Category Archives: Displays

Teardown analysis is a useful tool for understanding the component and manufacturing cost of electronics devices—but it doesn’t always tell the whole story of the value of a product.

Case in point is Google Glass, which sells for $1,500—but has hardware and manufacturing costs that amount to just $152.47, according to a dissection of the product conducted by the Teardown Analysis Service at IHS Technology. Does that mean that Google is pocketing a sky-high margin of 90 percent on each Glass sale?

Not by a long shot.

“As in any new product—especially a device that breaks new technological ground—the bill of materials (BOM) cost of Glass represent only a portion of the actual value of the system,” said Andrew Rassweiler, senior director, cost benchmarking services for IHS. “IHS has noted this before in other electronic devices, but this is most dramatically illustrated in Google Glass, where the vast majority of its cost is tied up in non-material costs that include non-recurring engineering (NRE) expenses, extensive software and platform development, as well as tooling costs and other upfront outlays. When you buy Google Glass for $1,500, you are getting far, far more than just $152.47 in parts and manufacturing.”

Looking through the Glass

Google Glass carries a BOM of $132.47. When the $20.00 manufacturing expense is added, the cost to produce the head-mounted computer rises to $152.47.

The attached table presents the preliminary BOM of Google Glass. Note that this teardown assessment is preliminary in nature, accounts only for hardware and manufacturing costs, and does not include other expenses such as software, licensing, royalties or other expenditures.

For more details on the IHS Teardown analysis of the Google Glass, please visit: https://technology.ihs.com/499685

Prototypical

Although thousands of units are in the hands of users, Google Glass is not yet generally available through retail. The pre-mass-market status of Google Glass is evident by examining its design.

“Today’s Google Glass feels like a prototype,” Rassweiler said. “The design employs many off-the-shelf components that could be further optimized. If a mass market for the product is established, chip makers are expected to offer more integrated chipsets specific to the application that will greatly improve all aspects of performance, including processing speed, energy efficiency, weight and size. Future product revisions are sure to make strides in all of these areas.”

Last year’s model

Most of the integrated circuits (ICs) in Google Glass are mature when compared with recent flagship smartphone designs. For example, the Texas Instruments Inc. OMAP4430 apps processor used in Google Glass is made with 45nm semiconductor manufacturing technology—two generations behind the 28nm chips employed in the latest flagship smartphones.

The use of more cutting-edge ICs could yield future Google Glass products that are smaller, lighter, more energy-efficient and less costly to produce than the current model.

High cost for LCOS

The second most expensive single component in Google Glass is also its most defining feature: its head-mounted liquid-crystal on silicon (LCOS) projector display. IHS estimates the cost of the Himax Technologies Inc. LCOS projection element made by Taiwan’s Himax Technologies Inc. at $20.00, accounting for 15 percent of the total Glass BOM.

“The LCOS display is the sine qua non of the Glass,” Rassweiler noted. “Just as e-readers wouldn’t exist without their e-Ink screens, Glass wouldn’t be possible with the LCOS display. The display is pretty slick, providing a near-eye viewing experience that must be seen to be believed.”

Texas Instruments inside

Texas Instruments components dominate the Glass design, with the semiconductor supplier contributing the apps processor, power management IC, audio codec, battery fuel gauge and regulator ICs. Altogether, TI accounts for an estimated $37.90 worth of components identified so far in the Glass, representing 29 percent of the BOM.

Sensory overload

Glass includes two accelerometers: one from STMicroelectronics and another from InvenSense Inc. Accelerometers are commonly used to detect motion in electronic devices, such as smartphones and video-game controllers. Given that smartphones generally incorporate just one multiaxis accelerometer, the use of two of these devices represents an interesting and unusual design choice that must be further investigated to be understood.

Premium rush

The frame of the Glass represents the single most expensive component of the device, at $22.00, or 17 percent of the BOM. The frame is made of titanium, a highly durable and expensive material used in high-performance military aircraft and in some eyeglass frames. However, titanium is rarely used in commercial electronic devices analyzed by the IHS Teardown Analysis Service.

