The semiconductor wafer chip industry has been in deep recession for the recent years, but the last year has been particularly bad. Recent reports have revenue down 30 % from last year. Within an industry with massive capital investments, and extremely thin profit margins, this constitutes a disaster.
A semiconductor wafer is a round disk produced from silicon dioxide. This is actually the form by which batches of semiconductor chips are made. Depending on the size of the patient chip and how big the InGaAs, hundreds of individual semiconductor chips might be made from a single wafer. More advanced chip designs can require greater than 500 process steps. After the wafer has been processed, it will be cut into individual die, which die assembled 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 always been an ordinary evolution of the semiconductor industry. In 1980, a modern day fab used wafers that have been only 100 mm in diameter (1 inch = 25.4 mm). The transitions inside the 1980s were in increments of 25 mm. Motorola MOS 11 in Austin (1990) was the very first 200 mm fab, and this was the 1st time an increment have been skipped (175 mm).
It has always been a challenge to be a young adopter of the new wafer size. The greater surface causes it to be more challenging to maintain process consistency throughout the wafer. Often the process tool vendors will be late to transition, and lose market share. Lam Research (LRC) grew tremendously on 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 initial 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 aspect in the transition to larger wafers is process technology. When the semiconductor industry moves to a different wafer size, the latest process technologies developed by the tool companies will sometimes be offered only on the largest wafer size tools. If a chip company would like to remain on the leading technology edge, it could be harder if this does not manufacture with the newest wafer size.
The last wafer size increase occurred in 2000 using the first 300 mm volume chip production facility. This is built by Infineon in Dresden, Germany. At the time, 200 mm wafers were the standard. It may not sound like a large change, but compound semiconductors has 250 percent more area when compared to a 200 mm wafer, and area directly relates to production volume.
By the end of 2008, worldwide, there were 84 operating 300 mm fabs, with 14 more fabs expected online in the end of 2009. Fab is short for “fabrication”, and it is 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 when compared to a 200 mm fab for the similar capacity of chip production. Intel estimates they spent $1 billion less on 300 mm capacity in 2004 compared to the same capacity would have cost instead because they build 200 mm wafer fabs.
The thing is many small and medium size companies do not require the quantity of production that the 300 mm fab generates, and they also may struggle to pay for the expense for any 300 mm fab ($3-4 billion). It is far from reasonable to spend this amount of cash and not fully use the fab. Since the 300 mm fab is inherently better compared to the smaller diameter wafer fabs, there exists pressure to get a solution.
For your 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 manufacture their product. This really is what is known as going “fabless”, or “fab-light”. The firms that perform alternative party manufacturing are classified as foundries. Most foundries have been in Asia, especially Taiwan.
Ironically, 300 mm was created by Motorola and Infineon in a project called Semiconductor3000 in Dresden, Germany. It was a little pilot line which was not competent at volume production. Those two companies have suffered using their peers using their lack of fore-sight. In 2000, Motorola operated 18 fabs and was the 5th largest semiconductor company on the planet. Today, Motorola has divested their manufacturing right into 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.
Brands like AT&T (Lucent), LSI Logic, Hewlett-Packard and Xilinx already have eliminated chip manufacturing. Companies like Texas Instruments and Cypress Semiconductor have set paths for your eventual elimination of most kgbapu their fabs. AMD (GlobalFoundries) and Motorola (Freescale Semiconductor) have separated their manufacturing divisions into independent companies, and profess a plan to become free from fabs. Even Intel outsources its newest hot product, the Atom (employed for “Netbooks”), to your foundry.
More than half in the fabs functioning at the outset of the decade are closed. With 20-40 fabs closing each year, you will find a glut of used production tools on the market, most selling at bargain basement rates.
Recently three from the largest semiconductor companies, Intel (microprocessors), Samsung (memory), and TSMC (foundry) have been planning a transition to 450 mm wafers. A InAs wafer needs to have approximately exactly the same advantage over a 300 mm fab, that the 300 mm fab has more than a 200 mm fab. It is actually undoubtedly a strategic decision to make a situation where other-than-huge companies is going to be in a competitive disadvantage. Intel had $12 billion in the bank after 2008. Can AMD (GlobalFoundries), or comparably sized companies, afford a 450 mm fab ($6-10 billion)? No.
If the industry consistently progress over the current path, competition will disappear. The greatest memory manufacturer will control memory, the greatest microprocessor manufacturer will control microprocessors, and the foundry business will be controlled by one company. These businesses have features of scale over their competitors, however existing manufacturing advantage will grow significantly.