The semiconductor wafer chip industry has been in deep recession for the last few years, however the this past year has been particularly bad. Recent reports have revenue down 30 % from last year. Within an industry with massive capital investments, and excruciatingly thin profit margins, this constitutes a disaster.
A semiconductor wafer is a round disk made from silicon dioxide. This is actually the form by which batches of semiconductor chips are manufactured. Depending on the scale of the patient chip and the size of the InGaAs, countless individual semiconductor chips may be made from just one wafer. More complex chip designs can require more than 500 process steps. Following the wafer continues to be processed, it will likely be cut into individual die, and those die assembled in to the chip package. These assemblies are utilized to make build computers, cell phones, iPods, along with other technology products.
Transitions to larger wafer sizes have invariably been a normal evolution from the semiconductor industry. In 1980, a modern fab used wafers which were only 100 mm in diameter (1 inch = 25.4 mm). The transitions in the 1980s were in increments of 25 mm. Motorola MOS 11 in Austin (1990) was the first 200 mm fab, and this was the first time that the increment had been skipped (175 mm).
It is definitely difficult to be an earlier adopter of any new wafer size. The greater area causes it to be more difficult to maintain process consistency over the wafer. Often the process tool vendors will likely be late to transition, and lose market share. Lam Research (LRC) grew tremendously at the transition from 125 mm to 150 mm, since their largest competitors during the time, Applied Materials and Tegal, failed to offer tools in the new wafer size. Intel and AMD were the first two chip companies with 150 mm fabs, and both companies had little choice but to pick Lam. LRC quickly grew and permanently acquired the marketplace.
Another element in the transition to larger wafers is process technology. If the semiconductor industry moves to an alternative wafer size, the latest process technologies developed by the tool companies will often be offered only on the largest wafer size tools. When a chip company would like to remain on the leading technology edge, it can be more challenging when it will not manufacture using the newest wafer size.
The very last wafer size increase occurred in 2000 with the first 300 mm volume chip production facility. It was built by Infineon in Dresden, Germany. At that time, 200 mm wafers were the typical. It might not seem to be a large change, but wide bandgap materials has 250 percent more area when compared to a 200 mm wafer, and area directly pertains to production volume.
By the end of 2008, worldwide, there were 84 operating 300 mm fabs, with 14 more fabs expected online by the end of 2009. Fab is short for “fabrication”, and is just what the semiconductor industry calls their factories. Within the second quarter of 2008, 300 mm wafers fabs passed 200 mm wafers fabs in production volume.
A 300 mm fab is substantially cheaper compared to a 200 mm fab for the very same capacity of chip production. Intel estimates they spent $1 billion less on 300 mm capacity in 2004 than the same capacity might have cost instead because they build 200 mm wafer fabs.
The issue is many small, and medium size companies do not need the volume of production that a 300 mm fab generates, plus they may struggle to pay for the expense for any 300 mm fab ($3-4 billion). It is not reasonable to invest this amount of money rather than fully utilize the fab. Because the 300 mm fab is inherently more efficient compared to the smaller diameter wafer fabs, there is pressure for any solution.
For that small and medium size companies, the remedy has often gone to close their manufacturing facilities, and hire a 3rd party having a 300 mm fab to produce their product. This is what is known as going “fabless”, or “fab-light”. The businesses that carry out the alternative party manufacturing are called foundries. Most foundries are in Asia, especially Taiwan.
Ironically, 300 mm was made by Motorola and Infineon at a project called Semiconductor3000 in Dresden, Germany. This was a small pilot line which had been not able to volume production. Those two companies have suffered with their peers off their lack of fore-sight. In 2000, Motorola operated 18 fabs and was the 5th largest semiconductor company on earth. Today, Motorola has divested their manufacturing in to a company called Freescale that now operates just 6 fabs. Infineon divested their manufacturing right into a company call Qimonda. Qimonda has filed for bankruptcy.
Businesses like AT&T (Lucent), LSI Logic, Hewlett-Packard and Xilinx have previously eliminated chip manufacturing. Businesses like Texas Instruments and Cypress Semiconductor have set paths for the eventual removal of most kgbapu their fabs. AMD (GlobalFoundries) and Motorola (Freescale Semiconductor) have separated their manufacturing divisions into independent companies, and profess a strategy to get free from fabs. Even Intel outsources its newest hot product, the Atom (employed for “Netbooks”), to some foundry.
Over half of the fabs in operation at the beginning of the decade are now closed. With 20-40 fabs closing every year, there is a glut of used production tools on the market, most selling at bargain basement rates.
Recently three of the largest semiconductor companies, Intel (microprocessors), Samsung (memory), and TSMC (foundry) have been planning for a transition to 450 mm wafers. A InAs wafer should have approximately the same advantage over a 300 mm fab, that a 300 mm fab has over a 200 mm fab. It is actually undoubtedly a strategic decision to create a situation where other-than-huge companies will likely be with a competitive disadvantage. Intel had $12 billion inside the bank at the end of 2008. Can AMD (GlobalFoundries), or comparably sized companies, afford a 450 mm fab ($6-10 billion)? No.
If the industry continues to progress across the current path, competition will disappear. The largest memory manufacturer will control memory, the greatest microprocessor manufacturer will control microprocessors, and also the foundry business will be controlled by one company. These companies have benefits of scale over their competitors, however existing manufacturing advantage will grow significantly.