“The frame is just one aspect of how Google is presenting Glass as a premium product,” Rassweiler noted. “The quality of the packaging and accessories, along with how the box contents are staged, gives the whole Google Glass experience a very high-end feel and appeal.”

Worldwide silicon wafer area shipments increased during the first quarter 2014 when compared to fourth quarter 2013 area shipments according to the SEMI Silicon Manufacturers Group (SMG) in its quarterly analysis of the silicon wafer industry.

Total silicon wafer area shipments were 2,364 million square inches during the most recent quarter, a 7.1 percent increase from the 2,208 million square inches shipped during the previous quarter. New quarterly total area shipments are 11.1 percent higher than first quarter 2013 shipments.

“Total silicon shipment volumes registered first quarter growth, with volumes also up relative to the same quarter last year,” said Hiroshi Sumiya, chairman of SEMI SMG and general manager of the Corporate Planning Department of Shin-Etsu Handotai Co., Ltd. “This growth at the start of the year is in-line with other semiconductor industry data showing improved conditions compared to the start of 2013.”

Quarterly Silicon Area Shipment Trends

 

Millions Square Inches
 

Q1 2013

Q4 2013

Q1 2014
Total

2,128

2,208

2,364

Semiconductor Silicon Shipments* — Millions of Square Inches

Silicon wafers are the fundamental building material for semiconductors, which in turn, are vital components of virtually all electronics goods, including computers, telecommunications products, and consumer electronics. The highly engineered thin round disks are produced in various diameters (from one inch to 12 inches) and serve as the substrate material on which most semiconductor devices or “chips” are fabricated.

All data cited in this release is inclusive of polished silicon wafers, including virgin test wafers, epitaxial silicon wafers, and non-polished silicon wafers shipped by the wafer manufacturers to the end-users.

The Silicon Manufacturers Group acts as an independent special interest group within the SEMI structure and is open to SEMI members involved in manufacturing polycrystalline silicon, monocrystalline silicon or silicon wafers (e.g., as cut, polished, epi, etc.). The purpose of the group is to facilitate collective efforts on issues related to the silicon industry including the development of market information and statistics about the silicon industry and the semiconductor market.

Later this month, IC Insights’ May Update to The 2014 McClean Report will show a ranking of the 1Q14 top 25 semiconductor suppliers.  A preview of the top 20 companies is presented in Figure 1.  The top 20 worldwide semiconductor (IC and O S D—optoelectronic, sensor, and discrete) sales ranking for 1Q14 includes nine suppliers headquartered in the U.S., three in Taiwan, three in Europe, two in South Korea, two in Japan, and one in Singapore, a relatively broad representation of geographic regions.

The top-20 ranking includes three pure-play foundries (TSMC, GlobalFoundries, and UMC) and six fabless companies.  It is interesting to note that the top four semiconductor suppliers all have different business models.  Intel is essentially a pure-play IDM, Samsung a vertically integrated IC supplier, TSMC a pure-play foundry, and Qualcomm a fabless company.

IC foundries are included in the top 20 ranking because IC Insights has always viewed the ranking as a top supplier list, not as a marketshare ranking, and realizes that in some cases semiconductor sales are double counted.  With many of our clients being vendors to the semiconductor industry (supplying equipment, chemicals, gases, etc.), excluding large IC manufacturers like the foundries would leave significant “holes” in the list of top semiconductor suppliers.  Foundries and fabless companies are clearly identified in Figure 1.  In the April Update to The McClean Report, marketshare rankings of IC suppliers by product type were presented and foundries were excluded from these listings.

It should be noted that not all foundry sales should be excluded when attempting to create marketshare data. For example, although Samsung had a large amount of foundry sales in the first quarter, most of its sales were to Apple.  Apple does not re-sell these devices, so counting these foundry sales as Samsung semiconductor sales does not introduce double counting.

