Hello from the rocky Maine coast--where spring has arrived on schedule and already is turning the countryside green. This new weekly column, which picks up from a weekly newsletter we wrote during the 1990s, will look at and comment on the important developments of the past week in the chip world.
Trying to find missing piece of copper chip
Going ahead with copper interconnects without low-k dielectrics is like eating a peanut butter sandwich without the jelly. That's what some experts are telling us. Low-k dielectrics continue to be the main piece missing in the ultimate, next-generation IC with copper metal interconnects. Copper is now moving into production, but its full benefit is being held back by the lack of a low-k dielectric needed to replace silicon dioxide as the interconnect insulator. To get up to speeds of a gigahertz and beyond, copper will need a low-k boost.
The chip industry may be close to identifying four-or-five leading candidates for next-generation low-k dielectrics. A big push in this direction could come from IBM Microelectronics, which plans to roll out its approach to low-k dielectrics later this year. The chip maker, which gets credit for setting the pace earlier in dual-damascene copper processing, believes it will also lead the way in low-k dielectrics. IBM will not say yet which direction it will go, but does say that it will not be fluorinated silicon glass, the immediate step that some companies are taking to reduce capacitance.
Two types of low-k dieclectrics--spin-on films and those deposited by chemical vapor deposition--are now fighting to win this race. Some experts believe the choice will be made by July when Semicon West, world's largest chip production trade show, meets in San Francisco. (See March 24 story).
What goes around comes around
For journalists, there is the "evergreen" story--a yarn that's rediscovered by new generations of reporters. We may have one of those stories this week in the case of physicists at Lucent Technology's Bell Labs who have developed an organic transistor they say one day could become cheaper to produce than silicon chips for such high-volume applications as smart cards and identification tags.
We remember those same claims made for R&D done for the Pentagon by Defense Electronics, a Los Angeles aerospace company, that we reported on back in the 1960s. We don't know what became of that earlier work--or the firm for that matter--but Bell Labs uses pentacene, a simple molecule made out of five connected benzene rings to form crystals having the electrical properties for a semiconductor. Its researchers say development of pentacene organic transistors is "opening up exciting research directions." Already, organic field-effect transistors have been made by Bell Labs from pentacene. I guess these developments do take time. (See March 20 story).
New boss may invigorate Hyundai
Keep your eye on Hyundai Electronics and its soon-to-be elected president, Chong Sup Park.
Based until recently in San Jose as president of Hyundai Electronics America, he is due to take over as head of the parent South Korean company in April. And he just may stir things up.
Park is bringing back plenty of new ideas he picked up in the U.S. For one, he plans to institute American-style financial management control systems at the chip giant. Park also wants to restructure Hyundai Electronics to reduce the traditional management hierarchy and strict seniority-based employee evaluation system. This approach "has plagued many large Asian companies," he believes. Hyundai is now starting employee stock option and profit-sharing incentive plans. Park also is moving fast to get operations started at its fab shell in Scotland. A deal with a semiconductor partner is "only a few weeks away," he says. No confirmation yet but the partner may be Intel. And despite the volatility of DRAMs, Hyundai won't cut back on their production.
But Park wants to reduce his firm's dependence on DRAMs from the present 85% of its chip sales to 60% "in a few years." Not surprisingly, he aims to do that by increasing sales of non-memory devices. Park also wants to boost Hyundai's foundry work significantly by competing more aggressively against the big Taiwan foundries. The plans of its new president should keep the pot bubbling at the world's largest DRAM producer. (See March 20 story).
Is there too much bullishness in chip gear biz?
Is the semiconductor equipment industry getting too hot? Are equipment makers feeling too optimistic about their zooming sales and stock prices? Could be. All this bullishness certainly makes us nervous. Equipment makers met with analysts this week in New York and it was one big love fest. Listen to SEMI president Stanley Myers: "It's generally agreed that we're in for another 18-to-24 months of solid growth." Oh boy.
Admittedly the supporting numbers look good now. Book-to-bill came out this week at 1.41 ($1.41 in orders received vs. $1 of shipments), the second highest in SEMI history. The chip capital equipment industry booked $1.6 billion in February, nearly double that shipped a year ago (see March 21 story).
Chip gear stock prices also reflect this strong optimism. SEMI's index of stock prices has shot up from 100 to 376 since it began in early 1999. The SEMIndex outperformed both the telecommunications and Internet stocks in 1999, points out
George Chamillard, CEO of Teradyne. "I think it's a credible measure of the health of the industry," he says. While there are a few people (like us) who remember all to well the equipment industry's previous boom-and-bust cycles, few if any at this week's meeting were expecting a downturn to arrive until 2002 at the earliest. Declares SEMI's Myers: "The convergence we're seeing in communications, computers, and the Internet that's driving chip growth is going to go on for at least another couple of years." Chimes in Teradyne's Chamillard: "The fundamentals are strong, and the long term now looks better than it ever has." Be careful, you guys. (See March 21 story).
Another reason to ignore daily stock fluctuations
It was fascinating this week to see Micron Technology take a big hit in after-hours trading, only to recover somewhat the following day. Seems that traders were overreacting to the Idaho DRAM maker's quarterly results. Turns out investors were disappointed over net income, which hit only $161 million in the quarter ended March 2, lower than the $341 million in previous quarter but still up smartly from $22.4 million a year ago. Shipments totaled $1.4 billion, down from $1.6 billion in the first quarter but up strongly from $1 billion a year ago. What caused the lower-than- expected results, the company says, was a 20% drop in memory prices during the quarter. (See March 21 story).
