The semiconductor wafer chip industry has been in deep recession for the recent years, but the last year has been especially bad. Research studies have revenue down 30 percent from last year. Within an industry with huge capital investments, and extremely thin profit margins, this constitutes a disaster.
A semiconductor wafer is really a round disk produced from silicon dioxide. This is the form in which batches of semiconductor chips are produced. Depending on the size of the person chip and how big the epi wafer, countless individual semiconductor chips could be made from just one 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 in to the chip package. These assemblies are used to make build computers, cell phones, iPods, along with other technology products.
Transitions to larger wafer sizes have been an ordinary evolution in the semiconductor industry. In 1980, a modern 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 very first 200 mm fab, and also this was the first time an increment had been skipped (175 mm).
It has long been difficult to be an early adopter of a new wafer size. The greater surface area can make it harder to keep up process consistency throughout the wafer. Usually the process tool vendors will likely 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, did not offer tools at 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 select Lam. LRC quickly grew and permanently acquired the current market.
Another element in the transition to larger wafers is process technology. When the semiconductor industry moves to a different wafer size, the most recent process technologies designed 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 can be more difficult when it fails to manufacture with 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 the time, 200 mm wafers were the conventional. It might not seem to be a large change, but compound semiconductors has 250 percent more area compared to a 200 mm wafer, and surface directly relates to production volume.
At 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 also exactly what the semiconductor industry calls their factories. Inside 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 compared to the same capacity might have cost instead because they build 200 mm wafer fabs.
The problem is many small, and medium size companies do not require the quantity of production that the 300 mm fab generates, and they also may be unable to pay the expense for a 300 mm fab ($3-4 billion). It is not reasonable to spend this sum of money rather than fully use the fab. Because the 300 mm fab is inherently more effective compared to the smaller diameter wafer fabs, there exists pressure for a solution.
For your small, and medium size companies, the answer has often been to close their manufacturing facilities, and hire a 3rd party having a 300 mm fab to produce their product. This is what is known going “fabless”, or “fab-light”. The businesses that perform 3rd party manufacturing are known as foundries. Most foundries have been in Asia, especially Taiwan.
Ironically, 300 mm was created by Motorola and Infineon at a project called Semiconductor3000 in Dresden, Germany. It was a small pilot line which had been not capable of volume production. These 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 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.
Companies 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 that eventual removal of most kgbapu their fabs. AMD (GlobalFoundries) and Motorola (Freescale Semiconductor) have separated their manufacturing divisions into independent companies, and profess an idea to get free of fabs. Even Intel outsources its newest hot product, the Atom (used for “Netbooks”), to some foundry.
Over half of the fabs in operation at the start of the decade are closed. With 20-40 fabs closing each 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) happen to be planning for a transition to 450 mm wafers. A InP wafer should have approximately the identical edge over a 300 mm fab, that the 300 mm fab has more than a 200 mm fab. It is undoubtedly a strategic decision to produce a situation where other-than-huge companies is going to be with a competitive disadvantage. Intel had $12 billion inside 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 along the current path, competition will disappear. The greatest memory manufacturer will control memory, the largest microprocessor manufacturer will control microprocessors, and also the foundry business is going to be controlled by one company. These businesses already have advantages of scale over their competitors, but their existing manufacturing advantage will grow significantly.