Overall, the list shown in Figure 1 is provided as a guideline to identify which companies are the leading semiconductor suppliers, whether they are IDMs, fabless companies, or foundries.

Figure 1

Figure 1

Outside of the top five spots, there were numerous changes within the 1Q14 top-20 semiconductor supplier ranking.  As shown, MediaTek jumped up four positions in 1Q14 as compared to 1Q13 into 12th place. MediaTek continues to experience extremely strong demand for its devices in the booming low-end smartphone business in China and other Asia-Pacific locations.  Moreover, MediaTek and MStar finalized their merger on February 1, 2014.  Annual post-merger sales for MediaTek are expected to be well over $6 billion.

After Avago’s purchase of LSI Corp. on May 6, 2014, the combined annual semiconductor sales run-rate of the two companies is likely to be over $5 billion.  Also, last year’s Micron/Elpida merger essentially created a new “giant” semiconductor company with Micron’s sales expected to be over $17 billion this year.

It should be noted that the sales of Micron and Elpida (merged on July 1, 2013), MediaTek and MStar, and Avago and LSI use the combined sales of the two companies for both 1Q13 and 1Q14, regardless of when the merger actually occurred.  This was done in an attempt to make the company’s 1Q14/1Q13 sales growth rates more directly comparable and give a clearer picture of the merged company’s sizes going forward.

Another potential merger to keep a watch for in the future is Fujitsu and Panasonic.  In February of this year, the two Japan-based companies signed a memorandum of understanding to combine the two companies’ system LSI businesses and form a new fabless semiconductor company.  IC Insights estimates that the combined 1Q14 semiconductor sales of these two companies was about $1.25 billion (down from $1.44 billion in 1Q13), which would have ranked the “merged” company as the sixteenth largest semiconductor company in the first quarter of this year.

In total, the top 20 semiconductor companies’ sales increased by 9% in 1Q14 as compared to 1Q13, which was two points higher than IC Insights’ current 7% forecast for total worldwide semiconductor market growth this year.  As shown, it took total semiconductor sales of just over $1.0 billion to make the 1Q14 top 20 ranking.

Figure 2 shows that there was a 58-percentage-point range of year-over-year growth rates among the 1Q14 worldwide top 20 semiconductor suppliers—from +48% for MediaTek/MStar to -10% for ST (it should be noted that excluding the legacy ST-Ericsson products, ST’s 1Q14/1Q13 sales increased 1%).

Figure 2

Figure 2

The success of the fabless and fab-lite business models and the continued strong growth of the memory market are evident when examining the top 20 semiconductor suppliers that logged double-digit growth in 1Q14.  As shown, 10 of the top 11 1Q14 performers were either memory suppliers (SK Hynix, Micron, and Samsung) or fabless/fab-lite companies (MediaTek, AMD, Infineon, Freescale, Avago/LSI, NXP, and Nvidia).

By MARK DANNA, Vice President Business Development, OWENS DESIGN, INC.

After nearly a quarter of a century, the off-shoring manufacturing trend that decimated the U.S. manufacturing sector and played a significant role in the slow pace of the current economic recovery seems to be ending. A number of large manufacturers, including NCR, Apple, Google, Caterpillar, Whirlpool and Ford have recently announced plans to return some of their overseas manufacturing to the United States. Even Nissan recently announced it was relocating a manufacturing plant from Mexico to the U.S. Many other American firms are considering taking similar action.

While this reshoring trend might be considered a ripple rather than a wave in the economic waters, it is growing. According to a study conducted in August 2013 by the Boston Consulting Group (BCG), 54 percent of the more than 200 companies surveyed were planning or seriously considering reshoring some of their manufacturing. That is a 17 percent increase over the 37 percent considering reshoring in 2012 when BCG last conducted the survey. Twenty-one percent of respon- dents said they were actively engaged in reshoring or will do so in the next two years, double the number reporting such activity a year ago.

