SAN FRANCISCO-- Your crystal ball foggy on what's ahead in the semiconductor market? Well, last week's SEMI Semicon West big equipment show offers one forecast of some certainty: the world for some time to come is going to be swimming in chips.
In spite of a global inventory glut and sagging demand, the chip industry is geared up to crank out kajillions more die in the years ahead. That's because most major vendors are still on a blitzing die shrink speed track and many are set late next year to launch next generation 300mm wafer fabs able to turn outnearly twice as many die as current 200mm facilities.
Moreover, a serious look at equipment and materials technology at Semicon West showed there's no stopping Moore's Law any time soon in cascading ever more chip quantities into the market. Only if chip makers exercise unaccustomed discipline to turn down the production spigot they have put in place will the expected overflow of die not happen.
That's somewhat good tidings for OEM customers. Super-abundant chips usually equates to low, lower and lowest prices. Die shrinks and booming yields have been the driving force behind the chip industry's traditional 30% a year cost reduction for decades.
The market perturbations, however, can be a mixed blessing in the supply channel, depending on where you fit. The present semiconductor glut creates enough pain for vendors and channels trying to cope with plunging revenues and profits (or losses. Even OEMs delighted with bargain-basement chip prices also
have to be concerned with what financial instability is doing to the long-term health of some of their key suppliers.
There's also a lot of uncertainty about the market impact of all this flood of chips, assured as that torrent may be.
Not the least quandary to consider is whether the market next year will be back on its feet and ready to absorb the surge of chips. The becalmed communications and networking market is expected next year to have finally siphoned off its
huge parts inventory. Will it be able to survive an even bigger avalanche of chips thundering from Moore' Law fabs?
The PC industry seems to have worked down excess chip inventories, but will demand be back to the heady days before the market collapsed?
Will promised new markets--wireless Web access devices, digital TV, broadband Internet-- take off to create new demands to soak up the surge of new chips?
Most chip makers laid their die-expansion in the 1998-2000 boom cycle, at times when they couldn't produce enough to keep up with ever spiraling orders.
Now with a sudden reality check, they are slowing down the ramp any way they can. New fabs under construction are being kept as empty shells without equipment, until better days are here again. A rush to next generation argon fluoride laser lithography able to pattern 0.13-micron and lower design rule die is being slowed, as producers find ways to extend presently installed kypton fluoride lithography tools down to these chip nodes.
And the race to build 300mm wafer fabs has hit a speed bump, as more than one chip maker ponders whether it makes sense to invest billions of dollars to crank out twice as many die as present 200-mm fabs already in overproduction. If you really need new capacity, you can purchase a surplus leading edge 200mm fab for 50 cents on the dollar in the distress market. And with new die shrinks, that fab can probably be very cost effective, while waiting on global demand to pick up to the level needed by creating a new 300-mm wafer giant.
However, the odds are almost certain that despite semiconductor firms belatedly starting to slash capital spending, the on-going die shrinks and new fabs already being equipped will keep the chip blitzkrieg rolling in the coming year. You can bet on it.