Leveraging shorter product lifecycles for new collaboration opportunities

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 7/19/2007

The insatiable consumer appetite for better, faster and cheaper products is resulting in faster design and manufacturing cycle times since new consumer products have shorter lifecycles than ever before.

Combined with escalating R&D costs as the challenge of developing new manufacturing process nodes, industry players are increasingly turning challenges into opportunities by heavily leveraging collaboration with carefully-chosen partners.

Case in point: IBM’s Steve Longoria, VP of semiconductor solutions in IBM’s systems and technology group reiterated this week during the Semicon West conference that Big Blue will not build any new fabs, but will continuing working with its Common Platform foundry partners – Chartered and Samsung. (Longoria had previously led the Common Platform effort, and was recently promoted. Big Blue announced other promotions in its research organization this week.)

As a result of this trend, the semiconductor industry has become markedly top-heavy, with leaders of the wafer fabrication pack now enjoying a hefty amount of control and power over the worldwide chip market. According to market research firm IC Insights, the top-five wafer capacity leaders accounted for 32 percent, or about a third, of total wafer capacity as of year-end 2006. At the same time, 48 percent, or about half, of the world's capacity was represented by the combined capacity of the top-10 leaders—indicating that relatively few companies control a very large portion of the IC industry's supply of wafer fab capacity.

The situation is just going to get more intense going forward. Pointing to a statement from the Global Semiconductor Forum, Longoria said that with the cost of semiconductor manufacturing continuing to climb, state of the art 90-nm and 65-nm fabs now cost an average of $5 billion, but the cost of developing the process technology also continues to rise with each generation.

Process Technology	Cost	Minimum Revenue
65-nm	$1.5 billion	$10 billion
45-nm	$2.4 billion	$16 billion
32-nm	$3 billion	$20 billion

Source: Goldman Sachs, June 2007

As such, few if any IDMs will be able to achieve an ROI for R&D. For example, to achieve an ROI at the 65-nm node, an IDM must generate a total of $10 billion in sales per year, but in 2006, only five IDMs – Intel, Samsung, Texas Instruments, STMicroelectronics and Toshiba – had sales of $10 billion or more, he added.

Another sign of changing times is TI’s exit from developing its processes past the 45-nm node.

Dr. Hans Stork said in an interview with Electronic News that since the company typically readies its 45-nm low-power process first, it was further along with development when the decision was made to cease internal process development. However, in the case of 32-nm, process development was in early stages and therefore it was easier to make the switch to its foundry partners TSMC and UMC.

Stork stresses that just because it is no longer doing its own process, it doesn’t mean there is no differentiation. In fact, it frees the company to focus on what it does best in its designs. This is a concept reiterated time and again during the show this week.

David Dutton, CEO of Fremont, Calif.-based plasma strip and rapid thermal processing tool supplier Mattson Technology Inc. feels the pressure from its memory customers, but is not surprised. “We’ve been here before. They tend to communicate as much as they know, and as a result, we don’t overcommit. Because of shorter cycle times, we have to work more closely with them. We look at it as an opportunity.” As a result of that closer insight into its customers' businesses, Mattson has been able to plan for entry into new markets, based on visibility into future demand in certain area. Mattson is looking to enter the low aspect ratio etch market in late 2008. 

And at photomask maker Toppan Photomasks Inc., much of the company’s R&D is done on in collaboration with key partners, explained Dr. Franklin Kalk, CTO of the Round Rock, Texas-based company. For advanced memory and microprocessor mask technology, Toppan works with Qimonda and AMD at the Advanced Mask Technology Center in Dresden, Germany, and performs joint venture work IBM at the Burlington facility on 45- and 32-nm mask development, Kalk said.

As the industry matures, players up and down the supply chain are discovering new ways to innovate through collaborative relationships and discovering that one plus one usually equals more than two, particularly when it comes to next-generation semiconductor technology.