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What is Your China Strategy?

Wednesday, September 7th, 2016

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By Dave Lammers, Contributing Editor

Equipment vendors have a lot on their plates now, with memory customers pushing 3D NAND, foundries advancing to the 7 nm node, and 200mm fabs clamoring to come up with hard-to-find tools.

China, which has renewed its investments in displays, packaging, and both 200mm and 300mm front-end fab capacity, is another challenge.

“All the managers in my company are scrambling to adjust their budgets so they can support China. I can tell you people are booking lots of flights to Shanghai,” said one engineer at a major equipment supplier.

Bill McClean, president of IC Insights (Scottsdale, AZ), said China is fast becoming a center for 3D NAND production, as several companies expand production in China. Intel is converting its Dalian, China fab partly to 3D NAND, and Toshiba might very well make a deal in China to build a 3D NAND fab there, he said.

“China could be the 3D NAND capital of the world,” McClean said at The ConFab conference in Las Vegas. While the U.S. government limits exports of leading-edge technologies on national security concerns, 3D NAND relies more on overlay and etch techniques at relaxed (40nm) design rules, he noted.

“Since the 3D NAND makers are not pushing feature sizes, it doesn’t raise red flags like if Chinese companies wanted FinFET technology. That is when the alarms go off,” McClean said.

However, McClean said the 3D NAND market is not immune to the oversupply issues that now face the DRAM makers. “I’ve seen this rodeo before,” McClean said.

China’s domestic IC market is slightly more than $100 billion, McClean said, while chip production in China was about $13 billion last year, representing just under 5 percent of worldwide production (Figure 1).

Figure 1. Source: IC Insights.

The difference between consumption and domestic production, referred to as the delta, is made up by imports. “This 13 percent (from domestic suppliers) drives the Chinese government crazy. Yes, they will close that gap a little bit, but not to the extent that they think,” McClean told The ConFab audience in mid-June.

Robert Maire, who consulted for SMIC on its initial public offering in the United States, spoke at length about China at the SEMI Advanced Semiconductor Manufacturing Conference (ASMC) in Saratoga Springs, N.Y. Amid the mergers and acquisition frenzy of last year, China managed to pull off the acquisitions of CMOS image sensor vendor Omnivision, memory maker ISSI, the RF business of NXP, Pericom Semiconductor, and Mattson Technology. (McClean said he believes that if the Omnivision acquisition were attempted in today’s more China-wary environment that Washington would block the deal).

Maire, principal at Semiconductor Advisors (New York), said China is far behind in its domestic semiconductor production equipment business. “If China has 14nm production capacity, but buys all of its equipment from abroad, it doesn’t really help them that much. China is getting started in equipment, but it has a lot of catching up to do.”

Scott Foster, a partner in market intelligence firm TAP Japan (Tokyo), said China must have an international scope in the equipment sector if it hopes to compete with the likes of Applied, Lam, and other well-established vendors. A few of Japan’s equipment suppliers are succeeding while operating in relatively narrow niches, but overall, competing globally is a challenge for mid-sized Japanese equipment companies. “If this is what is happening to Japanese equipment vendors, what chance do Chinese companies have?” Foster said.

Packaging may prove to be key

Skeptics of China’s prospects might take a long look at China’s success in packaging, an area where China is succeeding, in part by acquisitions of Asia-based companies, notably STATS ChipPAC (Singapore), which was acquired by Jiangsu Changjiang Electronics Technology Co. (JCET) last year. Separately, SMIC and JCET formed a joint venture to focus on chip scale packaging, wafer bumping, and fan-out wafer level packaging. The packaging joint venture is located 90 minutes from Shanghai, said Sonny Hui, senior vice president of worldwide marketing at SMIC.

Jim Walker, the packaging analyst at market research firm Gartner, said China-based packaging is now valued at nearly half (43 percent) of all worldwide packaging value by IDMs and OSATs. While the packaging industry overall is dealing with price pressures, the advent of wafer level packaging, and other forms of multi-chip integration, bodes well for the higher end of the back-end industry.

“As the semiconductor industry matures and Moore’s Law scaling slows, multi-chip integration via packaging is providing system vendors with a faster time-to-market, and a lower-cost means, of solving system-level challenges,” Walker said.

Packaging multiple chips in a module is likely to play a key role in the Internet of Things (IoT) markets, Walker said. Automotive, medical, home, and consumer solutions are all “heavily reliant on packaging,” he said.

