"300mm's Delay"
By Suzanne Deffree -- 4/8/2003
Electronic News
e-insite.net
Four years after the first 300mm fab was built and pilot production started, the promised land is still out of sight.
According to a recent report by researcher iSuppli Corp., 300mm activity slowed significantly after its initial hype cooled down and now -- with a tech recession still under way, and the geopolitical climate and overcapacity plaguing the semiconductor market -- 300mm's necessity is being examined closer than ever.
"Although the collapse of the semiconductor market in 2001 was a major factor in inhibiting the conversion to 300mm manufacturing, it is clearly evident now that the original premise for 300mm conversion needs to be challenged," Len Jelinek, principal analyst at iSuppli, said in the report. "First does the semiconductor industry need all this additional capacity, especially with the recent expansions of 200mm foundry capacity? Second, does 300mm manufacturing fit better in a foundry model or IDM model? Or will a new model be required for 300mm manufacturing to be successful? Third, what is the impact of feature size reductions on expanding wafer sizes?"
iSuppli found that long-term cost reductions gained by entering 300mm manufacturing will be required for companies to remain competitive on commodity products. Memory makers, which represent 36 percent of 300mm now and are expected increase to 67 percent in the next three years, must increase capacity while simultaneously reducing costs. Increased unit output and economies of scale will help aid manufactures in that way, but iSuppli also noted that labor has become a minimal part of leading-edge manufacturing. To that measure, suppliers will not continue to choose locations for low labor costs. Instead, cost benefits will come from infrastructure and tax breaks. Infineon Technologies AG, for one, has announced plans to move its headquarters out of Germany and to a more tax-friendly location with Switzerland at the top of its prospective list.
Jelinek further said that current business models will not drive 300mm conversion as they are not "friendly" with second-tier, smaller fables companies, which cannot initially sell large volumes, and force companies to split investment between technology and capacity.
"As IDMs announced their intentions to reduce capital expansions, the foundry model received positive reinforcement," he noted. "Foundries offer the unique ability to spread costs across numerous customers, allowing the foundries to continue to invest in both technology and capacity. Today it has become customary for foundry service providers to engage with one key partner that provides licensed technology in exchange for capacity."
Partnering overall, he said, will be a driver toward 300mm success on both large and small company terms. Both United Microelectronics Corp., with demand coming from its key partner Xilinx Inc., and Taiwan Semiconductor Manufacturing Co. Ltd., with high-volume customers like Motorola Inc. and Qualcomm Inc., have done such.
Still, Jelinek said that foundries need to refocus on small volume customers and develop a more flexible system if they wish to drive 300mm manufacturing.
FSI International Chairman and CEO Don Mitchell speaking at europa 2003 added another dynamic to the 300mm slowdown concerning capacity and smaller companies. "Of those that are looking at 300 mm investment, not only do you have to have the capacity to invest, but you’ve got to have the client’s mind [in] that factory," he said. "I think the one learning that people have come away with is that they have already built their pilot lines and they are loading them. You don’t make any money in 300mm until you give up capacity utilization at a pretty high rate. And so it takes some enormous amount of customer volume to make a lot of money in 300 mm. Now a few companies have that."
Meanwhile, iSuppli reported that reductions in feature size and expanding 200mm capacity has contributed to 300mm's slowdown. As unit volume increases while feature size decreases, second-tier component suppliers do not need to convert to 300mm to stay cost competitive and keep output up. Feature size reductions for small volume custom products can be obtained from current 200mm technology on 0.13-micron processes, iSuppli said.
"The first foundry that develops a 0.90nm technology using 200mm wafers will capture significant market share from second-tier semiconductor companies," Jelinek said.
Despite all of the hold ups, iSuppli believes that by 2010 20 percent of semiconductor manufacturing will be done with 300mm wafers. About 40 percent of 300mm operational fabs will be located in Taiwan by 2005, contributing to the total 70 percent to be found in Asia.
"The current conversion to 300mm manufacturing is clearly being driven by cost reductions on commodity products," Jelinek said. "Companies recognize that in order to remain competitive they must enter into 300mm manufacturing or face the loss of market share and margins. Although the rate of 300mm expansion has slowed, iSuppli believes that as demand increases in 2003 and 2004, the rate of 300mm manufacturing will increase."
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