolo Gargini, Intel fellow and director of technology strategy, said with regard to the continuing dialog on the move to the 450-mm wafer size, “From a technical point of view, this is not really very difficult, to be honest.”

“We’ve gone through several of these transitions and actually if you look at the situation nowadays, 90% of the steps are one wafer at a time, so the difficulty in the past was when you had to do diffusion on 100 wafers, and getting the wafers into the furnace was extremely complicated,” Gargini (pictured left) commented.

Indeed, this issue has garnered an increasing amount of interest in the semiconductor manufacturing industry as many suppliers have pushed back at making the shift, arguing that there is still much to be gained in terms of efficiency from the 300-mm wafer size. In January, industry analysts predicted the shift to 450-mm wafers would likely happen in 2025. However, in May, industry giants Intel, TSMC and Samsung said they had reached agreement that the industry needs to start working together to transition to the 450-mm wafer size, with the intention is to target 2012 to start a 450-mm pilot line.
Still, Gargini asserted, “If you have a chamber this big and make it bigger, and you put a bigger wafer in, you do some adjustments, but it is as simple as that. If you look also at the complexity of the equipment, it by in large relates – and I’m oversimplifying — to more steel and more massive structures, but it’s not extremely complicated from a technical point of view.

“It comes every eight, nine, 10 years and it is somewhat disruptive because everybody is used to doing two year improvement on equipment. So this appears like a destruction of this process, and you cannot do it by using a single supplier – you have to do it with the whole industry. In that case, it becomes more complicated. In fact, normally it takes four or five years of discussion. If I go back to 300-mm, we began discussing around 1993. By 1996 we got organized, by 1998 we had the right prototypes, and by 2001 it went into manufacturing. So we’ve already spent the down payment — the first two or three years of argument — which is always the same: The suppliers don’t want to do it, and we say that it’s good for you in the long run,” he continued.

Gargini noted that now as Intel and other industry players examine the complexity on each piece of fab equipment, much of the work that was done for the 300-mm wafer node can be utilized, citing fab automation as one example. “We already decided to reuse all the automation and the automation companies have not expressed too many concerns,” he said, and added that the public position and the private position of the equipment makers are not always the same. He said progress is actually being made.

In fact, last November, Tokyo-based Nikko Materials Co. Ltd. developed a 450-mm polycrystalline silicon wafer aimed at handling and mechanical testing, according to Gartner Dataquest

What is the cost comprised of?

“The early transitions were always stimulated by the suppliers because at that time, you used to have a wet bench, you make it a little bigger, you make the wafers a little bigger — it wasn’t very challenging. Only when we got to around the 6-inch wafer size did it become more complicated and at that point, Intel and IBM made an attempt to drive this convergence but it became clear that you can not drive in a vacuum. So 300-mm was a really good example of how to do this,” Gargini explained.

“The complexity came by doing two things at the same time: changing the technology node and changing the wafer size. By compounding this, then you multiply the complexity. But like what we experienced with the 300-mm generation, we established the process on 200-mm then we began – slower than the suppliers would have liked – the transition to 300-mm to make sure the processes were compatible,” he continued.

With costs estimated between less than $10 billion in a best case scenario to more than $1 trillion in a worst case scenario, according to Dan Hutcheson, president of VLSI Research, the topic is understandably a touchy one for many industry players.

“My opinion is that the compatibility between 300- and 450-mm will be even higher because everything now is down to a single wafer at a time that makes the scalability a much easier problem. Many people have memory of 10 years ago and that’s why this process happens only so often. You have to bridge 10 years of lack of dialog. … In my opinion, [the semiconductor equipment suppliers] are way overestimating the cost, Gargini concluded.

Lucas van Grinsven, director of corporate communications at Veldhoven, the Netherlands-based lithography leader ASML Holding NV, disagrees that the transition to the 450-mm wafer size is relatively easy. “I know quite a few people who would disagree,” he said in a one-on-one interview with Electronic News. “Officially, we haven’t made exact calculations … but it is a significant investment on behalf of the equipment makers. There is no doubt. I would disagree with Intel if they say it is a relatively simple transition because it is not. It’s a very complicated transition as was the transition from 200- to 300-mm.”

