But the rapid exit of established IDMs from leading-edge chipmaking means that capital spending on semiconductor equipment has collapsed. Even though it grew strongly in 2010 at 13 percent of sales revenue it is still well below the long-term trend of 20 percent of sales revenue, said Penn. "2011 capex at 6 to 8 percent means the companies are already throttling back. There will be no excess capacity in 2012, Penn said.
"The fourth quarter of 2010 will be the first capacity growth [for six quarters]," said Penn pointing out that 3Q10 global chip manufacturing capacity was still 11.2 percent less than the 3Q08 peak, despite IC unit sales being up 13.2 percent.
"You used to have myriad semiconductor companies building fabs. Now they are expecting a couple of foundries to do it all for them." And those chip manufacturers that are spending are mainly performing upgrades or squeezing a few extra tools into existing sites. "The number of new shells is near zero."
Penn pointed out that while TSMC's $6-billion annual capital may seem a lot but is not going to change the situation significantly, which has seen greater than 90 percent utilization across the board and 98 percent utilization at the leading edge. "Manufacturing capacity utilization will drop back in 2011, due to 2010's capital expenditure, but they will still remain high."
"TSMC have put their prices up. They are not being underhand or deceitful. They just think it is time they were paid full value for all the risk investment they have made. They are tired of being paid $4 per square centimeter of silicon when their customers get paid $9 per square centimeter.
Penn also suggested that foundries would likely expect customers to start funding future fabs up-front. "The chip industry model is broken. It is over dis-aggregated," said Penn arguing that this is why there are some companies making moves towards vertical integration.
Many chip company has gone to fab lite because of economic downturn and advanteges of foundry services. However as soon as the economic situation comes back normal i dont think theyd be gone for fabless phase. The nicest example of fabless company model is AMD, where they were battling against intel. No need to talk about who is the winner of the race (ok let say AMD had some other issues but main thing was lack of production capacity/advanced pricing)
Yeah, its true that building up a new fab gets more and more expensive and few can bear it but the rule is the same. Who is really eagered to be involved and win the game. Abu dhabi has money and would like to power up anybody who would be in their side. Who knows about Chinese fellows and their dreams
I still dont think tight capacity and foundry fact would effect future of semiconductor markets that dramatically, its rather effecting speed of release of innovative electronics and of course the increasing the cost/value.
in any case who has the money and will, can still gear up for higher capacity if their need increases. Example? TI and their vertical implementation of fabs, toshiba and now sony...So who has the money still can get fab capacity without need to deal with foundry.
Agree. I think the few companies who are still holding onto and expanding their fabs while working on innovative products will win over the new and up coming players due to this scenario in the long run. It is neccessary for a more ambitious semiconductor company to retain considerable independance on the manufacturing front.
I believe there is a healthy market for MEMS devices which do not need a state-of-the-art fab and the associated big price tag. These along with 3D chip integration via stacking are expected to provide economies of value as an alternative to few IDM's that afford economies of scale.
The 3D integration though may be more a packaging and assembly play at the backend than the fab at the front. How ever, the 3D 'flows' are still evolving, it will be interesting what 2011 brings.
Dr. MP Divakar
I agree with dakeste that the cost of the fab is going to be so much that single company will not be able to afford the cost. But i think that this is just one scenario. Another scenario can be a monopoly (single or consortium) so that to be able to control the market prices better.
Well, fab-light or fab-tight or fab-less, right now there is more concern over where the worlds economies are heading in the short term and that leads to a lack of investment until there appears to be more short term certainty.
with 'new foundries eager for market share' i actually meant only Samsung and GF.
I agree that apart from these two there probably isn't anyone else who has both the money, the technology and the will to become a major foundry player.
450mm will not be possible until Intel builds D1X or TSMC, GF or Samsung builds a 450mm ready fab to house the tools. Even then where are the tools? Nobody, that I am aware of, has even built a prototype 450mm production tool. Scaling a production process from 300mm to 450mm is going to be very challenging, to say the least.
If we go by Intel's model, it will take them 2 years to get 450mm process up and running once the tools are in place. Maybe 18months if they can transfer the previous process from 300-450 smoothly. Regardless that time is after the tools are developed and manufactured en mass.
One thing that I don't like about this fab light, tight or whatever strategy, is that we do not have the R&D capacity for new technologies to be developed and incorporated into new devices. Foundries are all about using the same few processes to fab logic, dram, flash, bulk ICs, etc, and they are only looking to develop technologies that will fit those needs. What innovative technologies are we missing out on because companies cannot invest in technologies that are a little more out there? I mean things like superconducting quantum computation or other interesting analog technologies that come from cutting edge device research in academia. These types of technology really need an industrial approach to get them working, but the prevalence of the fab-light-tight model will have them labeled as too risky and unfundable.
OK....I can see production on 450-mm diameter wafers coming from say, Intel, Samsung and TSMC, for example. But only after a period of stand-off when each waits for one of the others to commit the funds and pay the price of going first.
So Floating Gate when do you see 450-mm production starting... 2015, 2020 or 2025 or later?....and a new player?....maybe in a niche ....but not in high volume, not on 450-mm wafers, surely?
Some older or more specialized technologies perhaps. But in essence wafer production is about economies of scale and whoever makes on the biggest wafers in the biggest volumes has the per-chip price advantage.
The problem is you have to commit to spend $5 to $10 billion to do that. So it comes down to the cost of capital. In Taiwan TSMC was encouraged and supported has now achieved a leading position. In Abu Dhabi they are providing about $10 billion to give GlobalFoundries a chance of getting established.
That is helping to produce the GlobalFoundries' New York wafer fab but apart from that i don't see much reason for optimism about chip manufacturing "coming home."
David Patterson, known for his pioneering research that led to RAID, clusters and more, is part of a team at UC Berkeley that recently made its RISC-V processor architecture an open source hardware offering. We talk with Patterson and one of his colleagues behind the effort about the opportunities they see, what new kinds of designs they hope to enable and what it means for today’s commercial processor giants such as Intel, ARM and Imagination Technologies.