By David Lammers
As the semiconductor industry becomes more concentrated, both in terms of which companies are investing and where those investments are going, being near a cluster is paramount to success. Europe has three such clusters – Intel’s Leixlip facility in County Kildare, Ireland; the Dresden, Germany complex where GlobalFoundries is expanding; and Grenoble, France, where a combination of STMicroelectronics, the French research center Leti, and Soitec all have fabs.
A fourth cluster may one day develop in Abu Dhabi, where GlobalFoundries is likely to build a fab several years from now. Already, about 60 engineers from Abu Dhabi have gone to Dresden for training, said Gitta Haupold, vice president of Silicon Saxony. At the very end of the SEMI Industry Strategy Symposium (ISS) Europe, committee chair Cor Claeys of imec said Abu Dhabi was being considered as the location for ISS Europe 2012. The possible Abu Dhabi venue is an indicator of how Greater Europe is expanding its virtual border to include not only Moscow, where SEMI is holding Semicon Russia in late May, but in the Middle East as well.
Intel’s continued investments in Ireland, and the GlobalFoundries expansion at Dresden, have helped SEMI Europe to expand by 70 members, to around 1,200 companies. Indeed, Europe has a strong base of equipment companies (ASML, ASM International, EV Group, Oerlikon, Aixtron and others) and materials suppliers (Soitec, BASF, and others). Many of today’s fabs are built by the M+W Group.
But participants at the ISS Europe meeting said there is a strong feeling that Europe is slipping badly while Asia grabs an ever larger share of semiconductor manufacturing. Slowing down the shift of chip manufacturing to Asia, and building more energy into the manufacturing clusters in Europe, is a challenge which affects the future of Europe, speakers at ISS Europe said.
André-Jacques Auberton-Hervé, chairman of the SEMI Europe advisory board and the CEO of the Soitec Group (Bernin, France), said “semiconductors are as important to the future of Europe as is access to natural resources.” Heinz Kundert, president of SEMI Europe, said “losing competitiveness in silicon means losing our base in all industries.”
Indeed, the trend line is alarming for Europe. For decades, Europe accounted for 20-30 percent of semiconductor capital spending. That declined to 8-10 percent, and in the last few years even that meager share has dropped to only 4 percent, said Jean Therme, Director of CEA Grenoble, quoting statistics from IC Insights. (During an Applied Materials conference call last month, the company said roughly 10% of its fiscal Q1 sales came from European customers.)
A few years ago, Europeans seemed resigned to the inevitability of outsourcing semiconductor manufacturing to the large Asian foundries. Then, a light bulb went off when SEMI’s leadership began pounding home a message that many of the industries on which Europe’s economy depends are, in turn, reliant on staying ahead in semiconductors. Autos, medical equipment, wireless and wired communications, are among the world-leading European industries built on integrated circuits.
Neelie Kroes, vice president of the European Commission, summed it up well in a heartfelt message presented during ISS Europe. “Europe is in the middle of a series of crises, including a rapidly aging population, a globalizing economy, and environmental issues. We can’t solve them without a strong IC industry. Just as grain was central to an agrarian economy, and iron and steel to the machine age, it is semiconductors which are central to the information societies we now live in.”
Ms. Kroes described the strengths of Europe in R&D, noting that research means relatively little unless new ideas can be brought to the market by commercial enterprises. “As a Union, as Europe, we need a presence in advanced manufacturing. There is no use trying to do that in a fragmented fashion. We need to take concrete actions, and we need to take them now.”
The semiconductor industry has formed a group of 27 executives and experts, called the European Commission, Key Enabling Technologies (KET), High Level Group. The EU’s KET initiative is pounding home the message that manufacturing is essential for Europe, and that semiconductors, nanotechnology, advanced materials, photonics, and biotech are key to future growth.