Further, he said, “Is it a demanding transition and one that will require a lot of attention from the equipment industry and ASML in particular? Yes. What is our position? If the market really says we want to move to 450-mm, we’ll move with them. So far, its not entirely clear what the position of the entire market is. … It will cost a lot of money. If the device makers are serious about this transition, they have to be committed to help fund the R&D that will have to be done.”

In terms of whether ASML thinks the 2012 pilot line date is feasible, van Grinsven did not say directly but commented, “We’ve got a lot of stuff on our plate at the moment, so we’re really busy already. We’ll have to see.”

Not to minimize the task, he concluded, “Obviously there is an efficiency gain to be had with the move from 300- to 450-mm and part of the industry discussion is about how much that gain will be. If you still have to expose every field, is that gain going to be 30% for lithography? Probably not. The gain will be elsewhere in the fab. Fundamentally, we believe the biggest gains are going to be had in the shrink, basically in continuing Moore’s Law. We’ve got an extended roadmap which will lead to much bigger efficiencies than 30% maximum for lithography.”

Semiconductor sales may escape harsh economy’s impact

July 15, 2008 at 3:28 pm | In Forecast | No Comments
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Gartner says - 7/14/2008 - Electronic News

Semiconductor sales may escape harsh economy’s impact, Gartner says

While remaining cautious, Gartner notes “relatively robust” semiconductor sales for the first half of the year and predicts continued sales growth for the second half. By Suzanne Deffree, Managing Editor, News — Electronic News, 7/14/2008

Gartner Inc’s optimism toward the semiconductor market continues to grow, as the market research company today said the industry will record Q2 sales growth.

Gartner in June predicted flat growth for the quarter and at the time said that even flat results would be an encouraging sign for the semiconductor market.

However, the company now expects Q2 sales to reach about $65 billion, which is sequential growth of 2% and year-over-year growth of 8%. Gartner noted numbers from the World Semiconductor Trade Statistics (WSTS) association that pegged May semiconductor sales at $20.5 billion, which was higher than Gartner’s expectation of $19.8 billion. (See WSTS chart below.) The market research company since April has put much stress on Q2 as the quarter to watch when it comes to the year’s growth.

According to Gartner data, Q1 sales were $63.5 billion, 4% higher than Q1 2007. For the first half of 2008, Gartner said it expects sales to total about $128 billion compared with $121 billion for the first half of 2007.

“Global macroeconomic conditions are continuing to deteriorate, especially in developed economies (although there are early signs of a slowing in growth in emerging regional markets, as well), as central banks and governments struggle with the consequences of troubled financial markets and sharply higher energy and raw material prices,” Richard Gordon (pictured, right), a research VP at Gartner, said in the company’s Semiconductor DQ Monday Report this morning. “Taking effective action to deal with slower growth in the face of increasing inflation is problematic, which suggests that the global economy will get worse before it gets better.”

Gartner said it is surprising how “relatively robust” semiconductor sales have been in the first half of the year, considering the economy.

“The fact is that, when the books are closed on the first half of 2008, according to WSTS measure, about an additional $7 billion will have been spent on semiconductors in the first six months of this year compared to last,” Gordon said. “We can conclude — and we have hard evidence from markets such as PCs and cell phones — that spending on electronics has held up well despite the effects of the economic downturn.”

Nevertheless, the question Gordon and Gartner are now asking is: Can this market strength continue?

Gartner pointed to the second half’s normal spending up tick on back-to-school and holiday-season purchases. With that in mind and citing WSTS data, the research company said semiconductor sales revenue should total about $139 billion in the second half for annual sales of about $267 billion and annual growth of about 4%.

“However, if the apparent relative immunity of the electronics market to worsening macroeconomic conditions evaporates in coming months, this would lead to a sharp slowdown in semiconductor sales in the second half of the year. In this worst-case scenario — say, if sales in the second half of 2008 failed to reach $125 billion — then annual growth for the semiconductor market would drop below 0%, signaling a market contraction and heralding challenging business conditions for the first half of 2009,” Gordon said.

Gartner’s next forecast update is scheduled for August.

Industry says ‘no’ on 450-mm wafer size, but no pushback on Intel - The Sandbox - Blog on EDN

July 15, 2008 at 8:52 am | In Manufacturing | No Comments
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Industry says ‘no’ on 450-mm wafer size, but no pushback on Intel

Jul 15 2008 7:34AM

The Sandbox - Blog on EDN - 450000245

I’m starting to wonder what the real story is behind all the talk on the 450-mm wafer size. I’m here at Semicon West in San Francisco this week, where ‘450’ is the buzz everywhere you turn, with most equipment vendors saying they won’t go down that path.

