FYI
Micron Defends DRAM Strategy
(11/07/97; 4:25 p.m. EST)
By Darrell Dunn, Electronic Buyers' News
Reacting to criticism from other memory manufacturers that Micron
Technology has played unfairly as DRAM prices have fallen, a company
executive said on Thursday that Micron did what it had to do to remain
financially viable during one of the worst downturns in the industry's
history.
"We have to make money on DRAMs," said Jeff Mailloux, Micron's
DRAM marketing manager. "We don't have any choice. We're not a
huge, diversified company, and that has driven the things we've done in
terms of aggressive shrinks and cost reduction."
Mailloux said in February 1996, Micron put its planned fab in Lehi,
Utah, on indefinite hold, a move that decreased its potential wafer starts
by 50 percent. Solely through process shrinks to 0.3 micron and a
conversion of all its capacity to 8-inch wafers from 6-inch wafers,
Micron, in Boise, Idaho, has been able to double bit output of DRAM
during the past year, according to Mailloux.
Plans to move to 0.25-micron and smaller geometries during the next
year could double bit output again in 1998 without additional fabs, he
said. Mailloux said other DRAM producers have not reduced
production, but have only limited the size of production increases
throughout the DRAM downturn.
"Where things end up being different from a lot of our competitors is
many of them are still operating older fabs they haven't upgraded, and
have not converted their production to the latest technologies," Mailloux
said.
European Chip Making Is Still Humming Along
(10/24/97; 5:00 p.m. EDT)
By J. Robert Lineback, Semiconductor Business News
The sharp buildup of new chip production capacity in Europe seems to be
continuing, showing little or no ill effect from the recent softness in global
semiconductor markets.
The surprising stamina in semiconductor capital spending is being driven
by a wide range of factors. Now-healthy European chip makers are
pouring money back into their own fabs, major foreign investments are
being made by newcomers to Europe, and the skilled labor to run these
plants is still available. Also stirring the pot is the intense competition
going on now between regional governments to attract high-tech
manufacturing. Some incentive packages cover up to 40 percent of a
company's total fab costs.
"I believe we are seeing something new in Europe -- healthy companies
committed to investing heavily as a rule," said Jean-Philippe Dauvin, vice
president and chief economist at SGS-Thomson Microelectronics, based
in Paris. "We are enjoying a big boom in the dedicated and application
specific [chip] business, such as automotive electronics, mobile
communications, and smart cards. This is why we are investing again."
Along with this investment resurgence, European chip manufacturing
appears to be undergoing a metamorphosis. Many of the new large fabs
are now being equipped to serve global markets rather than focus
primarily on regional customers as they have in the past, according to
European industry managers.
"We have demonstrated to ourselves that it is possible to serve competitive
global markets with European manufacturing," said Stuart McIntosh, chief
operations officer for Philips Semiconductors in Eindhoven, The
Netherlands. "The issue is getting the right caliber of people, motivating,
and organizing them effectively."
A big reason for the changing role of European chip production is the
fast-growing pile of money it takes to fund today's state-of-the-art wafer
processing plants. Also changing the role of European plants are chip
companies' new global manufacturing strategies.
Three years ago, Texas Instruments turned over worldwide BiCMOS
logic processing to its German wafer fab in Freising, near Munich. Last
year, TI spent $80 million to expand the plant's clean room. Now TI is
converting its chip processing from 6-inch to 8-inch wafers. In the 1980s,
TI's German fab produced bipolar products nearly exclusively for the
European market. Today, TI's bipolar products are produced in Sherman,
Texas, for worldwide markets.
"Today, 6 percent of Friesing's capacity might serve Germany, but it goes
to the Far East for packaging and then [comes] back. About 20 percent
goes to European customers," said Peter Dennstedt, vice president of TI
Europe Semiconductor who is also European manager for mixed-signal
and logic products. There have been other changes. "Four or five years
ago, many companies were looking for European content because of trade
barriers and duties in the European Union and the EFTA [European Free
Trade Association]," Dennstedt said. "But semiconductor duties have
more or less gone away."
Chip Assembly Back In Line
Europe is also seeing a rebirth of back-end chip assembly operations,
something it had been losing to Asia in the past 10 years because of high
European wages. Several major companies -- including Motorola and
Siemens AG -- are now setting up chip assembly and final test operations
in Europe, using high levels of plant automation to increase their response
times to key European customers. One state-of-the-art site is located in
Toulouse, France. Motorola is implementing an integrated manufacturing
strategy, coupling power IC fabrication with final chip packaging and test,
primarily for its European auto customers.
