Future Horizon’s forecast meeting for the first half of 2013 made it clear how electronics and the semiconductor industry in particular is facing big problems – and some of them are being exacerbated by the often adversarial rather than cooperative nature of the business.
“I believe there are at least ten or twelve major issues that the semiconductor industry will have to address over the next decade and the current business model that the industry has will not solve them,” said Malcolm Penn, president and CEO of Future Horizons as he described the challenges facing an industry buffeted not just by economic headwinds but the accumulated pain of dealing with the end of classic Moore’s Law scaling.
“The impact of new transistor design: that changes the complete infrastructure. Everything changes, “ said Penn. “Everything before has been planar based. Now they are going vertical. That’s going to strain the system.
“Advanced lithography will change the game as well. There are already a lot of semiconductor companies that could not make the transition to immersion lithography. They stayed the wrong side of the line. And so they were stuck at 90nm or 65nm at best. A number of the DRAM makers now can’t get the cost structure they need because they don’t have the immersion technology,” Penn said. “If you can’t make the transition to EUV you will be stuck at 16nm.”
“Transistor variability is another issue. Not every fabless company will be able to deal with these issues. There will be a definite defining point. Some won’t make it.”
These are areas where companies are doing work together to try to find ways to accommodate the complexities of double patterning and vertical transistors. Other big changes are potentially being held back by commercial relationships.
“The 450mm transition is an obvious one. Who is going to pay for that?” asked Penn, noting that much of the development risk is on the side of the equipment builders but it will be chipmakers who reap the rewards of wafer-size increases. The equipment builders wind up preparing for orders that then suddenly get cancelled with little warning when the market turns down.
“The way we currently do business is not stable for this level of industry. There is a long time to revenue. And companies still feel it’s appropriate to turn supply on and off like a tap,” said Penn, pointing to Apple’s decision to cancel orders from one of its key suppliers for LCD screens – a factory that was ostensibly built to supply Apple’s needs. “There has to be a bit more responsibility in the model. I’m a believer in the free market but it doesn’t mean that you have to behave like this. Was this what Adam Smith had in mind?”
Penn argued that the industry should look more to the Airbus model in which the partners work to a longer-term schedule and, although there is friction, do not subject suppliers to continual feast and famine cycles.
For the year, Future Horizons expects to see growth in the semiconductor market of a little under 8 per cent, although this could easily be thrown off course by further turmoil in the Eurozone and the US – which is how last year’s 8 per rise as the silicon industry neared its glass ceiling of $300bn into a 2.5 per cent fall.
If the industry does grow as expected with unit demand providing much of the momentum, 2014 could be a period of extremely tight supply even though Gartner has pointed to relatively slack inventories for the current quarter. People may come to desire somewhat more longer-term cooperation from their silicon suppliers next year if the economy doesn’t get side-swipped again.