According to Harry Moser, former CEO of Charmilles Technology Corp. and founder of the Reshoring Initiative, over 50,000 manufacturing jobs returned to the U.S. between 2009 and 2012. In the five years previous, the number returning was close to zero. Those 50,000 jobs constitute about 10 percent of the new manufacturing jobs created in the U.S. over the last three years.

Contributing factors to the reshoring trend

There are a number of global and domestic economic factors that are causing many American, and even some foreign companies, to consider moving their manufacturing operations to American soil. The two most significant are wages and productivity.

For example, according to an April 2013 Bloomberg article, the average pay in Asia almost doubled between 2000 and 2011, while wages increased by only 5 percent in the developed world and by 23 percent worldwide. Labor costs were one of the prime drivers off the off-shoring trend, and this significant rise in labor costs in the region erodes one of the key economic benefits of moving manufacturing to that region.

When that upward wage trend is coupled with differences in the levels of productivity of American and foreign workers, reshoring becomes even more attractive. According to a U.N. report compiled by the International Labor Organization (ILO), American workers out-produced and worked longer hours than their counterparts in Japan, Switzerland and all 27 European Union countries. While workers in Asian countries do tend to work longer than their American counterparts, even this is changing. Chinese workers have recently been demanding shorter hours and in some cases, job tenure after a certain number of years of employment.

Further, even when working fewer hours, American workers consistently out-produce their Chinese counterparts. According to ILO statistics, the average Chinese industrial worker produces $12,642 worth of output per year, while the average Chinese farmer or fisherman produces about $910 worth of output in the same time. By comparison, an American worker in the industrial sector produced $104,606 worth of output and a worker in the farming or fishing sector produced $52,585 per annum.

When one considers the diminishing difference in labor costs and the magnitude of difference in worker productivity, reshoring starts to become a very attractive alternative. It becomes even more attractive if one takes some additional factors into consideration.

Logistics are vastly simplified. The distances parts and finished goods have to be shipped will generally be shorter, which saves on both time and cost. The expenses and risks in maintaining a global supply chain are significantly reduced, as is the time and expense involved in dealing with customs issues. Communication across multiple time zones is also minimized.
Reshoring to the U.S. can also help reduce employee stress and increase productivity, since fewer employee hours will be lost to overseas travel. Business travel expenses will also be reduced. In addition, employees will experience fewer frustrations due to linguistic or cultural misunderstandings, making it easier for them to do their jobs.

Additional potential benefits of reshoring manufacturing to the U.S. include greater security and a more stable political environment, better protection of intellectual property and lower energy costs as the U.S. becomes a global leader in energy production.

In BCG’s survey, 43 percent cited labor costs as a factor in their interest in reshoring, 35 percent cited proximity to customers and 34 percent cited quality issues. Additional considerations cited skilled labor, transportation costs and supply chain management efficiencies. According to Moser, when the total cost of ownership of overseas manufacturing is considered, domestic manufacturing in the U.S. is the clear economic winner.

Reshoring challenges

Of course, a decision to move a company’s manufacturing back to the U.S. offers its own set of challenges. It takes time to build a manufacturing facility and train workers. This can easily take a couple of years and a considerable investment in capital. In the mean time, one still has to be producing the goods needed to meet customer demand.

Once a company decides to reshore, it has to handle the logistics of ending production in its overseas facilities and ramping up in the new U.S. facility. It also may have to deal with overseas employees and even its host country being less than supportive of its reshoring decision. Indeed, an American factory manager in China was briefly held hostage by his factory workers over rumors the company planned to move its manufacturing back to the U.S.

In addition to the purely logistic issues, it is critical to consider your customers in your reshoring equation. It’s vitally important to assure them that your reshoring transition will not interrupt their expected flow of finished products or lead to significant increases in their price.

Easing the reshoring transition with domestic outsourcing

Ironically, a potential solution to these reshoring transi- tional challenges can be found in outsourcing. In this case, however, it’s a domestic outsourcing, rather than overseas outsourcing that offers a viable business solution. A domestic outsourcing partner can provide the engineering and manufacturing resources that are needed to minimize the pain involved reshoring.

