The semiconductor wafer chip industry has been in deep recession for the last few years, however the last year has been especially bad. Recent reports have revenue down 30 percent from last year. In an industry with huge capital investments, and excruciatingly thin profit margins, this constitutes a disaster.
A semiconductor wafer is really a round disk made from silicon dioxide. This is the form by which batches of semiconductor chips are manufactured. Depending on the size of the person chip and how big the epi wafer, hundreds of individual semiconductor chips might be made from a single wafer. More complicated chip designs can require greater than 500 process steps. Following the wafer has been processed, it will probably be cut into individual die, which die assembled to the chip package. These assemblies are used to make build computers, mobile phones, iPods, and other technology products.
Transitions to larger wafer sizes have invariably been a normal evolution from the semiconductor industry. In 1980, a contemporary fab used wafers that were 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 initial 200 mm fab, and this was the first time an increment was skipped (175 mm).
It has always been a challenge to get an earlier adopter of a new wafer size. The larger area causes it to be more challenging to keep process consistency across the wafer. Usually the process tool vendors will likely be late to transition, and lose market share. Lam Research (LRC) grew tremendously at 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 very 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 aspect 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. If a chip company wants to remain on the leading technology edge, it can be more difficult if it does not manufacture with the newest wafer size.
The very last wafer size increase happened in 2000 with the first 300 mm volume chip production facility. This was built by Infineon in Dresden, Germany. At the time, 200 mm wafers were the typical. It might not seem like a large change, but wide bandgap materials has 250 percent more area than a 200 mm wafer, and area directly concerns production volume.
At the end of 2008, worldwide, there have been 84 operating 300 mm fabs, with 14 more fabs expected online in the end of 2009. Fab is short for “fabrication”, and it is 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 more affordable compared to a 200 mm fab for the same 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 by building 200 mm wafer fabs.
The problem is many small and medium size companies do not need the volume of production that the 300 mm fab generates, and they may not be able to afford the expense for any 300 mm fab ($3-4 billion). It is not reasonable to shell out this amount of money and never fully utilize the fab. Because the 300 mm fab is inherently better compared to the smaller diameter wafer fabs, there exists pressure for any solution.
For that small and medium size companies, the solution has often been to close their manufacturing facilities, and hire a 3rd party using a 300 mm fab to manufacture their product. This can be what is known going “fabless”, or “fab-light”. The firms that perform alternative party manufacturing are classified as foundries. Most foundries are 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 that was not competent at volume production. Those two companies have suffered using 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 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.
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 your 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 without any 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 actually closed. With 20-40 fabs closing each year, you will find a glut of used production tools on the market, most selling at bargain basement rates.
Recently three from the largest semiconductor companies, Intel (microprocessors), Samsung (memory), and TSMC (foundry) happen to be planning for a transition to 450 mm wafers. A InSb wafer needs to have approximately the same advantage over a 300 mm fab, that the 300 mm fab has spanning a 200 mm fab. It really is undoubtedly a strategic decision to create 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.
When the industry will continue to progress across the current path, competition will disappear. The greatest memory manufacturer will control memory, the greatest microprocessor manufacturer will control microprocessors, and the foundry business is going to be controlled by one company. These businesses already have advantages of scale over their competitors, however their existing manufacturing advantage will grow significantly.