The semiconductor wafer chip industry has been in deep recession for the recent years, however the this past year has been particularly bad. Research studies have revenue down 30 percent from last year. Within an industry with big capital investments, and extremely thin profit margins, this constitutes a disaster.
A semiconductor wafer is actually a round disk produced from silicon dioxide. This is the form by which batches of semiconductor chips are made. Depending on the size of the patient chip and how big the epi wafer, hundreds of individual semiconductor chips may be made from one wafer. More complex chip designs can require greater than 500 process steps. Following the wafer continues to be processed, it will likely 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 been a typical evolution from the semiconductor industry. In 1980, a contemporary fab used wafers that have been only 100 mm in diameter (1 inch = 25.4 mm). The transitions in 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 1st time that the increment have been skipped (175 mm).
It has always been challenging to become a young adopter of the new wafer size. The bigger surface can make it more challenging to keep up process consistency across the wafer. Usually the process tool vendors will be late to transition, and lose market share. Lam Research (LRC) grew tremendously in the transition from 125 mm to 150 mm, since their largest competitors at that time, Applied Materials and Tegal, failed to offer tools in 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 pick 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 an alternative wafer size, the most recent process technologies designed by the tool companies will often be offered only on the largest wafer size tools. When a chip company would like to remain on the leading technology edge, it could be more difficult if it fails to manufacture with all the newest wafer size.
The final wafer size increase happened in 2000 using the first 300 mm volume chip production facility. This is built by Infineon in Dresden, Germany. During the time, 200 mm wafers were the typical. It might not sound like a large change, but wbg semiconductors has 250 percent more area than 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 at the end of 2009. Fab is short for “fabrication”, and is also 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 more affordable than 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 might have cost instead because they build 200 mm wafer fabs.
The problem is many small and medium size companies do not need the volume of production that a 300 mm fab generates, and they also may struggle to pay the expense for any 300 mm fab ($3-4 billion). It is far from reasonable to invest this sum of money and not fully make use of the fab. Since the 300 mm fab is inherently more effective compared to smaller diameter wafer fabs, there is pressure for any solution.
For the small, and medium size companies, the remedy has often been to close their manufacturing facilities, and hire a 3rd party having a 300 mm fab to produce their product. This really is what is known as going “fabless”, or “fab-light”. The businesses that perform the third party manufacturing are classified as foundries. Most foundries will be in Asia, especially Taiwan.
Ironically, 300 mm was developed by Motorola and Infineon at a project called Semiconductor3000 in Dresden, Germany. It was a small pilot line which had been not able to volume production. Both of these 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 earth. Today, Motorola has divested their manufacturing 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. Brands like Texas Instruments and Cypress Semiconductor have set paths for your 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 from the fabs in operation at the start of the decade are closed. With 20-40 fabs closing each and every year, you will find 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) have been planning for a transition to 450 mm wafers. A InSb wafer should have approximately the same edge on a 300 mm fab, which a 300 mm fab has spanning a 200 mm fab. It really is undoubtedly a strategic decision to make a situation where other-than-huge companies is going to be with 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 over the current path, competition will disappear. The largest memory manufacturer will control memory, the greatest microprocessor manufacturer will control microprocessors, and also the foundry business will be controlled by one company. These firms have features of scale over their competitors, however their existing manufacturing advantage will grow significantly.