Outsourcing spreads for process development and manufacturing

by Bob Haavind, Editorial Director, Solid State Technology

Expanding use of outsourcing, especially for process development, is helping to deal with rising costs for chipmakers, according to speakers at a SEMICON West panel.

To manage escalating costs, chipmakers increasingly participate in collaborations and partnerships, according to Craig West, director of applications for Toppan Photomasks. They see the ability to participate in advanced technology development without spending a half billion dollars on a new development lab, he added, which might include more advanced process tools as well as metrology.

“Many fabs don’t have the extra capacity to keep up with the latest technologies,” explained Farah Tuten, engineering manager for Freescale Semiconductor’s Chandler, AZ, fab. The market fluctuates a lot now, she said, and it is a great benefit to add some extra capacity quickly when necessary. She described the Freescale approach as “asset light,” meaning that while the company doesn’t do much manufacturing outside of its own fabs, it does leverage partnerships for R&D.

The industry is maturing, and looking to reduce costs and risk for both current and next-generation products, according to Tim Tobin, CEO of Entrepix, an outsourcing firm. Consumerization, with tighter margins and shorter life cycles, increases risk. Already 51% of chips are for the consumer market, and this will rise to 60%-61% by 2010, he predicted.

As a result, there is a paradigm shift among chipmakers, Tobin believes. “Why buy a new tool?” he posed, as a question that chipmakers might ask. Instead, they will outsource an advanced process until they can utilize 50% of the capacity of a tool, and then they buy their own.

With today’s fast-paced consumer markets, a chipmaker may be even more interested in speed than cost, pointed out panel moderator Tom Cheyney, longtime industry editor and now publisher/editor of online blog “Chip Shots.” Outsourcing firms already have tools and processes in place so that development can proceed more quickly than an independent device manufacturer (IDM) can set up tools in its own fab.

Lots of innovation is going on with MEMS, silicon and SOI wafers, new materials, and so on, according to Bert Bruggeman, VP/GM of SVTC, a development fab spun out from Cypress Semiconductor with VC backing to focus independently on its unique business model. A devicemaker can try out new ideas and come up with technology and process steps at a development fab like SVTC without tying up its own fab equipment, he suggested.

One outsourcing firm, Innovion, operates three fabs in Chandler, AZ, San Jose, CA, and Gresham, OR, offering about 25% of what is found in a typical cleanroom. While some work is done for traditional IDMs, explained VP Steve Swanson, the fabs also work on III-V compounds, SOI, VCSEL, MEMS, and other novel devices. There are 26 implanters, for example, that handle standard as well as alternate species, from low- to high-energy (MeV range). Tools can handle wafers from 2-in. to 200mm as well as specialty substrates, he noted.

One of the main topics addressed by the panel was the common concern about sharing intellectual property (IP) with an outsourcing company. Freescale’s Tuten explained that she had come from Intel, which “outsources nothing!” After joining Freescale, where outsourcing is common, she learned that while the chipmaker always works with signed contracts, “we don’t tell them everything.” Her only concern with IP, she said, is about outsourcing with China.

SVTC’s Bruggeman explained that his firm is very careful not to divulge the most advanced technology of its customers. Also, when doing development work, “we don’t get paid for patents and papers, all that belongs to the customer.”

Craig West of Toppan said that his firm leverages its own IP to improve its services to customers. Tobin of Entrepix also said that his company might add its own IP when appropriate while processing customers’ wafers.

“But customers may become dependent on an outsourcer,” Tobin cautioned, so trust must be developed, allowing flexible solutions while not handcuffing a customer. Toppan’s West suggested that joint project teams are a good way to share knowledge, and that his company often has one team member at a customer’s site.

In fact, an outsourcing firm can offer expertise that is sometimes even deeper than that of the customer, Cheyney commented. Freescale’s Tuten agreed, explaining that outsourcers can often add engineering expertise. Even though their processes may not be exactly the same, she said, it doesn’t matter as long as they achieve the same film thicknesses and etch depths. While this is far from Intel’s concept of “copy exact,” Tuten suggested that sometimes working with other companies shows that there might be a “better way.”

Another advantage of a close working relationship with an outsource firm is the ability to maintain tight cycle times, according to Tuten. “If you have tool sets that are not running very well in the fab, it’s nice to have some delta capacity as a backup,” she explained.

“Implanters are famous for breaking down,” chimed in Swanson of Innovion. But to take advantage of the extra capacity, the logistics need to be worked out, with proper wafer carriers and transportation, sometimes out of state on tight schedules.

The panel was asked what happens if there is a major slowdown in the industry. “Outsourcing may disappear fast,” was a comment from the audience. Although this was a problem in the past, the panelists granted, the greatly increased activity in development work would help the now-thriving outsourcing industry to get by.

Swanson said that half his customers were under contract to continue manufacturing work even if things slow down. In fact, he said, about half of them have no implanters at all.

Still, he and the others agreed, it is critical for outsourcing firms to carefully manage costs and operate lean. With the accelerating pace of device and process development, it appears their services are becoming an integral part of the chipmaking supply chain. — B.H.


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