By David Lammers

I spent a morning recently at a community college near the GlobalFoundries fab in upstate New York, and learned a lot about the challenges facing students and educators.

Fred Strnisa, instructor, semiconductor and nanotechnology

Fred Strnisa, who teaches semiconductor manufacturing technology (SMT) at the Hudson Valley Community College’s Malta campus, has a mix of students. Of the 13 people in the SMT sequence, only two are recent high school graduates, and four are over 40.

“A lot of the people who come here are in their late 20s and 30s,” said Strnisa. “They are trying to reinvent themselves,” hoping to move on to what they believe will be better careers as operators and technicians at the Malta fab, or at one of the General Electric facilities in the Albany-Schenectady-Troy- area.

With fellow SMT teacher Abe Michelin, Strnisa says his job “is to make my students valuable to employers in the area,” including GlobalFoundries, GE, and the College of Nanoscale Science and Engineering (CNSE) and Sematech research complex in Albany, 20 miles to the south. He plans to increase the number of students in the two-year sequence, providing funding materializes.

The coursework is demanding, including hands-on labs aimed at making working diodes. And almost all of the students have jobs. “One student is the manager at the Advanced Auto Parts store here,” Strnisa said, concerned that some his students might have too much on their young shoulders.

Brett Miller stopped by Strnisa’s lab, and volunteered that of the original 15 who started the two-year SMT sequence with him, only six made it through. “Nine of them couldn’t handle it. Usually it is the older students who take it more seriously,” said Miller, who was laid off after a long stint at a book marketing company in the area. He graduated from the SMT program last May, and is hoping to get a job at GlobalFoundries.

“The economy totally tanked here during the downturn, but I saw more high tech companies coming to the area, so I decided to reeducate myself with the SMT program,” he said, estimating that he spent 70-75 hours a week at the classes or studying on his own. He could do that because he qualified for unemployment insurance and supplemental “599B” money to support his retraining effort.

GlobalFoundries has about 1,300 people on board now, and will hire about 300 more by the end of this year when volume production begins. “I’ve been waiting to be hired, to hear back from the hiring manager,” Miller said. “Eventually, I’d like to be in management, but a technician’s job would be a great start.”

Miller said the labs in the SMT program helped him to understand the chip-making process. “When a lab goes wrong, we learn how to fix it,” Miller said, exuding enthusiasm.

Penny Hill, an associate dean at the college’s Tec-Smart program (Training and Education Center for Semiconductor Manufacturing and Alternative and Renewable Technologies), said the SMT program “is pretty difficult for young kids right out of high school. The requirements are challenging, and oftentimes at their ages they aren’t quite sure what they want to do. And then there often are money issues,” she said.

The HVCC’s Tec-Smart program, located not far from the Malta fab, opened in January 2010. It is a gorgeous place, with a church-like peaked ceiling and huge windows, set amidst a nearly pristine forest. Wind turbines and two large solar panels are outside. Geothermal, HVAC, and solar energy programs complement the SMT sequence, partly supported by a Department of Energy grant.

On a sunny and cool spring morning, it seemed like an idyllic place to be. However, there are several challenges facing the school’s industrial technology programs, said Andrew Matonak, president of the Hudson Valley Community College, based in Troy, N.Y. It costs at least 50 percent more to educate a student in industrial skills or health sciences, compared with a liberal arts program. He estimates a $19,000 cost for an industrial sequence, such as one aimed at teaching students the electrical and mechanical skills needed to repair sophisticated machinery. That falls far short of $3,400 in tuition.

Compared with three years ago, New York state funding is 21 percent less. “The state keeps pushing the funding requirements down to the counties, but these health sciences and industrial technology programs are costing more.”  The equipment in the SMT lab costs about $500,000, Strnisa estimated, and adding more students requires buying more workstations and tools.

Phil White, dean of the schools of business and engineering & technical technologies, adds that people are still getting to know what GlobalFoundries is all about, and vice versa. The curriculum in the SMT program is being adjusted, based on discussions with GlobalFoundries people.

Students, Matonak and White said, are discussing among themselves the semiconductor industry’s corporate culture, including what it might be like to wear a bunny suit for 12-hour shifts. “For some students, who like socializing, working in a cleanroom environment might be a challenge,” White said.

Penny Hill, associate dean, and Fred Strnisa, outside the HVCC Malta building.

By David Lammers

The announcement that Elpida Memory Inc. is declaring bankruptcy essentially takes Japan out of the DRAM sector which Japanese companies came to dominate in the mid-1980s.

What happened in Japan that took out all the once-leading DRAM makers over three decades?

Three things come to mind: First, the yen tripled in value vis a vis the dollar. Secondly, Japanese managers lacked strategic direction and became overly cautious. Third, Samsung and others, sensing opportunity, pounced on the opening.

Go back 30 years to the lovely, green island of Kyushu in southern Japan. Toshiba embarked on a gamble there — one that eventually earned the company billions of dollars in profits — moving from NMOS to the more power-efficient CMOS transistor technology. At Toshiba’s Oita Works in the early 1980s, Toshiba DRAM engineers had a single, parts-starved implanter and were staying up all night, starting at 11 pm every night, to boost the single-digit yields of their one megabit CMOS DRAM.

By the mid-1980s, Tsuyoshi Kawanishi, the general manager of Toshiba’s semiconductor operations, and his staff had taken yields for the 1-Mbit CMOS DRAM to respectable levels. Kawanishi was a charismatic manager, confident without being arrogant, who knew that CMOS at the megabit density was a winning combo in a memory IC sector that was growing rapidly as the computer boom got fully underway. His staff idolized him and – similar to the positive momentum built by Jim Morgan at the helm of Applied Materials – the positive wave at Toshiba carried over into successes in notebooks computers, displays, and other products.