Partnering with a domestic design house offers a number of advantages. The outsource partner will have a core of experienced engineers and design teams used to bringing multiple new designs to volume production every year. In addition, most will have access to established U.S. manufacturing facilities capable of producing products in volume. As a result, whether it is bringing an estab- lished production line back to the U.S. or building one for a company’s next generation product, collaboration with the right outsourcing partner can essentially make a company’s reshoring transition seamless from a customer point of view. Of course, the key is picking the right outsource partner.

Picking the right outsourcing partner

The very first things to consider when deciding to choose a domestic outsource partner to smooth your company’s reshoring transition is their size and experience in your particular industry. Are they large enough, and do they have the resources to give you the level of manufacturing support you require? On the other hand, are they so large with so many clients that your project won’t receive the attention and support needed for it to succeed? Most importantly, do they have experience in your industry or one that is closely related?

An outsourcing company with lots of semiconductor manufacturing experience, for example, may be an excellent partner for a company in other high technology industries such as LED, flat panel or solar manufacturing, but it may not be the best choice for a company manufacturing home appliances.

Finally, you need to consider the kind of working relationship you want to have with your partner. Do you want a very close association with a lot of communication between your team and theirs? Would you rather have a more hands-off approach, where you provide them the project specifications and expect only periodic updates unless a problem arises? Is their preferred working relationship compatible with yours? Getting the answers to all these questions will require research in terms of formal references, word of mouth from others in your industry and online research, but the time spent researching your potential partners upfront will pay dividends in the long run.

By Prakash Arunkundrum, PwC Strategy and Operations Consulting Director

There is continued evidence that despite spending several millions on IT transformations, improving internal planning processes, maturing supply chains, and streamlining product development processes- several companies still struggle with predicting their financial and operational performance.

Don’t think so? Take a look at the PwC analysis on earnings surprises for 2012-2013 – many companies were poor at predicting revenue one quarter out, and the guidance on certain metrics such as gross margins and OpEx were poorer.

graph 1

Some attribute these results to fast product lifecycles, behavioral factors (i.e., sandbagging to exceed performance), market volatility, or a host of other external factors. I contend that these results can also be explained by many internal factors, such as how a company approaches planning and how seriously they value predictability.

At PwC, we benchmark operational performance of high-tech and semiconductor manufacturers on a regular basis. Recently, we have noticed that the median forecast accuracy of technology companies from 2009 to 2013 has dropped over 500 basis points! This doesn’t correlate with the belief within many companies that they are getting better with their planning processes.

So what are we missing?

While companies have improved their operational planning processes, disconnects to the broader financial planning and reporting processes have remained and in some cases, worsened due to the faster clock speed of product introductions. As I’ve stated previously, there are several reasons behind “surprises.” Below is the common classification of earning surprises and note that several of them are due to planning challenges.

image 2

When examining this across several companies, there are five core reasons behind the planning disconnects:

  1. Limited understanding of true market rate of demand – Historical projections to develop a financial plan are disconnected from unconstrained sales forecasts; Post-close bridge analysis explain deltas but don’t drive improved forecast methods
  2. Immature end-to-end S&OP processes – Slow open-loop supply planning and partner collaboration processes
  3. Disconnects between S&OP, Product Planning and Financial planning process – Forecasts have insufficient operational input and incentives are not always aligned
  4. Budget allocations do not always reflect latest sales, product, and operational pulse – Process lacks leading indicators and transparency
  5. Inability to make rapid cross-functional decisions based on data and simulation models reflecting changing business environment

Often the costs of inaccuracy are not immediately felt, lulling companies into deprioritizing the impact of poor planning. Left unaddressed, planning challenges impact predictability, and can also impact business performance.  A few real-life anecdotes behind some of our client engagements on planning topics include:

  • “… Why does my S&OP plan call for higher inventory levels than the financial plan (which was provided as street guidance)?  The S&OP plan called for higher revenue attainment and on-time performance, but finance never factored the cost to support revenue “ – High-tech COO
  • “Despite all the IT investments, I just missed my quarterly gross margin target by a mile”- Manufacturing OEM CFO
  • “We are really good at hitting our dollar revenue forecast but continue to watch with baited breath if we will make the quarterly budget targets till the last day of quarter” – Semiconductor VP of Finance
  • “We have no idea how many buffers are placed on the demand plan and by whom – leading to mistrust on the real demand internally and with partners” – Semiconductor VP of Operations

The answer: Step closer toward “Integrated Planning”

With experience helping clients improve financial efficiency and performance from our PwC legacy service offerings and in operations from recent acquisitions such as PRTM, Diamond and Booz & Co, we have found that the following key areas are critical steps toward improving your planning process:

1.     Process: Balance and align S&OP and Finance goals to create a consensus plan by:
  • Separating forecasting from demand planning – Establish a demand planning discipline and analytics driven capability as a neutral function that drives consensus across sales, product marketing, operations and finance
  • Orchestrating the financial, product, and operations planning activities across products, geographies, and functions on a unified cadence
  • Linking planned incentives to planned performance and corporate goals instead of budgets and functional goals
2.     Data: Align product data structure across all functions while establishing an integrated operational data model for common definitions and usage
3.     People: Minimize organizational silos and align incentives –  Clearly defined accountability for execution and adherence to outcomes of the decision making forums
4.     Technology: Create an end-to-end planning simulation system that supports both S&OP planning and financial planning activities – Unified simulation model across all functions with ability to understand impact of changes directly on the key elements of the P&L and balance sheet

The Integrated Planning environment—with integrated process, data, organization, and technology capabilities—will allow finance and operations teams to work closely and strategically, ultimately enabling companies to accurately forecast earnings and respond with agility.

While these steps sound ambitious and daunting, I recommend key stakeholders start by stepping back to assess their current end-to-end planning process to begin their Integrated Planning journey.

A newly finalized Department of Defense (DoD) rule reduces the risk of counterfeit semiconductor products being used by our military by implementing needed safeguards in the procurement of semiconductors and other electronic parts. The final DoD rule addresses contractor responsibilities for detection and avoidance of counterfeit electronic parts. Among other provisions, the rule implements section 818 of the National Defense Authorization Act (NDAA) for fiscal year 2012, which calls for DoD to utilize trusted suppliers to mitigate the risks of counterfeits.

“Counterfeit semiconductor products can end up in critical consumer, industrial, medical, and military devices, potentially undermining our public safety and national security,” said Brian Toohey, president and CEO, Semiconductor Industry Association. “The new Department of Defense rule will help stem the tide of dangerous counterfeit semiconductor products by mandating that DoD contractors purchase from original manufacturers or authorized sources. This rule represents a long fought victory for the semiconductor industry and a significant step toward ensuring the safety and security of semiconductor products used by our military.”

While the proposed rule issued last year contained numerous issues of concern for the semiconductor industry, the final rule incorporates many improvements called for by SIA in comments filed last year. The final rule requires contractors and their subcontractors to establish a counterfeit electronic part and avoidance system, subject to audit, that includes procedures to show their use of original manufacturers, authorized distributors, or authorized aftermarket distributors prior to turning to other outlets. Additionally, the rule further strengthens flowdown requirements to subcontractors called for by SIA and subjects violators of the requirements within the rule to disapproval of their purchasing system and/or potential withholding of payments by DoD.

SIA has long advocated for measures to stop the dangerous proliferation of counterfeit semiconductor products. Counterfeiters often “harvest” semiconductor components from old circuit boards and then re-mark them to indicate they are new or that they have better performance than the original components. These counterfeit semiconductors, which may be indistinguishable from authentic semiconductors, are then sold through a network of international brokers, posing a risk to critical end products. For more information, see SIA’s anti-counterfeiting whitepaper.