"We have just installed two major backend assembly lines for this effort,"
said Steve Hanson, senior vice president and general manager of the
company's Semiconductor Components Group, based in Geneva. "It is
the beginning of a trend," he said, "where we have fully integrated
manufacturing at a site to directly serve large local customers,"
Siemens also is aggressively pursuing a European chip-assembly strategy
in Europe, aiming at shortening cycle times in semiconductor deliveries.
With the help of government subsidies, the German chip maker is now
building a 350 million DM ($200 million) semiconductor packaging and
test facility in northern Portugal, near Oporto.
"We are now moving in equipment and will start back-end manufacturing
at the beginning of 1998," said Hans-Peter Bette, vice president of sales
coordination for memory products at Siemens in Munich. "With the
increase of our front-end capacity in Europe, we decided we needed a
certain amount of capacity here."
The Munich chip maker also is now using an automated chip-assembly
line at its new 8-inch wafer fab in Dresden, Germany, to speed up the job
of turning out dynamic RAMs (DRAMs) . The packaging and test
operation is capable of handling one-third of the fab's output. With its
close proximity to the silicon-processing front end, "the AMB -- advanced
manufacturing back end -- provides faster feedback on yields and device
performance," Bette said.
The new back end has also enabled Siemens to ramp up the Dresden fab
much faster. The 8-inch fab is now running at 7,000 wafer starts a week,
up from the original target of 5,000 to 6,000 in the ramp-up phase. The
ramp up has gone so quickly that Siemens is now moving logic ICs into
the Dresden facility ahead of schedule.
Shortage Of Investments Fuels Chip Revival
Ironically, one of the biggest factors fueling Europe's chip-making revival
has been the dearth of new investments in the early 1990s, a time when
government officials and industry observers originally had expected
capital spending to boom in the united markets of the European Union.
Recessions, coupled with the lack of investments, caused Europe's chip
industry to slip further behind other regions.
These industry doldrums led to fewer job opportunities for skilled labor,
including wafer fab technicians and engineers. Lately, however, Europe's
available labor pool has become a major draw for new plant investments,
said Dauvin at SGS-Thomson. "We have a lot of these people in Europe,
and the level of wages is not a problem today."
European investments began to pick up momentum in the mid-1990s,
when semiconductor capital spending surged globally. Then, a few years
later, when capital spending cooled in other regions, investments in
Europe continued to show surprising steady growth, according to market
statistics compiled by Semiconductor Equipment and Materials
International (SEMI). Industry managers and analysts alike suggest
Europe continues to be driven by the need to make up lost ground with
other chip-making regions and by its key resource -- skilled labor.
According to the latest survey of capital equipment buyers by SEMI,
European chip makers are continuing a five-year growth trend in plant
investments. The majority of that spending is going back into European
plants, according to industry managers.
The SEMI survey shows European semiconductor equipment buyers
planning to place orders totaling $3.1 billion in 1997, up 10 percent from
$2.8 billion in 1996. In 1993, European-based companies bought only
$917 million worth of production equipment, according to SEMI's
survey.
Significant investments in Europe are also being made by Asian and U.S.
semiconductor suppliers -- several of which are taking their first steps into
the world of global chip manufacturing. South Korea's Hyundai Group
and LG Semicon are building their first European fabs in Scotland and
Wales respectively. Once all phases are completed in the next decade, the
Hyundai project in Dunfermline is expected to be the largest foreign
investment in Europe's history at $3.6 billion. And LG Semicon's
Newport, Wales, plant is expected to cost $1.9 billion. Both Korean
DRAM makers plan to begin making 64-megabit DRAMs in their
European plants late next year.
"They are both well on their way to building those facilities, and there is
no indication of any delays," said analyst Richard Gordon at Dataquest
Europe Ltd. in Engham, England. "Hyundai and LG both know they have
to have huge facilities to increase their market share in Europe once the
DRAM business improves. The next critical step is when they decide to
put in the equipment. There is no indication that they have pushed back
their plans."
Advanced Micro Devices of Sunnyvale, Calif., is setting up its first
offshore wafer fab in the former East Germany city of Dresden, with
about $550 million in government incentives for a total of $1.9 billion in
investments over a 10-year period. The plant will begin producing AMD's
K7 microprocessors with quarter-micron technology and 8-inch wafers.
