The semiconductor wafer chip industry has been in deep economic downturn for the last few years, however the a year ago has been particularly bad. Research studies have revenue down 30 percent from last year. In 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. Here is the form where batches of semiconductor chips are made. Depending on the scale of the person chip and how big the epi wafer, hundreds of individual semiconductor chips may be made from a single wafer. More advanced chip designs can require a lot more than 500 process steps. After the wafer has become processed, it will be cut into individual die, and these die assembled in to the chip package. These assemblies are used to make build computers, cellular phones, iPods, and 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 which were only 100 mm in diameter (1 inch = 25.4 mm). The transitions within the 1980s were in increments of 25 mm. Motorola MOS 11 in Austin (1990) was the first 200 mm fab, and also this was the first time that an increment had been skipped (175 mm).
It is definitely a challenge to get an early adopter of any new wafer size. The bigger surface area makes it more challenging to maintain process consistency across the wafer. Frequently 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 at the time, Applied Materials and Tegal, did not offer tools at 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 choose Lam. LRC quickly grew and permanently acquired the marketplace.
Another factor in the transition to larger wafers is process technology. If the semiconductor industry moves to a different wafer size, the newest process technologies created by the tool companies will sometimes be offered only on the largest wafer size tools. If a chip company wants to remain on the leading technology edge, it may be more challenging when it fails to manufacture using the newest wafer size.
The last wafer size increase occurred in 2000 using the first 300 mm volume chip production facility. It was built by Infineon in Dresden, Germany. At the time, 200 mm wafers were the typical. It may not seem like a large change, but compound semiconductors has 250 percent more area than a 200 mm wafer, and surface directly pertains 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 is also exactly what the semiconductor industry calls their factories. In 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 which they spent $1 billion less on 300 mm capacity in 2004 compared to same capacity would have cost instead because they build 200 mm wafer fabs.
The problem is many small and medium size companies do not need the amount of production that the 300 mm fab generates, plus they may struggle to pay for the expense to get a 300 mm fab ($3-4 billion). It is really not reasonable to spend this amount of cash rather than fully utilize the fab. Since the 300 mm fab is inherently more effective compared to smaller diameter wafer fabs, there is certainly pressure to get a solution.
For the small, and medium size companies, the solution has often gone to close their manufacturing facilities, and hire a 3rd party with a 300 mm fab to manufacture their product. This can be what is known going “fabless”, or “fab-light”. The firms that perform 3rd party manufacturing are classified as foundries. Most foundries will be in Asia, especially Taiwan.
Ironically, 300 mm was made by Motorola and Infineon in a project called Semiconductor3000 in Dresden, Germany. This is a little pilot line that was not able to volume production. These two companies have suffered making use of their peers from their absence of fore-sight. In 2000, Motorola operated 18 fabs and was the 5th largest semiconductor company in the world. Today, Motorola has divested their manufacturing right into a company called Freescale that now operates just 6 fabs. Infineon divested their manufacturing in to a company call Qimonda. Qimonda has declared bankruptcy.
Businesses like AT&T (Lucent), LSI Logic, Hewlett-Packard and Xilinx already have eliminated chip manufacturing. Businesses like Texas Instruments and Cypress Semiconductor have set paths for that eventual elimination of most kgbapu their fabs. AMD (GlobalFoundries) and Motorola (Freescale Semiconductor) have separated their manufacturing divisions into independent companies, and profess an idea to become free of fabs. Even Intel outsources its newest hot product, the Atom (employed for “Netbooks”), to some foundry.
Over fifty percent in the fabs functioning at the outset of the decade are now closed. With 20-40 fabs closing each year, there exists 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) happen to be planning a transition to 450 mm wafers. A InP wafer must have approximately the same edge on a 300 mm fab, that the 300 mm fab has more than a 200 mm fab. It is actually undoubtedly a strategic decision to produce a situation where other-than-huge companies will be in a competitive disadvantage. Intel had $12 billion within the bank after 2008. Can AMD (GlobalFoundries), or comparably sized companies, afford a 450 mm fab ($6-10 billion)? No.
In the event the industry continues to progress across the current path, competition will disappear. The biggest memory manufacturer will control memory, the largest microprocessor manufacturer will control microprocessors, as well as the foundry business will be controlled by one company. These businesses already have benefits of scale over their competitors, but their existing manufacturing advantage will grow significantly.