semiconductor manufacturing

Analysis: Time for the semi and wafer industries to make nice

By Lou CoveyEditorial Director

Last week we did a piece on the dysfunctional relationship between the semiconductor industry and the silicon wafer industry.  Both have the potential of healing the rift and ensuring a profitable give and take for several decades, but there is also the potential that, if attitudes do not change within the next decade, it will get even worse.

IBM is recycling silicon wafers for solar use

Last week’s article pointed out that the wafer companies stuck it to the semi industry when the solar boom hit 10 years ago.  Wafer fabs shifted resources to solar because the requirements for solar cells was not as stringent as those for semiconductors, and then they jacked up the prices for semi customers.  The chip companies took it in stride, but when the solar bubble popped five years ago they started demanding and getting price concessions and have been for several years, in the face of rising demand for computing silicon.

Here’s the rub.  The solar panels containing that silicon had a 20-year lifespan when they were installed.  It is now 10 years later and those early panels are showing degradation now, with an average degradation of 1 percent per year.  By the end of the second decade, early adopters will be back on the power grid unless they replace the older, less efficient panels.  That is going to create a new demand for silicon wafers for solar panel use in 10 years.

IBM stepped up with new processes to recycle semiconductor wafers and will be going into the business of supplying material to the solar industry, but the wafer industry as a whole could repeat history by looking to make a quick killing by selling cheap product to solar and jacking up prices again.  It’s time for both sides to sit down and plan accordingly.

Economics and Vengeance wreak havoc with wafer market


Deliveries are up, revenues are down for silicon wafters By Lou Covey Editorial Director

As Semicon West approaches in two months, there will be a rising chorus of predictions for 450mm manufacturing and test equipment. But silicon wafer industry revenues are heading in the wrong direction, dramatic technology advances in test and reclamation, and an overall urge for revenge among their customers over gouging during the solar boom.

In February, SEMI issued its annual report on the state of silicon wafer industry that showed a small increase in the delivery of wafers to customers in spite of a well-known glut of supply, but a sharp decline in revenues that outstripped reasons based on inventory. What is more, this appears to be developing into a trend over the past three years.

When questioned about the discrepancy, SEMI replied simply, but cryptically, that it was due to "market pressures and a weak yen.” Yet placing the blame on the decline of Japanese currency seemed knee-jerkish at best. While it is true the yen has plummeted over the past 20 years, the decline has relatively flattened out over the past five years. Japan, while still the leading supplier, has seen a significant increase in competition worldwide especially in China, Malaysia and even the US, modifying the yen's influence even more. The extremely vague explanation "market pressures" is even more suspect. Let’s take a look at test, for example.

A joint study by Hewlett Packard, the University of Oregon and the University of California, San Diego showed that applying data mining to optimize IC test resulted in significantly higher yields on virgin wafers. At ITC in 2013, Craig Nishizaki, Senior Director of ATE Development at NVIDIA, extolled the benefits of test data management methodologies. Higher yield through improved test reduces demand. Although, you wouldn’t know it talking to people in the test management industry.

Jim Reedholm, an independent representative of Yieldwerx, based in Austin Texas. “I haven’t seen any data that would backup any claim that effective test management would reduce demand for wafers, but it sounds right.” Executives at other semiconductor test management technology companies were either unresponsive or, strangely enough, unlocatable.

OK, so maybe no, maybe yes. How about reclaimed wafers?

According to Semico analyst Joanne Ito, improvements in reclamation processes for silicon wafers has dramatically dropped the demand for test wafers for semiconductor manufacturing and, according to SEMI, both revenue and material shipments are up 14 percent from last year. Ito believes that will be a trend going forward, but SEMI predicts that increase will flatten out by 2015. We might be getting closer to a reason for the discrepancy between revenue and shipments.

Reclaimed Silicon Wafer market is Spiking

According to Ito, during the solar boom up to 2008 there was a significant lack of raw material for wafers, which drove up prices for the high-quality virgin wafers that the semiconductor industry needs. That same solar demand ate up the capacity for 200mm and 300mm manufacturing. When the boom blew out, demand for the raw material dropped and a huge overcapacity developed in 200-300mm facilities.

