On Earthquakes and Engineers
By David Lammers
Now that modern-day fabs rely much less on operators, there is a tendency to downplay labor as an important factor in chip manufacturing. While it is true that 300-mm fabs require many fewer operators, the need for technicians who can install and maintain the incredibly expensive equipment is becoming more important.
Here in Austin, experienced equipment technicians and fab managers are being recruited to move to New York to work for the GlobalFoundries fab near Saratoga Springs. The GlobalFoundries pull is requiring Samsung Austin, Spansion, and Freescale to try and figure out how to hang on to their best people. And as Applied Materials tries to meet strong demand for refurbished equipment from its Austin facility, that means tracking down knowledgeable equipment people who may have moved on to jobs elsewhere.
Recruiting engineers and technicians to semiconductor manufacturing isn’t easy. Chemical engineers at the University of Texas at Austin, for example, look first to the energy (oil and gas) companies, where salaries are higher, though that often requires living in Houston.
Now that the Japan quake has caused such havoc, analysts such as Dale Ford at IHS iSuppli and Bill McClean at IC Insights have been saying the electronics industry needs to seriously rethink its dependence on suppliers in earthquake-prone areas. McClean issued a bulletin called “IC Fabs in Danger” which noted that “fully 90% of pure-play IC foundry capacity is located in seismically active regions.”
“Since the two largest IC foundries in the world (TSMC and UMC) have such a significant presence in Taiwan,” McClean said, “a disastrous earthquake or typhoon in that country would have serious ramifications for the entire electronics supply chain.” Dale Ford at iSuppli said exactly the same thing on two Webcasts about the Japan quake’s impact on the supply chain.
Foundries, notably TSMC, have convinced many of their customers to strike up sole-source relationships in return for attractive wafer pricing. Because so many part types are sole-sourced, McClean argues that “the ramifications of damage to IC foundry fabrication facilities would be much greater than damage done to individual IDM IC fabs.”
Security goes beyond earthquakes and typhoons. Samsung has 330 acres in Austin, and the company fully expects to populate that space with five chip fabs. Not only is central Texas considered to be an earthquake-free zone, it is far away from North Korea. Apple sat down with Samsung at one point and said it would not accept having so much of its chip supply coming from fabs just a few dozen miles from North Korea’s artillery. Being able to tap UT-Austin’s engineering talent was another major factor in the Austin expansion.
Morris Chang, the CEO of TSMC, has decided to build TSMC’s third megafab in Taichung, in central Taiwan. With megafabs in Hsinchu in the north and Tainan in the south, one wonders if Chang considered building TSMC’s third megafab in an earthquake-free zone?
That leads back to labor availability. Don Brooks, who held executive positions at TSMC from 1991-1997, once explained that TSMC surely gained tax advantages by being in Taiwan, compared with being in the United States. “The real advantage TSMC has is the Taiwan engineers. They work incredibly hard,” he told me in the mid-1990s.
And for not a whole lot of money, either. While long-time TSMC employees have been enriched by stock options, the labor costs in Taichung are surely less than they would be in, say, Dallas, where Chang worked until moving to Taiwan in the mid-1980s.
Chang once told me that TSMC had a hard time attracting engineers to work at its Camas, Wash. fab. He said TSMC was at a disadvantage in trying to hire American engineers, who, if they were good at their profession, often had more attractive offers from Intel and others. That is probably still true.
The increased awareness of earthquake dangers butts up against the traditional manufacturing questions of who has good yields, who has capacity, who has the best wafer costs. No doubt about it. For a company to put all of its chip supply in earthquake-prone areas is nothing short of stupid. As long as the earth’s core remains molten, volcanoes and earthquakes occur, naturally and often. No wishful thinking can alter the tendency for them to happen most often in China, Taiwan, Japan, (where I lived for 19 years) and the U.S. West coast. Surprisingly, South Korea is not considered to be in a seismic zone.
But capacity is king, and right now, TSMC has more of it than any other foundry. And it is building enough new capacity to serve its customers, even as they bite their fingernails in fear of a major Taiwan quake like the one that hit Japan’s Tohoku region.
Until GlobalFoundries can build a couple more fabs in Dresden and Malta (with Abu Dhabi coming next), and, more importantly, attract and train the young engineers and technicians who know how to make those new fabs hum at high yields, the earthquake warnings will remain a long-term concern in an industry notorious for short-term thinking.