By Mark LaPedus

The analog chip market is currently in a seasonal lull. But preparing for an eventual upturn in the sector, Infineon, Maxim, On Semi, TI and others are quietly expanding their fab or backend capacities.

Seeking to expand its analog footprint, for example, market leader Texas Instruments Inc. is now converting one fab to larger 200mm wafers and looking at a process shrink within its 300mm plant. In addition, Infineon Technologies AG is moving towards 300mm wafers in select power semiconductor fabs. Rival Maxim Integrated Products Inc. is expanding its internal packaging efforts. And the foundries are also expanding their analog and mixed-signal efforts.

Total global analog revenue remained nearly flat last year, reaching $42.3 billion in 2011, according to Databeans Inc. Like most segments in the semiconductor industry, analog is down but not out right now.

“A lot of people say analog is yesterday’s news,” said Venu Menon, vice president of analog technology development in the Technology and Manufacturing Group at Texas Instruments (TI). “Analog is still growing faster than the overall semiconductor market.”

Analog still enables “new applications and new markets,” Menon said at last week’s 13th International Symposium on Quality Electronic Design (ISQED) in Santa Clara, Calif.  And unlike digital, analog is “not limited by an industry roadmap. (There are) significant opportunities to differentiate.”

Regarding the slowdown in the analog sector, Craig Berger, an analyst with FBR Capital Markets, said the lull is temporary.  “The chip sector is at the cyclical trough right now in analog shipments generally, and should ramp as we move through 2012,” Berger said in an e-mail. “Some portions of the supply chain are buying chips at well below consumption levels (i.e. China, white goods/appliances and some industrial), which is expected to ease as inventory levels are now at very low levels.”

Doug Freedman, an analyst with RBC Capital Markets, said: “For the cycle, I see a slow road to recovery. One market at a time is returning to shipments at demand levels. There will likely be very little inventory rebuild, just an end to an inventory burn.”

The down cycle in analog

In early March, analog chip giant TI cut its guidance for the first quarter, citing soft wireless demand. “Of the company’s $100 million revenue cut, the entire shortfall was attributed to wireless shipments, with weaker OMAP sales weighing more heavily than connectivity,” FBR’s Berger said in a report in early March. OMAP is TI’s application processor line for the mobile segment.

“While 4Q11 was an exciting time for new OMAP design wins and initial orders for products like the Amazon Kindle Fire, Barnes & Noble Nook Tablet, Samsung Galaxy S II (GTI9100G), Motorola Bionic, Galaxy Nexus, and others, sales of many of these end products have seasonally decelerated in 1Q ‘12, while customers also deplete chip and device inventories,” he wrote in the report.

“Despite this, we still believe 1Q ‘12 will be the fundamental revenue trough for the chip sector and for TI, with a 2Q ‘12 cyclical reacceleration likely,” he said. “Stepping back, TI has done a good job of focusing on its analog core, building competitive barriers, and growing scale.”

Since 2009, TI has acquired several fabs that could add $9 billion of total analog revenue when fully operational. In 2010, TI acquired Spansion Inc.’s fabs in Japan, and bought Semiconductor Manufacturing International Corp.’s fab in China. The big blockbuster occurred last April, when TI bought National Semiconductor, which itself owned two fabs.

And amid TI’s fab acquisition spree, the company continues to ramp up RFAB, its 300mm analog fab in Richardson, Texas.  Last year, however, TI also announced plans to close two older 150mm semiconductor manufacturing facilities in Hiji, Japan, and Houston, Texas.

TI’s strategy differs from most rivals. The company wants to maintain its leadership in analog and expanding its fab footprint is part of the equation.  In contrast, most of TI’s analog rivals have not made any recent fab acquisitions. Most analog houses have not even significantly expanded their internal fab capacities, and, in some cases, they outsource some or all of their production to the silicon foundries.

“If you want to excel — and be a big player in all segments — you need the factory horsepower to do that,” Menon said in an interview at ISQED.