By the end of 1999, the fab will move to 0.18-micron technology to
produce microprocessors for world markets.
When AMD first began looking at sites to locate its first foreign wafer
plant, Dresden was not on the original list of potential locations, recalled
Gene Conner, senior vice president of operations. But "we were
approached by people representing Dresden and we simultaneously
learned of Siemens' plan to build a facility there. So, we added them to the
list."
After deciding the city's infrastructure and skilled labor could support an
advanced wafer fab, AMD began negotiating with government officials
and area banks to strike what ended up as one of Europe's biggest
incentive packages for a new chip plant. "The financial assistance package
we got was a big factor, of course, but incentives alone are not sufficient
to cause anyone to put a facility into a particular location," Conner said.
Most chip executives are quick to point out that government subsidies and
financial incentives are usually the finishing touches in the site selection
process. In the European Union, high levels of subsidies, grants, and
incentives can raise warning flags. But economically depressed and less
developed regions in the EU are allowed to offer higher subsidies to
companies.
"Normally, the higher the incentive package, the higher the need for
incentives," said Philips' McIntosh. "Fabs will have typically have a life
of 15 to 20 years. So, operations must be viable over a long period of
time."
Competition Gaining Momentum
But competition, if anything, is continuing to heat up between European
regions hunting for chip production plants. In July, Belgium's state
government of Flanders launched an initiative to develop a manufacturing
industry in the region. It earmarked more than $300 million in incentives
to attract chip makers to the northern part of the country.
Flanders is already on the semiconductor industry map. The state is the
home of Alcatel's ASIC manufacturing arm, known as Mietec, and
Belgium's research organization, IMEC (Inter-university Microelectronics
Center), Europe's largest independent R&D organization.
"The good news for us is that we have found serious interest from several
companies in the United States and Asia," said Roger De Keersmaecker,
director of the IC Project and associate director of Flanders Foreign
Investment Office in Brussels. "When we started this effort we were
worried that certain areas in Europe had locked up the position as prime
areas -- Scotland and Ireland, for example," he said. "For regions on the
European continent," he added, "AMD's decision to move into Dresden
was critical because it shows that there is something beyond Scotland."
Scotland, Northern England, Wales, and Ireland, all of them hot beds of
investment in chip and systems manufacturing, began early on to
aggressively recruit foreign investments after U.K.-based companies
began to disappear.
"The U.K. basically lost its home-grown industry and began seeking
investments from Japanese and American companies," said analyst
Malcolm G. Penn, president of Future Horizon, in Kent, England.
"Today, the United Kingdom provides over half of Europe's PCs. Many
of the televisions are produced here for Europe by Sony and Hitachi." As
a result, the United Kingdom and Ireland combined account for nearly as
much chip purchasing as Germany.
While the United Kingdom and Ireland remain the top spot for chip plant
investments in Europe, some stress signs are beginning to show. Industry
managers worry about the region's ability to keep up with demand for
skilled labor. "What you are now seeing is competition for workers and
people moving from one company to another," said Yanit Farber, general
manager of Tefan UK, which provides consulting, plant design, and
operational analysis to chip makers. He said chip makers face some risks
from higher salaries and job-hoping, but there are comparable risks in
other European countries.
"There are threats of strikes and unions in other countries," Farber said.
"France, for example. IBM must deal with six unions in its French plant.
These situations are changing but it is still a couple of years before the rest
of the continent will be as competitive."
To keep Scotland and Northern England competitive with the rest of the
world's skilled labor, government, university, and corporate training
programs are quickly being set up in the region. Applied Materials, the
Santa Clara, Calif., equipment giant, has recently set up a $20 million
European Technical Center in Newcastle, England, to provide training for
all of Europe. In August, Nikon Precision Europe GmbH of Langen,
Germany, opened a $27 million Deep-UV Education and Application
Center in Livingston, Scotland.
"The new challenge is the training issue, and Scotland has started some
interesting efforts to combine university and industry programs to educate
more people in microelectronics," said Otto Wild, executive vice president
at Nikon's German-based European subsidiary, near Frankfurt. Similar
training programs are now being considered in Germany and other
European countries in an attempt to maintain an available skilled labor
pool.
"Today there is no problem with available people, but if [Europe's
buildup] continues, in two years -- around 1999 -- we could start having
some bottlenecks, said Dauvin of SGS-Thomson. "But it won't be as bad
as it has been in Asia, Japan, and even the United States." |