Therme, chairman of the group which helped create the ideas behind the list of Key Enabling Technologies, said Europe is in a near-crisis. While 22 new fabs in Asia are planned for 22 nm technology, only one is being planned in Europe. In solar and lithium-ion batteries, Therme described similar stories, including interest-free loans to solar companies in China. Europe does the R&D, but China and Taiwan account for 80 percent or more of the manufacturing in these emerging industries.
Therme’s call for advanced manufacturing was taken up by Carlo Bozotti, CEO of STMicroelectronics, who speaks to public gatherings fairly infrequently. After recounting the successes of European research consortia, Bozotti made a key point: “History shows that when manufacturing relocates, R&D follows soon after.”
There was an consistent line of argument during the symposium: while More Moore (density doubling) continues, More Than Moore is set to play a more prominent role. Bozotti clung to this line by detailing the growing importance of More Than Moore, including the integration of passives, analog, and advanced packaging. “More Than Moore is changing the rules. It is the beginning of an increasingly important story.”
Taking no questions, Bozotti left the stage after his call for “mastering manufacturing science.” But during the next few days, people returned to Bozotti’s special situation, speculating on the EU political forces pulling STMicroelectronics to build a 300-mm fab in Europe. However, Bozotti faces a chief financial officer and others within his own company who are said to be reluctant to pour capital into another 300-mm fab. With TSMC and GlobalFoundries investing so heavily, the risk of capacity shortages at its foundry partners may not be quite so large, at least not for the near term, some participants said.
GlobalFoundries is hiring about 100 people a month to work in Dresden, and is “looking all over Europe,” including in Poland and Czechoslovakia, for the “highly specialized technical and engineering skills” needed to expand the foundry’s operations, said Jens Drews, a GlobalFoundries government relations executive based in Dresden. “The graduation rates for engineers in Europe are not high enough to sustain successful clusters of manufacturing,” Drews said.
Ironically, the two U.S.-based companies operating in Europe, Intel and GlobalFoundries, are expanding aggressively near Dublin and Dresden, including recruitment campaigns. Intel currently has 300 Irish workers in the United States for training, preparing for a technology upgrade in Leixslip, and is recruiting in Ireland, said Leonard Hobb, engineering research manager at Intel Ireland. Given that neither NXP Semiconductors nor Infineon Technologies are likely to build 300-mm fabs again, the question is: What will STMicro do?
Bill McClean of IC Insights said STMicro may have to counter the 300-mm manufacturing moves by Texas Instruments by building a 300-mm analog IC fab. French president Nicolas Sarkozy has backed STMicro as much as possible. But with Sarkozy’s approval rating at 22 percent in the latest poll and facing an election in 2012, major French government funding for another STMicro fab in Grenoble may hang on the results of that election. Budget deficits are as real in Paris as they are elsewhere.
What is to be done? Besides educating bureaucrats in Brussels, Paris, Berlin, and other capitals, there are other measures that must be taken to foster semiconductor manufacturing in Europe. Energy costs can be twice as high as in some Asian countries. Tax credits for research and development can be strengthened. Subsidies, of course, are required to match those given in Asia and elsewhere. Perhaps most importantly, as Alain Astier, a group vice president at STMicroelectronics said, Europeans must believe in their own strengths.
The good news is that the mood has swung in favor of manufacturing. “There has been a sea change in the last 12 months. You would have been crucified a year ago for proposing to manufacture in Europe. Now, manufacturing is on the agenda,” said Malcolm Penn, president of market research firm Future Horizons.
And the necessity of manufacturing may swing the fence sitters into action. The semiconductor industry is headed toward an era of tight capacity, increasing ASPs, and rising foundry wafer prices at TSMC and elsewhere, Penn said.
Thought precedes action. Building a consensus in Europe that semiconductor manufacturing is worth financial support and is an exciting career path for European students, is a good start. SEMI and the executives on its board deserve great credit for driving home the message that advanced semiconductor manufacturing is vitally important for Europe.
Now it is up to companies to take the next step. And those companies need not be limited to STMicroelectronics. Samsung and perhaps TSMC could build fabs in Europe and, I am sure, profit from the experience.