Sam Wang, a Gartner analyst who focuses on foundries, pointed out at Semicon West that China’s semiconductor industry faces continued challenges in a hotly contested foundry market. Few China-based foundries have enjoyed the strong growth that SMIC has demonstrated, he said. (SMIC has been “running at very high utilizations, and we are working very hard to solve the problem,” said SMIC’s Hui.)

While SMIC has enjoyed double-digit growth for several years, the five second-tier Chinese foundries – — Shanghai Huahong Grace, CSMC, HuaLi, XMC, and ASMC — saw declining revenues year-over-year in 2015. Overall, China-based foundries accounted for just 7.8 percent of total worldwide foundry capacity last year, and the overall growth rate by Chinese foundries “is way below the expectations of the Chinese government,” Wang said.

China-based companies are focusing partly on MEMS and other devices made on 200mm wafers, including analog, sensors, and power. SMIC’s Hui said “most of our customers don’t see much benefit to migrate to 12-inch. 200mm still has a lot of potential; just consider the hundreds of products still made on 180nm technology, which was developed 20 years ago. Many customers still see that as a sweet spot.”

Foster, who has three decades of tech-watching experience from his base in Tokyo, said the 200mm wafer fabs being built in China will make products that “do not need the gigantic scale” required of Intel, TSMC, Samsung and Toshiba. Figure 2, courtesy of SEMI, shows the seventeen 200mm wafer fabs/lines that are expected begin operation in 2015 to 2019. Six of the seventeen will be in China.

Figure 2. Source: SEMI

“After decades of trying, China has found a market-based strategy: building scale and experience from the bottom up. In the long run, this is likely to be far more effective than going out to buy foreign companies,” Foster said.

Display is another area China is counting on. In an Aug. 18 conference call following a strong quarter, Applied Materials chief financial officer Bob Halliday told analysts: “In display, we recorded record orders of $803 million with more than half coming from projects in China.”

The Applied CFO also said, “Just listening to the Chinese government, they’re in this for a long-term and their interest in investing in the semiconductor industry is probably only going to increase.”

Kateeva turns to China funds

China is often lumped together with other Asian nations as a country that has a government-led, me-too, follower mentality. But increasingly, China is either proving innovative itself, or able to quickly adopt innovations from the West.

At the Innovation Forum at Semicon West, Conor Madigan, co-founder of ink jet printer startup Kateeva (Newark, Calif.) spoke about the readiness of Chinese venture capital funds to step in where Silicon Valley-based VCs were overly hesitant. China proved a more receptive place to raise money than the United States, though the early establishment of the M.I.T. spinout did come from U.S. based sources.

After its initial development effort, Kateeva figured it needed more than $100 million to accomplish its goals. After making the rounds to raise funds in the United States without success, Kateeva turned to China, where five different funds eventually became investors.

Asked why Chinese investors were willing to back Kateeva when funds in the United States and other Asian countries were reluctant, Madigan pointed to a confluence of factors.

The Chinese government had identified OLED displays as a focus of its Five Year Plan. The follow-on economic plan further identified inkjet technology as a critical technology. Investors in China favor companies which can provide the equipment for products, such as OLEDs, which have the government’s blessing and financial support. That government support reduced the investment risks in ways that are not readily seen in Japan or the United States, he said.

Madigan had studied OLEDs as an undergraduate at Princeton University, and then studied under an M.I.T. professor who had developed ink jet technology for large formats.

Though an early goal was to use large-format inkjet to deposit the RGB materials in OLEDs, the Kateeva team learned that its YieldJet system could be adapted to solve a more urgent problem: thin film encapsulation (TFE). It “pivoted” on the advice of an early customer, which fortunately already had developed the “ink” which under UV light would form a uniform encapsulation layer for the large OLED substrates required for TVs and other large display applications.

Two display companies in China identified Kateeva as a strategic partner, which allowed Kateeva to raise money from private Chinese VC funds, rather than taking money from regional government funds which might have asked Kateeva to locate its manufacturing operations in their local area.

Madigan also pointed to the tendency of U.S.-based venture capital funds to favor software companies over manufacturing-focused opportunities. As VCs make money in software-related startups, the funds gradually have more partners and investors which favor software because that is what they are familiar with.

VC fund managers with backgrounds in software “want to invest in the space that they understand. In the United States, that often means software, because you pick companies in the space that you understand.”

At The ConFab 2015: Interview with Digital Specialty Chemicals

Monday, June 29th, 2015
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Blog review March 9, 2015

Monday, March 9th, 2015

Pete Singer is delighted to announce the keynotes and other speakers for The ConFab 2015, to be held May 19-22 at The Encore at The Wynn in Las Vegas. The line-up includes Ali Sebt, President and CEO of Renesas America, Paolo Gargini, Chairman of the ITRS and Subramani Kengeri, Vice President, Global Design Solutions at GLOBALFOUNDRIES.