An equally talented Toshiba semiconductor division manager, Taizo Nishimuro, was at that time in charge of sales and marketing. He was making sure that Toshiba’s limited supplies of CMOS DRAMs were allocated fairly to the world’s computer makers, which were all were clamoring for parts. “We know where every single one mega DRAM is going. We have to, because of the trade frictions,” Nishimuro told me in an a 1986 interview.

Nishimuro-san was right to be worried. In 1985 the United States Dept. of Commerce had slammed DRAM dumping duties on Japan, setting off a series of events which led to the 1986 U.S.-Japan Semiconductor trade agreement, which formally called for an expectation that U.S. companies would hold a 20 percent share of an open Japan chip market.

It took a year for NEC, Hitachi, Mitsubishi Electric, Fujitsu, Matsushita Electric, Oki Electric, and others to catch up with Toshiba’s lead in CMOS DRAMs. But they did it, and Japanese semiconductor companies came to hold six of the top 10 spots in the world semiconductor rankings. At one point, investments in Japan’s semiconductor fabs were more than half of all Japan’s capital investments – an astounding amount of money was going into memory fab building. It was enough to scare Intel and other U.S.-based DRAM makers out of the memory sector and into MPUs – a fortuitous change in direction for Intel.

As exports of DRAMs and other well-made products soared, Japan’s trade surpluses ballooned. The imbalances were made worse by the country’s shima kuni konjo (literally, island country mentality, which came to mean an arguably insular belief by many Japanese that nearly everything done in Japan, by Japanese people, was more reliable and more valuable than products made outside of the Japanese islands). With an anti-import bias entrenched in the national mentality, Japan’s trade imbalance proved nearly intractable.

As a result, the dollar, worth about 240 yen in early 1985, quickly started rising in value to the 120- 130 range. The yen now regularly trades at 75-80 yen to the dollar, which is in sharp contrast to the relatively stable rate seen for the Korean won over the past decade.

The dollar's value has declined against the yen over the past decade. (Source: Forecastchart.com)

Over the past decade, the Korean won has remained stable against the U.S. dollar. (Source: Forecastchart.com)

Thus, just a few years after Toshiba’s success with its CMOS megabit DRAM, Japanese managers had twin headaches: how to deal with the higher yen and the insistent market-opening demands from the U.S. Semiconductor Industry Association, led by Bob Noyce, Gordon Moore, Wilf Corrigan, Jerry Sanders, Charlie Sporck, and other battle-hardened executives.

The persistent trade imbalances which Washington and the SIA railed against led to en daka (too high value of the yen). The yen’s value became a ever-heavier weight bearing down on the Japanese semiconductor industry.

As the yen was rising, the confidence of Japan’s top managers – who had computer and telecom operations as well as semiconductors to deal with– began sagging. The executives leading Japan’s electronics industry moved away from a stance of bold initiative — exemplified by Toshiba’s Kawanishi and the CMOS move – to a more hesitant, bottom-line-driven mentality.

Again, cultural perceptions played a role. During this early 1990s period I interviewed Kazuo Kimbara, who ran Hitachi’s semiconductor operations. He fretted that the United States economy would be dragged down by social challenges such as crime, education, racial conflicts, divorce, and the like. Kimbara-san, and others, couldn’t quite see beyond the headlines to the basic realities of the U.S. economy, which proceeded to do quite well as software, networking, personal computers, and mobile products combined to form the tech-driven economy we have today.

As Japan’s confidence and chip investments faltered, Samsung pounced. Everything broke right for Samsung, as the Korean won remained relatively stable while the yen rose sharply in value. Investments in and revenues from NAND complemented its DRAM base. And Samsung invested during the industry down cycles, and in 200-mm and then 300mm wafer equipment while Japanese companies did not, relatively speaking.

Caption: Hajime Sasaki at the NEC Foundation’s 2011 C&C Prize ceremony.

Another point has to do with the sequence of development of Japan’s semiconductor industry. Hajime Sasaki, who ran NEC’s semiconductor operations in its heyday, famously said Japan’s chip industry was “like a dog chasing two rabbits” — logic and memory — ending up with neither. Samsung seemed to uncoil like a baseball slugger, initially seizing the DRAM opportunity, then building into NAND, and – having built a solid base in commodity memory – moving on to the logic and foundry opportunity.

A few words about Elpida. Its president, Yukio Sakamoto, was a vice president at Texas Instruments Japan until 1993. TI operated several fabs in Japan, and Sakamoto moved up the ladder by solving tough problems, recalled Mentor Graphics CEO Wally Rhines, who also worked at TI then.

“When a customer would call up and say it needed a rush shipment by Friday, Sakamoto would tell us, ‘I’ll take care of it.’ And he would. He did that over and over again, saying ‘I’ll take care of it.’ That is how he gained everyone’s respect, by taking care of the tough challenges that come up when you are running a semiconductor operation,” Rhines said.

As talented and committed as Sakamoto-san surely is, he and his colleagues at Elpida ran up against a set of new realities in the DRAM industry. They were among the leaders in the drive to 20nm design rules, to Wide I/O DRAM and Mobile DRAM. Elpida remains a major supplier to Apple. But is it enough? Will the Japanese government move to save Elpida and its jobs, or let it go just as Germany let Qimonda die?

Without NAND and facing a bleak future for DRAMs, Elpida may in fact go bankrupt. Japanese chip manufacturers simply can’t thrive in an era of 78 yen to the dollar.

Barring a phoenix-like miracle by Elpida, it is a sad end to a remarkable run by a long line of Japanese DRAM makers.

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.

Ana Hunter

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.