ISS 2011: Cleantech, LEDs, capital efficiency, setting 2011 expectations

by Michael A. Fury, Techcet Group

January 12, 2011 – The second day of ISS 2011 opened with an Emerging Applications session, led by John Lushetsky, the acting Deputy Assistant Secretary for Energy Efficiency at the US Department of Energy. Market capitalization for semiconductor companies is $522 billion; automotive is $312B; solar is $104B. VC investment in solar is much greater in the US, and covers a much broader range of technologies than in Europe or Asia. Current capital costs are $3.40/Watt; achieving the goal of $1/W will require significant cost reductions in all components: PV module ($0.50), power electronics ($0.10), and installation/balance of system ($0.40). Their current Si module roadmap shows a path from $1.83 to $0.85, so additional breakthroughs are needed.

US share of PV production has fallen significantly over the past 10 years. (Source: US DoE)

Monocrystalline silicon PV module cost reduction research roadmap.  (Source: US DoE)

Bright spots in the emerging LED market were the focus of Ross Young, SVP for displays, LEDs and lighting at IMS Research. There are now ~75 companies in volume production of GaN LEDs, which account for 81% of the total >$10B LED market. Backlighting for displays is dominated by five companies, and the remaining 70 will be competing for general lighting, an LED market that will overtake display usage by 2015. Aixtron and Veeco have been the primary beneficiaries of the resulting growth in MOCVD sales. OLEDs are self-emitting devices that do not rely on GaN technology, and demonstrate distinct market behavior. Android smart phones are today’s main OLED driver.

Marc van den Berg, VantagePoint Capital Partners & chairman of Bridgelux, took us back to school for "Lessons Learned from the Computer Industry and the Future of Solid-State Lighting." LEDs can be modulated and driven by digital content. This has enabled Klipsch to introduce at CES speakers that screw into a light bulb socket to provide lighting as well as sound, using in-home power line signals from the home theater system. LED street lighting will be able to adapt to current conditions for both.

Cleantech growth markets were discussed by Warren Jones, director at ThinkEquity LLC. Smart phones, smart lighting, and smart cars don’t go far enough — smart buildings and smart homes will become more prominent in developing energy saving strategies. Companies including Johnson Controls & Honeywell are front-line players, but others such as Cisco will also play a role in managing the digital data stream.

A travelogue from process technology to energy management was guided by Yuval Wasserman, president & COO of Advanced Energy Industries, focusing on their journey into the solar inverter market. Sticking to what you do best is still a good strategy. Recognizing how your core competences apply to emerging technologies makes it even better. AE moved into first place in the inverter market (27% share) in 1H10.

Opening the session on forecasts, trends, and lessons learned was Christian Gregor Dieseldorff of SEMI. Capital spending for memory and foundry fabs are 4x and 3x respectively over MPU, logic, and other types of fabs. However, among new facilities beginning volume operation in 2010 and 2011, LED fabs outnumber all others 2:1. LED players grew from 4 majors in 2007 to 13 majors in 2011. South America is opening its first fab, CEITEC in Brazil, for RF, analog and mixed signal ICs to 0.6µm.

Top 5 foundries include SMIC and Samsung. Share of top 5 Foundries is about 68%. (Source: SEMI)

Wally Rhines, CEO of Mentor Graphics, presented on "Creating Measurable Value through Differentiation." Apple first chose differentiation with their personal computer, but excelled at it with their iPhone. TI has reinvented its approach to calculators, and has carved a unique niche today in partnership with educators. In semiconductors, FPGA have sustained a 60+% gross profit margin, 10 points higher than analog devices and all other less profitable types. Leverage in semiconductor differentiation is shifting from process and design to embedded hardware and software IP. Apple still excels in ease of use.

Top 11 companies by 2009 gross margin. (Source: Company financial reports, corporate Web sites, Mentor Graphics)

Shawn DuBravac of the Consumer Electronics Association set expectations for 2011, fresh from last week’s CES show. This year will be better than 2010 and better than originally expected, though possibly at the expense of 2012. Tablet PC shipments will nearly double. Single-family housing starts are forecast to double by 2012. Sensors are becoming more prevalent in consumer products. Forget Wii — picture a ski helmet with an in-view GPS display for real time speed and altitude reporting. More functions are being designed so that the hardware device and the software application are mutually dependent, so one is worthless without the other.

Capital efficiency, multisourcing, 450mm

Leading into the first panel discussion, moderator Dan Hutcheson, CEO of VLSI Research, delivered some opening comments on capital efficiency. Even though the cost of lithography tools is escalating, the cost per pixel printed has declined consistent with the price per transistor since 1960. No implementation date has been agreed on within the industry, but he asserted that preparation for 450mm has been easier and cheaper than 300mm.

Panelist Dave Miller from DuPont Electronics & Communications noted that collaboration between equipment and materials suppliers still has room for improvement in the early development cycles. Tetsuo Tsuneishi from Tokyo Electron Ltd. believes that engineering advances will make EUV affordable, as long as the customer is willing to pay for it. He concedes that 450mm is definitely coming, but only in concert with geometry shrinkage; no target date was ventured. James Clifford from Qualcomm CDMA Technologies pointed out that while fabless suppliers have no capital issues, they also have no control of capacity or utilization. Multi-sourcing from several foundries provides the flexibility they needed to recover quickly from the latest recession, as well as to have the best shot at delivering early products at 22/20nm. Barring any radical breakthroughs in battery technology, their performance advances are all constrained to a 0.5W power point. Intel’s Robert Bruck, Intel Bruck sees engineering ingenuity overcoming challenges to Moore’s law, but the economic challenges instill less confidence. Being the #1 or #2 supplier in a niche remains viable, but #3 is increasingly harder to sustain. 450mm will come when it’s economically feasible for all of the players (note that this is not an actual date).

Q&A: Emphasizing collaboration

From the audience Q&A, Abu Dhabi’s recent investment in GlobalFoundries was cited as an example of the type of public-private collaboration that will facilitate some of the upcoming economic challenges that remain. In process development, the vendor neutrality that both equipment and materials suppliers have historically maintained will give way to early-stage, long-term mutual development commitments. Even such a two way agreement may flounder without an equal commitment from a fab customer from the outset. Purchase of process equipment by materials suppliers for the purpose of process materials development is not economically feasible. Closer collaborations among specific equipment and materials suppliers and customers, including fabless customers, is likely to bear more fruit than consortium models.

Michael A. Fury, Ph.D, is senior technology analyst at Techcet Group, LLC, P.O. Box 29, Del Mar, CA 92014; e-mail [email protected].


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