SEMI recently released a report on the economics of a 450-mm wafer transition and concluded that for now, “Shrinks, new materials, and new processes will continue to advance the industry on Moore’s Law, but there are simply not enough R&D resources available to continue such advancement in nodes and processes AND to work on a 450-mm wafer size transition.”

This report is corroborated by a recent survey of semiconductor industry insiders by Wright Williams & Kelly Inc that found some survey respondents did not expect to see 450-mm wafers in production until 2014 or beyond, with more than half of the respondents indicating that 450-mm wafers would never happen in production manufacturing, marking an increase in negative sentiment over the 2007 results.

After the enormous cost to make the 300-mm wafer transition, semiconductor manufacturing equipment vendors are rightfully cautious, however that didn’t stop Intel, Samsung and TSMC from saying in May that they want a 450-mm wafer pilot line in 2012, justified by one Intel exec who said last month that equipment makers are overestimating the cost of moving to 450-mm wafers.

This seems to fly in the face of what Stanley Myers, president and CEO of SEMI said yesterday during a panel discussion when asked if there is push-back on Intel, given that most industry players do not wish to make the move to 450, “Intel is THE customer, so they are part of the analysis,” referring to SEMI’s report which leads me to think that some parties are holding back what they truly think, or are too shy to step up and say no to Intel, which frankly has called most of the shots in the equipment industry. Given the revenue-generated power and capex spending of Intel, Samsung and TSMC combined, I’m starting to think the equipment makers may have no choice but to begin working on the move to 450 whether they like it or not.

Chime in with your thoughts.
-Ann Steffora Mutschler, Senior Editor

Entropic acquires RF Magic

July 10, 2008 at 10:40 am | In Uncategorized | No Comments
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4/10/2007 - Electronic News

By Colleen Taylor, Contributing Editor — Electronic News, 4/10/2007

Digital entertainment chipset maker Entropic Communications Inc. today announced that it has signed a definitive agreement to acquire broadband RF SoC developer RF Magic Inc. Terms of the deal were not disclosed.

The newly merged entity formed by the two San Diego-based semiconductor companies will retain the Entropic Communications name. Patrick Henry, Entropic’s current president and CEO, will be the CEO of the merged company. Mark Foley, RF Magic’s current president and CEO, will become the president and COO of Entropic Communications once the deal closes.

“This merger brings together two independently successful companies in one of the fastest growing segments of the semiconductor market,” Henry said in a statement. “It’s a very natural and ideal fit for both of us. We are both focused on delivering multimedia content into and around the home and have developed two exceptionally talented teams with core competencies not only in chip design but also in systems level design.”

“With our combined domain expertise in satellite, telco and cable operator-based deployments, we are confident that we have the team in place to take advantage of the market opportunities, much more so than if we remained separate entities,” Foley added in the statement.

Some analysts say that digital media content delivery has emerged as a primary driver of the global consumer electronics industry and its associated semiconductor market. According to market research firm iSuppli Corp., the broadband video-on-demand market for media is set to reach nearly 4.5 billion units by 2010.

The digital media market has also garnered support from private equity. Entropic closed on a venture funding round worth $25 million.

Fuel cells look for a boost -

July 9, 2008 at 1:51 pm | In New Techs | No Comments
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7/4/2008 - Electronic Business

Fuel cells combine chemicals to produce a reaction to produce electricity. Theoretically, they could power cell phones for much longer time periods than lithium-ion batteries.

By Tam Harbert, Contributing Editor — Electronic Business, 7/4/2008

Even in a world of skyrocketing energy costs, there’s no shortage of power for mobile phones. And that makes it difficult for alternative energy technologies like fuel cells that are trying to find a market in consumer electronics.

Fuel cells for portable applications generated a lot of hype several years ago, with predictions that mobile phone fuel cells would be on the market by 2007. That didn’t happen. But development work continues at several start-ups, as well as large OEMs. Now the start-ups are predicting that commercial products will start hitting the market in late 2009 or 2010. Maybe. Whether they find a home in any market is still a huge question mark.