Micron's ambitious expansion keeps going
Current margin problems aren't slowing down Micron Technology's aggressive expansion in the DRAM market. The big memory maker is increasing its capital spending on semiconductor operations by 60% to $1.6 billion in its current fiscal year.
About one-third of these expenditures will be used to keep on upgrading its existing frontend fabs. The company still has plenty of room to add capacity without equipping its empty fab shells at its Lehi, Utah, complex. It can still increase capacity by 40% at its fab in Avezzano, Italy, and by 30% at its joint-venture fabs in Singapore and Japan. Micron estimates that global DRAM demand this year will continue at the industry's traditional 80-to-100% bit-growth rate. Micron's production mix will be 50% for PC133 SDRAMs, 10-to-15% for Double Data Rate SDRAMs, 5-to-10% for Direct Rambus, and the rest for PC100 and EDO products. Micron was surprised by a surge in sales from aging EDO devices, which now sell for a premium of $3 over spot market prices for SDRAMs. (See March 22 story).
What it takes to get a good CEO these days!
We know it's difficult to recruit experienced staffers in Silicon Valley, but we didn't know the labor shortage extended to top management. Advanced Micro Devices, which had looked hard for a new president who would be a leading candidate to succeed Jerry Sanders as CEO, came up with a great package to get Hector Ruiz, who was running Motorola Semiconductor.
It turns out that the former Motorola exec was promised at least $1.5 million in the event the board does not elect him to replace Jerry by 2002. Ruiz appeared to be the heir apparent when he was hired in January, but the plan got a lot clearer when AMD filed its annual proxy statement this week. He is due to receive a lump-sum severance payment equal to two years of his current annual base salary and the vesting of his initial option will be accelerated by two years. Ruiz now earns a $750,000 annual salary and has an option to purchase 1 million shares of AMD stock.
The proxy didn't forget Sanders either. The CEO was awarded $2 million for leading the company to the successful completion of Fab 30 in Dresden and to fourth-quarter profitability. That bonus is on top of Jerry's $1 million salary, $115,298 in company-provided vehicles, $79,754 in "physical security services," stock options, and other compensation. AMD really takes care of its top executives. (See March 24 story).
Flash will be 2nd largest memory segment this year
Flash is hot! After growing 83% in 1999, global revenues are expected to more than double this year. Driving this impressive sales growth are wireless communications and consumer products such as digital cameras, MP3 audio players, and set-top boxes. Market researcher IC Insights predicts that flash memory revenues will grow 119% to $9.97 billion this year from $4.56 billion in 1999. The flash market amounted to only $2.49 billion in 1998.
By making it to the No. 2 spot this year, flash will pass SRAMs and trail only DRAMs. It will account for 21% of the global memory market this year, up from 14% last year. Worldwide unit shipments of flash will hit 1.9 billion chips in 2000, up 56% from 1.22 billion in 1999, according to the market researcher. Cellular phones alone will consume 430 million flash chips this year. Next year, unit sales should grow 26% to a total of 2.39 billion devices, IC Insights predicts. (See March 22 story).
Chinese eye global cell phone market
Without a doubt, China has a world-class cellular phone market. As many nations have learned, China finds it far cheaper and easier to add this kind of communications infrastructure than it is to add lines and poles. Annual sales of mobile phones in China run 27 million sets annually. But the market is now turning into a real dogfight, with local companies challenging foreign makers for the first time.
For years, three Western giants dominated China's cellular phone market. Ericsson, Motorola, and Nokia control 85% of the business. But the competitive picture changed abruptly last year when Samsung jumped in and grabbed 10% of the market. The South Korean company's success has prompted local investors to rush into the market. China's top producer of consumer-electronics products, the Konka Group, is now going into volume production of GSM cellular handsets. And more local suppliers--such as the Haire and Panda groups and Xiamen Chinese Overseas Electronics--are soon expected to follow Konka's lead. Konka aims to turn out 1 million sets this year and is working hard to build up production so that it can ship 4-to-5 million phones annually in three years.
The Chinese consumer leader, which designed its own GSM phone with technology aid from Lucent Technologies, is very ambitious. It expects to start designing its own GSM chips within two years, and selling its GSM phones around the world in three years.
(See March 24 story).
LSI Logic zeros in on consumer chips
Consumer ICs once again have become a mainline strategy at LSI Logic. The BIG chip maker kept a low profile in consumer markets in recent years, but now it is stepping up its consumer activities with the major focus on the digital video market.
The two major technology drivers for its consumer road map will be high-speed Internet connectivity and wireless home networking. It will target three product areas over the next 18 months: digital satellite set-top boxes, Sony Corp.'s Playstation 2 game player, and digital video disk players. The company plans to leverage its design expertise in the digital subscriber line (DSL) and HomeRF markets to pry open new design opportunities in intermediate-generation Playstation 2 game consoles and in two-way, digital satellite set-top boxes. No one is deploying two-way satellite boxes yet, but there has been a lot of talk about developing such a two-way satellite connectivity. (See March 23 story).
If you have any comments, additions, or questions, don't hesitate to E-mail us at email@example.com. Have great weekend!
(See previous week's Semiconductor Alert! March 13-17).