OK, so oversupply tends to push down prices and revenues. Econ 101. There is only one problem. Demand has not decreased in the semi industry. It is increasing as demand for smart devices worldwide drives semi design starts. Hence, the steady increase in shipments to semi customers. Why the dramatic drop in revenue?

Ito thinks the answer might be vengeful purchasing executives in semiconductor companies.

“During the solar boom, the semi industry (which has higher requirements for the wafers than solar) saw an annual increase in prices of 10-12 percent from the wafer manufacturers because of the cost of silicon raw materials. So the semi industry said, ‘We paid you a when the cost went up, we want this cost reduction reflected in our prices.”

Now we have a better idea what “market pressures” are actually in play. The opportunity to return to the wafer manufacturers what they forced upon their customers a decade ago is too good to resist.

This quid pro quo may seem good for the industry in the short run. However, long-term it is causing significant problems. We will take a look at that next week…

Do you agree there is an element of vengeance going on, or do you see other factors at play? Leave a comment and tell us what you think.


Chipmakers Adopt Cymer Technology

New Tech Press sat down with Nigel Farrar, vice president of marketing and lithography Technology for Cymer, Inc.(Nasdaq: CYMI) to talk about the prospects of extreme UV process adoption, as well as new products including the SmartPulse™ data management tool, and focus drilling technology for ArF immersion light sources.

Rising custom IC costs could eat into Apple's nest egg

By Lou Covey, Editorial Director It's time to stop wondering what Apple is going to do with its cash reserve after it pays out dividends to stock holders.  If what Cadence's Tom Beckley says about the next generation of chips holds true, Apples is going to need every dime to create the next generation of processors for the iPad and iPhone.

Beckley, senior vice president of R&D in the Cadence Custom IC group, was the keynote speaker at the 2012 International Symposium on Quality Electronic Design in Santa Clara (ISQED) addressing "Taming the Challenges in Advance Node Design."  Beckley pointed out that Apple has been the poster child for cost-efficient development and production, but even if every chip developer followed the "Apple Way" it would not put much of a dent in the total cost for developing the next generation of SoCs.

The A5 system on chip in the current Apple products, designed at 45nm, could come in under $1 billion to design and bring to market with effective control of the supply line.  Cost projections for a chip at 28nm (the next step) could be as much as $3 billion. At 20nm, the cost could exceed $12 billion (if you build your own fab, which Apple could well afford.)  The Cadence exec stated that the cost of EDA tools (both purchased and developed) could run as high as $1.2 billion alone.

The evidence of the increasing costs of development can be seen in the profit margins of the iPad.  According to iSuppli, the cost of the A5 chip in the new iPads at $23 is double the cost of the original A4 chip.  Why is the cost going so high?  Because the way chips are being manufactured is changing dramatically.

Beckley explained that the physics of making a semiconductor mask reached a breaking point at the current most popular nodes as the resolution of a photoresist pattern begins to blur around 45nm.  Double patterning was created to address that problem at 32nm.  "But everyone wanted to avoid doing it at 32nm because of the mask costs.  They wanted to maximize their investment in lithography equipment."

The process splits the design where the structures are too close together, into two separate masks.  It's an expensive process (especially when each mask costs around $5 million) and requires entirely new ways of creating the masks to avoid rule violations.  But where the foundries were willing to let is slide at 35nm, they are requiring double patterning at everything below, Beckley stated.

These new techniques are driving up development costs straight up the design chain.  Beckley said he has close to 400 engineers in his unit working on tools just for 20nm design -- half of his entire staff.

The benefits of the moving the node are just as tremendous, he said.  Instead of millions of transistors, each chip will have billions allowing for greater functionality in devices.  "We expect improvements  of 25-30 percent in power consumption and up to 18 percent overall perform and improvement," he predicted.

"If what I'm saying scares you, it should.  There are many questions and issues to be ironed out," Beckley concluded.  "But at Cadence we are already working with a dozen customers on active test chips, which will increase to 20 very soon, and we are already working with customers for products at 10nm."

What are you doing to overcome the rising cost of custom ICs?  Join the discussion at