Mark Simmons, Product Marketing Manager, Calibre Manufacturing Group, Mentor Graphics writes about cutting fab costs and turn-around time with smart, automated resource management. He notes that the competition for market share is brutal for both the pure-play and independent device manufacturer (IDM) foundries. Success involves tuning a lot of knobs and dials. One of the important knobs is the ability to continually meet or exceed aggressive time-to-market schedules.

Paul Stockman, Commercialization Manager, Linde Electronics blogs that there is an increasing demand for and focus on sustainable manufacturing that will contribute to a greening of semiconductors. This greening must be robust and responsive to change and cannot constrain the individual processes or operation of a fab.

Applied Materials’ Max McDaniel writes on the quest for more durable displays. He says the same innovators who created such amazingly thin, light and highly functional smartphones (with the help of Applied Materials display technology) are already developing durability improvements that may eliminate the need for protective covers.

Batteries? We don’t need no stinking batteries, says Ed Korczynski. We’re still used to thinking that low-power chips for “mobile” or “Internet-of-Things (IoT)” applications will be battery powered…but the near ubiquity of lithium-ion cells powering batteries could be threatened by capacitors and energy-harvesting circuits connected to photovoltaic/thermoelectric/piezoelectric micro-power sources.

With the 2015 SPIE Advanced Lithography (AL) conference around the corner, some people have asked me what remaining EUVL challenges need to be addressed to ensure it will be ready for mass production later this year or next.  Vivek Bakshi of EUV Litho, Inc. provides thoughts on this topic and what he expects to hear at the conference.

Phil Garrou continues his look at presentations from the Grenoble SEMI 3D Summit which took place in January, focusing on an interesting presentation by ATREG consultants on the future of Assembly & Test.

On Tuesday, January 20, President Obama once again stood before a joint session of Congress to deliver a State of the Union Address.  With the newly seated Republican-controlled Congress and his Cabinet present, the President discussed topics ranging from the current state of the economy to foreign affairs and his ideas on how to move the nation forward.  Jamie Girard of SEMI was pleased to hear that the President supported multiple policy goals including expansion of free trade, corporate tax reform, support for basic science research and development and others.

Blog review June 30, 2014

Monday, June 30th, 2014

Pete Singer blogs that at The ConFab last week, IBM’s Gary Patton gave us three reasons to be very positive about the future of the semiconductor industry: an explosion of applications, the rise of big data and the need to analyze all that data.

Tony Chao of Applied Materials writes that Applied Ventures will be participating in the second-annual Silicon Innovation Forum (SIF) held in conjunction with SEMICON West 2014 in San Francisco on Tuesday, July 8. The forum is designed to bring new and emerging innovators together with the semiconductor industry’s top strategic investors and venture capitalists (VCs), in order to enable closer collaboration and showcase the next generation of entrepreneurs in microelectronics.

Adele Hars of ASN recently caught up again with Laurent Malier, CEO of CEA-Leti to get his take on the ST-Samsung news. Malier said that CEA-Let has been heavily investing in FD-SOI technology, committing critical scientific and technological support at each phase of FD-SOI development.

Phil Garrou blogs that last week at the 2014 ISC (International Supercomputing Conference) it was announced that the Intel Xenon Phi processor “Knights Landing” would debut in 2015. It will be manufactured by Intel using 14nm FinFET process technology and will include up to 72 processor cores that can work on up to four threads per core.

Blog review April 14, 2014

Monday, April 14th, 2014

The increased performance and the rapid shift from traditional handsets to consumer computing device post a number of manufacturing and supply chain challenges for fabless chip makers. Dr. Roawen Chen of Qualcomm says the scale of the challenges also creates an “extreme stress” for the existing foundry/fabless model to defend its excellence in this dynamic landscape. In a keynote talk at The ConFab, titled “what’s on our mind?” Dr. Chen will deliberate on a number of headwinds and opportunities.

Jean-Eric Michallet, Hughes Metras and Perrine Batude of CEA-Leti describe how the research group has already demonstrated the successful stacking of Si CMOS on Si CMOS, achieving benchmark performance for both layers of transistors. The main process challenge is to develop a sufficiently low-temperature process for the top transistor layer to limit the impact on the lower transistor layers.