TI has not acquired any new fabs in 2012, but the company is still expanding its footprint. TI’s 300mm RFAB is producing power management devices based on 0.25- and 0.18-micron geometries right now.

The “sweet spot” for analog is 0.25-micron technology, but TI is reportedly looking at finer geometries — and reportedly perhaps 0.13-micron processes — in RFAB. “There are plans to go smaller” in terms of process geometries within RFAB, Menon said, without elaborating.

The former National Semiconductor operation had two fabs, including one in South Portland, Maine and one in Greenock, Scotland. The South Portland fab is a 200mm facility, while Greenock is a 150mm plant. At present, TI is quietly converting the Greenock fab to 200mm capacity, he said. That conversion started prior to TI’s move to buy National.

Since the acquisition, there has been some speculation that TI would shutter the National fabs and move the production to RFAB. Asked to comment on that speculation, Menon said: “(National) has capable factories. National has capable high-voltage and high-speed’’ devices.

RBC’s Freedman has a slightly different observation. “During the 2009 recovery, TI was not able to keep up with demand,” Freedman said. “As a result, they started a pretty major fab expansion plan. I was never a big believer in the thought ‘if you build it they will come.’ ”

However, Freedman added: “TI should have some excess fab capacity to handle upturns in a 50+ percent gross margin business. While they might have over built in the past, they needed a refresh to the fab footprint, so I’m not surprised by the closure of some older fabs. The National fabs they bought run well and are likely more cost competitive than some older internal facilities.”

FBR’s Berger said TI’s fab expansion program is only part of the analog story. “TI has been an aggressive capacity expander with its 300mm fab, of which only some modules are built out,” Berger said.  “The firm will clearly see the lowest die costs with this facility, though we note that analog fabs do not see the same volume scale as digital parts, so switching out the different mask sets and taking the resulting yield hit do impact costs. While a slightly lower price is good, we also note that analog business is generally won on performance, price, catalogue product availability, and service – not just price.”

Others are expanding

Besides TI, others are also making a move on the fab front. In October, Germany’s Infineon produced power ICs on 300mm wafers at its Villach, Austria-based pilot line. The high-volume production site for these devices will be at its 300mm fab in Dresden, Germany. In addition, Infineon has also begun construction of a second 200mm fab in Kulim, Malaysia. The current 200mm fab makes power semiconductors.

Meanwhile, rival analog chip maker Maxim Integrated Products Inc. has recently moved towards what it calls a “hybrid manufacturing model.” At one time, the company handled its internal fab production, packaging and test in-house.

A large percentage of Maxim’s front-end production is still done within its own fabs. Then, in 2010, the company formed a 300mm foundry alliance with Taiwanese DRAM makers Powerchip Semiconductor Corp. Maxim also has a foundry deal with Japan’s Seiko Epson Corp.

At one time, Maxim outsourced its entire packaging efforts to the subcontractors. But seeking to develop some of its own capability, Maxim has set up a wafer-level packaging and wafer-bumping plant in Dallas, Texas, said Vijay Ullal, group president for consumer and automotive solutions at Maxim.

Two other analog players in the top 5, STMicroelectronics Inc. and Analog Devices Inc. (ADI), did not respond to repeated press inquiries.

Another player, On Semiconductor, has been on an acquisition spree. But it recently announced plans to close its wafer manufacturing facility located in Aizu, Japan, by the end of June 2012. That fab was previously owned by Sanyo Semiconductor, which was acquired by On Semi. Meanwhile, another emerging analog player, Japan’s Renesas Electronics Corp., is said to be merging its chip operations with those from Fujitsu Ltd. and Panasonic, according to reports.

Meanwhile, the silicon foundries are also expanding their analog capacities or processes or both.  In September, GlobalFoundries announced it is offering its 180nm BCDlite foundry technology optimized for automotive applications such as power management devices, audio amplifiers, displays and LED driver integrated circuits (ICs).

Tags: ADI, Maxim, STMicroelectronics, Texas Instruments

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