Closer Collaboration Required to Deal with Technology Complexity
-- Materials Suppliers Adopt Knowledge-based Business Models --
Half Moon Bay, California, January 11, 2007 – The increasing complexity of technology and price pressures from the consumer-driven markets are forcing closer collaboration between suppliers in all sectors of the semiconductor supply chain, according to speakers at the Strategic Materials Conference (SMC) 2007, which opened today at the Ritz Carlton Hotel.
In the area of IC packaging, more complex chips have resulted in a proliferation of package types, from less than 100 in the 1980s to thousands today. This in turn has driven the outsourcing trend because IDMs do not have the resources to develop every type of package, according to Chris Scanlan, vice president, corporate R&D, for Amkor Technology.
“Not so long ago packaging was just an afterthought,” he said. “Now there is a lot more interaction between IC designer and the package designer.” Subcontractors such as Amkor are also working more directly with the end-system makers and have closer collaboration with materials suppliers, he noted.
A similar proliferation is occurring in the silicon wafer industry. In 1990, there were 1,000 different wafers specifications used by MEMC. That’s expected to increase to 3,000 specifications by the end of the decade, according to Nabeel Gareeb, the company’s president and CEO. “Our lives as wafer suppliers continue to be more segmented and more specialized,” he said. “If you look across different [product] segments…each of those would require different specifications for each node, each fab and each application.”
While numbers of wafer specifications have increased, the universe of wafer suppliers has shrunk from more than 20 to six today. By the end of the decade there may only be four suppliers, according to Gareeb.
Some observers believe this could create future supply problems for the semiconductor industry given the strong growth of solar power -- an application that also uses silicon wafers. Demand for solar grade silicon is growing at well over 20 percent a year, while semiconductor wafer demand is growing at 10 percent, according to MEMC.
Gareeb said there has been a trend towards “pre-sold capacity expansion” into the solar market, whereas the semiconductor industry has been less flexible in this regard. “Only if the pain [of wafer shortages] increases” will semiconductor customers change their behavior, according to Gareeb.
Steve Buchwalter, in charge of IC packaging at IBM, expressed concern that the outsourcing trend has put IDMs a few more steps away from the source of the critical materials. “Our subcontractors deal directly with the materials suppliers”, he said. “We need to understand these materials [and] have an avenue to deal directly with the chemical and materials suppliers.”
Joanne Feeney, an analyst with FTN Midwest Securities Corporation Research, noted that semiconductor materials was transforming from a manufacturing-based industry to one that was knowledge-based. However, as solutions become more specialized and risk remains the same, the potential payback from the R&D investment is reduced.
Jim Harrison, in charge of global fab materials for Intel, supported the view that materials suppliers have to get away from the mentality of selling products to selling knowledge. “If you have a magic molecule, we are going to buy it,” he said. Harrison said a typical process technology uses 200 materials. Industry economics dictate that most of those will tend to be commodities. “We can only afford a few magic molecules,” he said.
Materials suppliers used to be able to develop a product for one customer and sell it across the entire industry to pay back the investment. “That’s not the case anymore”, noted Bill Noglows, CEO of Cabot Microelectronics. “Our ability to get paid for technology [we develop] is critical for our success going forward.”
SEMI is a global industry association serving companies that provide equipment, materials and services used to manufacture semiconductors, displays, nano-scaled structures, micro-electromechanical systems (MEMS) and related technologies. SEMI maintains offices in Austin, Beijing, Brussels, Hsinchu, Moscow, San Jose (Calif.), Seoul, Shanghai, Singapore, Tokyo and Washington, D.C. For more information, visit www.semi.org.