Fuel cells combine chemicals to produce a reaction to produce electricity. Theoretically, they could power cell phones for much longer time periods than lithium-ion batteries. And when they did run out of power, a consumer could simply pop another fuel cell cartridge into his phone rather than having to plug into a wall somewhere to recharge.

For the consumer electronics market, companies are pursuing either of two different types of cells: one uses methanol, the other uses hydrogen. Advocates of each approach like to point out their advantages and the disadvantages of their competitors. But both approaches face the same significant obstacles.

One big regulatory barrier appears to be falling. Until recently, regulations prevented consumers from carrying methanol or hydrogen on airplanes. But last year, the International Civil Aviation Organization created new regulations that will allow methanol cartridges on planes starting this October and hydrogen in 2009. Individual countries must approve and implement the regulations, but fuel-cell proponents expect the regulations to be in place by the time their products are on the market.

But there are plenty of other obstacles, including technical ones. The chemicals used in fuel cells have limited temperature and humidity ranges, a problem because people want their cell phones to work regardless of the weather. Portable device batteries for consumer applications must be able to operate at the very least from minus-10 degrees to 40 degrees C, according to Jerry Hallmark, manager of energy systems technologies in Motorola Inc’s mobile devices business. Even MTI Micro Fuel Cells Inc, a fuel-cell start-up in Albany, NY, that says it has solved the temperature problem, has a temperature range of only 0 degrees to 40 degrees C.

Motorola has been investigating fuel cells for 10 years and continues to talk with a variety of fuel-cell companies, Hallmark noted. Early this year, Motorola and Angstrom Power Inc, a fuel-cell company based in Vancouver, Canada, completed a six-month trial using Angstrom’s hydrogen-based device in a Motorola SLVR L7 phone (prototype pictured, left). Without any redesign of the phone, the Angstrom device ran about twice as long as the battery version of the SLVR, according to Hallmark. “We’re pretty optimistic,” he said. “Angstrom’s technology looks very good compared to some others we’ve looked at.”

But it still suffered from a narrow temperature range – it couldn’t produce power at either the hot or cold end of the temperature range, he said. And it couldn’t provide bursts to meet peak power needs. Fuel cells tend to provide a constant level of power, but can’t handle it when consumer devices need a burst of power. “A battery does a great job of providing peak power, for example when you need extra power for the flash on a camera,” Hallmark said.

However, that problem could be solved by a hybrid approach, including a small battery or other small energy storage device that could be used to meet peak power needs, noted Olen Vanderleeden, director of business development at Angstrom.

Another barrier is cost. Today, “the fuel cell costs more than the device that you’re charging,” said Bruce McKendry, CEO at fuel-cell developer Antig Technology Co Ltd in Taipai (Antig’s Cellini fuel cell pictured, left). Fuel-cell companies say that there is nothing inherently costly about the technology and that costs will come down as volumes ramp up. Hallmark thinks manufacturers could get fuel cell costs down to about twice the cost of lithium ion, perhaps less, which he says would be a reasonable premium for the initial product.

But then there’s an additional cost that lithium ion doesn’t have: the fuel. Although the actual cost might be minimal, the larger problem is the fact that there is no infrastructure or distribution channel to provide methanol or hydrogen to mobile phone users. “In order to roll this out in a big way, you have to have a fuel-distribution channel in place,” said McKendry. “Consumers need to be able to go to Best Buy or some other big box store to get the fuel.”

That’s one reason McKendry and others think the first product to hit the market will be a fuel-cell-based universal charger. Such a device, which consumers could use to recharge many of their portable devices via a USB cable, would be a nice way for OEMs to dip their toes into the market. “It will give manufacturers and brands a feeling for whether or not it’s a viable technology in the marketplace,” said McKendry.

He predicted that OEMs will start testing the market with such products in 2009, and if the products find acceptance and if a retail fuel-distribution network is in place, OEMs could start designing fuel cells into products in 2010 and beyond.

And even that may be too optimistic. Hallmark said Motorola wouldn’t even start to develop a product “until we can actually demonstrate a prototype that meets all of our requirements. Then we would start product development and that typically takes 12 to 18 months.”

Those are a lot of “ifs.” The biggest of which is what if there simply aren’t enough people that want the advantages that fuel cells offer? After all, most people except hard-core road warriors seem happy with the way they recharge their phones today, which McKendry himself admits

“It’s not for everyone, not even for me,” he said. “I don’t use my cell phone enough to warrant having a fuel cell.”

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