San Jose, Calif. The IC business is fast becoming unaffordable for all but the wealthiest chip makers.
Rising fab and chip-design costs are creating a new elitism, with the well-heeled few able to shoulder the burden and the mass of suppliers squeezed out, according to data from one design tool vendor. The trend will become even more pronounced starting at 45-nanometer manufacturing, Synopsys Inc. predicted at last week's International Symposium on Quality Electronic Design (ISQED) here.
In the new IC world order, fewer integrated device manufacturers (IDMs) can afford to build fabs, while
only an elite group may be able to develop leading-edge IC designs over time. At the 45-nm node, a new 300-mm fab costs about $3 billion, process technology R&D runs $2.4 billion and a "mask set" is up to $9 million, Synopsys said. Test costs, meanwhile, continue to be flat.
IC design costs range between $20 million and $50 million, the EDA company estimated. And there's a new problem on the block: process variation. Identified as one of the new "pressure points" at the 45-nm node, variation is becoming one of the root causes of chip failures.
Much of the data is uncertain for the 32-nm node and beyond, but some say that by then, a new 300-mm fab could go for $10 billion, as process R&D costs reach $3 billion and design costs $75 million.
"I am not saying that the semiconductor industry has reached a stalemate," said Tom Williams, a fellow at Synopsys (Mountain View, Calif.). "But making the jump to the 65- and 45-nm nodes will involve a very small part of the [chip-making] population. You will see people jumping at the 45- and 32-nm nodes too, but only the elite few will be able to afford it."
There are two sides of the economic problem in the semiconductor industry: IC design and manufacturing. Both IDMs and fabless design houses are affected.
On the manufacturing side, Williams painted a troubling set of trends. Overall plant costs could escalate faster than expected, he said, due in part to the soaring prices for semiconductor manufacturing equipment, materials and a forgotten line item: R&D.
For R&D expenses alone, an IDM must spend an estimated $1.5 billion just to develop a 65-nm process technology, but that figure is expected to jump to $2.4 billion for the 45-nm node and $3 billion for the 32-nm era, Williams said. Those totals include the CAD tools, process models and related costs, but not the fab or equipment.
But few, if any, IDMs will be able to achieve a real return on investment (ROI) for R&D. For example, Williams said, to achieve an ROI at the 65-nm node, an IDM must generate a total of $8.3 billion in sales per year. In 2006, only five IDMs had sales of $8.3 billion or more: Intel, Samsung, Texas Instruments, STMicroelectronics and Toshiba, according to IC Insights Inc. (Scottsdale, Ariz.).
The ante gets upped in subsequent process generations. An IDM must generate $13.3 billion and $16.7 billion in annual sales to achieve an ROI at the 45- and 32-nm nodes, respectively, said Williams. Based on last year's sales, only Intel Corp. and Samsung Electronics Co. Ltd. could sustain a real ROI in overall R&D costs.
To recoup these types of investments, chip makers will be under more pressure to develop products at higher volumes, Williams said. Many of those chips will be targeted for the high-volume consumer apps, added David Lammers, an analyst with VLSI Research Inc. (Santa Clara, Calif.) and editor of a professional site called WeSRCH.com.
Real men have fab consortiums
Lammers also agreed that fab costs are skyrocketing. For example, a new 300-mm "gigafab," which is capable of making 100,000 wafers a month, could cost between $5 billion and $10 billion in the near term, Lammers said.
Mask costs, on the other hand, "have not gone up, as some people have feared [they would]," he said. "They can't. People can't afford it."
In Lammers' view, the R&D picture is also less bleak than Williams of Synopsys paints it. "Intel is about the only logic company that can do it alone," Lammers said, but many IDMs have spread their R&D and fab costs by "following the consortium model."
One example is IBM Corp.'s manufacturing-technology alliance, which includes AMD, Chartered, Freescale, Infineon, Samsung, Sony and Toshiba. In this "fab club," the vendors plan to share the R&D costs at the 65-nm node and beyond.