A New Chip Fab for Austin?
By David Lammers
This year, 2012, is a “Year of the Dragon” in the Asian zodiac calendar, yet another reason for Samsung Electronics to build a third semiconductor fab in Austin, Texas.
There are 12 animals in the Zodiac menagerie. People born in the Dragon years have assertive personalities, bringing vitality and confidence to their business pursuits. That “Dragon personality” seems to characterize Samsung, which has invested in the semiconductor industry’s down cycles with great success.
All signs point to the need for another Samsung logic fab in the United States. Samsung saw a 73 percent rise in its smartphone/tablet business in the most recent quarter, and the company racked up more than $5 billion in quarterly profits. To meet demand for Apple’s foundry needs and Samsung’s own internal SoC consumption, a new logic fab will be needed.
Add to that Samsung’s long-range plan to make foundry equivalent to its memory business. Ana Hunter, the vice president of Samsung’s foundry business, was in Austin recently for a Global Semiconductor Association (GSA) event, and she outlined how important leading-edge foundry is to Samsung’s strategy. Samsung and GlobalFoundries have cooperated on developing a 28nm process aimed at smartphones and tablets, she said, adding that the two foundries “will cooperate on second sourcing and technology and will compete for business.”
Samsung has a 330-acre site in north Austin, with the logic-oriented Main Fab (earlier called Fab 2 or S2) reaching high yields soon after completion of the $3.6 billion expansion project. C. J. Muse, an analyst with Barclay’s Capital, predicts that Samsung will need to add ~43,000 wafers a month of 32nm capacity in 2012 to support Apple’s A6 production and internal Samsung application processor demand. To meet that need, Samsung’s LSI operation will nearly double its logic-oriented investment to about $7 billion this year, exceeding Samsung’s memory-related investments, Muse said.
Christian Gregor Dieseldorff, a research director at SEMI, said Samsung has “allocated much more spending for System LSI/Foundry-business, more than ever seen before.” Samsung will increase its installed capacity for System LSI and foundry by more than 30 percent in 2012, from ~530,000 wafers per month (in 200 mm equivalents) at end of 2011 to ~700,000 by the end of this year.
Sure, there are issues which need to be worked out in central Texas. Travis County and Samsung are trying to reach agreement on the tax valuation of the Samsung property and production equipment, a dispute which one would hope will not turn out to be a showstopper. Earlier, Austin’s electric grid was a concern, but Austin Energy added the needed substations.
Probably the biggest challenge is the talent pool. Samsung competes with Intel and the other big chipmakers for experienced technicians and manufacturing engineers, some of whom are more comfortable working for a U.S. company with schedules that are less aggressive than Samsung’s deployment expectations. Unfortunately, Texas schools are not very well funded, and are not turning out enough people who want to learn to maintain an etcher or boost fab productivity.
Recent global events also lean in favor of a new Austin fab. The leadership change in North Korea could easily provoke military conflicts that could impact Samsung’s Kihung fab complex, not far from Seoul. The earthquake and tsunami in Japan is fresh in everyone’s memory, or should be.
There is a new realization that putting all of one’s chips (or disk drives) in one geographical locale is just not smart business. Apple, for all of its legal issues with Samsung’s system designs, needs to source chips from at least one fab complex not in a military or seismic danger zone.
I’ll close with an anecdote garnered when three friends of mine and I gathered at a restaurant in Austin for a holiday burgers-and-beers lunch. “What kind of laptop should I buy after I turn in my company system?” said Greg, who is retiring in March after 40 years of managing J.C. Penney stores. “Oh, I wouldn’t get a laptop,” said Garry, a software engineer, arguing that a new iPad tablet would be able to do everything Greg needs to do. I sat back and thought how ludicrous that would have sounded just two years ago, but how much sense it makes in the Year of the Dragon.
It all adds up to the need for a new logic fab in Austin, opening in mid-2013.