Phil Garrou continues his analysis of the IMAPS Device Packaging Conference with a review of the keynote by AMD’s Bryan Black, titled“Die Stacking and High Bandwidth Memory.” Black stated that “…while die stacking is catching on in FPGAs, Power Devices, and MEMs, there is nothing in mainstream computing CPUs, GPUs, and APUs …HBM Stacked DRAM will change this!” Garrou also reviews the newly announced STATSChipPAC FlexLine, which uses eWLB technology to dice and reconstitute incoming wafers of various sizes to a standard size, which results in wafer level packaging equipment becoming independent of incoming silicon wafer size.

Karen Savala, president, SEMI Americas, blogs about the sustainable manufacturing imperative, noting that sustainability is increasingly considered a differentiating factor in global competitiveness relative to the technologies and products being provided. In conjunction with SEMICON West and INTERSOLAR North America, SEMI is organizing a four-day Sustainable Manufacturing Forum to share information about the latest technologies, products, and management approaches that promote sustainable manufacturing.

Blog review April 7, 2014

Monday, April 7th, 2014

Pete Singer reveals the lineup of presenters for Session 1 of The ConFab, to be held June 22-25 in Las Vegas, and provides summaries of their talks. Speakers will be Vijay Ullal, COO, Fairchild Semiconductor; Dave Anderson, President and CEO, Novati Technologies; Gopal Rao, Senior Director Business Development, SEMATECH; Adrian Maynes, Program Manager, F450C; and Bill McClean, President, IC Insights.

Phil Garrou blogs about a variety of diverse issues this week, including GLOBALFOUNDRIES’ potential purchase of IBM’s semiconductor business, Altera’s separate deals with Intel and TSMC, why FinFET could be more expensive that more conventional CMOS strategies, as view by Handle Jones of IBS, and a new joint development program between ASE and Inotera focused on 3D IC packaging.

Blog review March 31, 2014

Monday, March 31st, 2014

Ofer Adan of Applied Materials blogs about his keynote presentation at the recent SPIE Advanced Lithography conference, which focused on how improvements in metrology, multi-patterning techniques and materials can enable 3D memory and the critical dimension (CD) scaling of device designs to sub-10nm nodes.

Soitec’s Bich-Yen Nguyen and Christophe Maleville detail why the fully-depleted SOI device/circuit is a unique option that can satisfy all the requirements of smart handheld devices and remote data storage “in the cloud.” Devices that are almost always on and driven by needs of high data transmission rate, instant access/connection and long battery life. Demonstrated benefits of FDSOI, including simpler fabrication and scalability are covered.

This year’s IMAPS Device Packaging Conference in Ft McDowell, AZ had a series of excellent keynote talks. Phil Garrou takes a look at some of those and several key presentations from the conference. Steve Bezuk, Sr. Dir. of Package Engineering for Qualcomm discussed “challenges and directions in mobile device packaging”. Qualcomm expects 7 billion smartphone units to be shipped between 2012 and 2017.

Karen Lightman of the MEMS Industry Group writes about the recent MEMS Executive Congress Europe 2014. She describes how every panelist shared not only the “everything’s-coming-up-MEMS” perspective but also some real honest discussion about the remaining challenges of getting MEMS devices to market on-time, and at (or below) cost.

Pete Singer shares some details of the upcoming R&D Panel Session at The ConFab this year. The session, to be moderated by Scott Jones of Alix Partners, will include panelists Rory McInerny of Intel, Chris Danely of JP Morgan, Mike Noonen of Silicon Catalyst and Lode Lauwers of imec.

Blog review March 17, 2014

Monday, March 17th, 2014

Pete Singer is delighted to report that Dr. Roawen Chen, Senior Vice Present of global operations at Qualcomm, has accepted our invitation to deliver the keynote talk at The ConFab, on Monday June 23rd. As previously announced, Dr. Gary Patton, Vice President of IBM’s Semiconductor Research and Development Center in East Fishkill, New York, will deliver the keynote on the second day, on Tuesday June 24th.

Phil Garrou takes a look at what was reported at SEMI’s 2.5/3D IC Summit held in Grenoble, focusing on presentations from Gartner, GLOBALFOUNDRIES, TSMC and imec. He writes that GLOBALFOUNDRIES has been detailing their imminent commercialization of 2.5/3D IC for several years, and provide a chart showing the current status report. TSMC offered a definition of their supply chain model where OSATS are now integrated.

Bharat Ramakrishnan of Applied Materials writes about the importance of wearable electronics in the Internet of Things (IoT) era, and the role that precision materials engineering will play. He note that one key part of the wearables ecosystem that is still in need of new innovations is the battery. Two of the biggest challenges to overcome are the thick form factor due to battery size, and the lack of adequate battery life, thus requiring frequent recharging.