“By working together to implement common sense policies like this DoD rule, we can win the fight against counterfeit semiconductor products and help ensure the safety of technologies that are vital to America’s economic and national security,” said Toohey.

Applied Materials, Inc. today announced its Applied Endura Volta CVD Cobalt system, the only tool capable of encapsulating copper interconnects in logic chips beyond the 28nm node by depositing precise, thin cobalt films. The two enabling applications, a conformal cobalt liner and a selective cobalt capping layer, provide complete enclosure of the copper lines, improving reliability by an order of magnitude. The introduction of cobalt as a superior metal encapsulation film marks the most significant materials change to the interconnect in over 15 years.

“The reliability and performance of the wiring that connects the billions of transistors in a chip is critical to achieve high yields for device manufacturers. As wire dimensions shrink to keep pace with Moore’s Law, interconnects are more prone to killer voids and electromigration failures,” said Dr. Randhir Thakur, executive vice president and general manager of the Silicon Systems Group at Applied Materials. “The Endura Volta system builds on Applied’s precision materials engineering leadership by delivering CVD- based cobalt liner and selective cobalt capping films that overcome these yield-limiting issues to enable our customers to scale copper interconnects to beyond the 28nm node.”

The Endura Volta CVD system, with its two new process steps, represents a major technology extension for copper interconnects beyond 28nm. The first step involves the deposition of a thin, conformal CVD cobalt liner to increase the gap fill window of copper in narrow interconnects. This process improves the performance and yield of the device by integrating the pre-clean, PVD barrier, CVD cobalt liner and copper seed processes under ultra-high vacuum on the same platform.

The second step, a new “selective” CVD cobalt capping step, is deposited after CMP to encapsulate the copper lines for enhanced reliability performance. Complete envelopment of copper lines with cobalt creates an engineered interface that demonstrates over 80x improvement in device reliability.

“Applied’s unique CVD cobalt processes represent an innovative materials-enabled scaling solution,” said Dr. Sundar Ramamurthy, vice president and general manager of Metal Deposition Products at Applied Materials. “It is deeply satisfying that these materials and process innovations in development for almost a decade are now being adopted by our customers for their high-performance mobile and server chips.”

By Dan Tracy, senior director, Industry Research & Statistics, SEMI

Given the slow economic growth in the U.S. during the first quarter, coupled with challenging geo-political developments around the world,uncertainty once again permeates the industry outlook for the year.  With that said, industry trends show the first quarter of this year being generally stronger than the first quarter of one year ago. This week, the Semiconductor Industry Association (SIA) announced that semiconductor sales reached $78.6 billion in the first quarter, the highest-ever first quarter sales.

Industry data collected by SEMI and its data partners also demonstrate a positive first quarter compared to one year ago. Combined equipment billings reported by SEMI and the Semiconductor Equipment Association of Japan (SEAJ), as reported in our respective book-to-bill programs, have first quarter 2014 billings at about $7.9 billion, over 30 percent higher than one year ago.  Leadframe unit shipment growth, reported to SEMI, is up 14 percent compared to the same period one year ago.

Segment

1Q 2013

1Q 2014

Year/Year Growth
Equipment Billings* ($B)

$5.9

~$7.9

~33%
Leadframe Shipments

77.2

88.4

14.5%

*- Combined billings reported by the SEMI and SEAJ book to bill, respectively

Following two years of decline in investments, equipment spending is expected to improve this year — off of the lower base, while steady semiconductor unit growth will drive spending growth on semiconductor materials.  Combined spending on equipment and materials will approach $85 billion globally for the year.

Over the previous ten years, approximately $110 billion has been spent on equipment and materials in North America for semiconductor manufacturing, and another $12 billion (or more) in spending for 2014 will enable manufacturers here to maintain their prominent rankings in the industry.  With this investment, North American wafer fabs continue to represent over 14 percent of the total installed base globally.

The encouraging start to the year, coming off of two years of declining investments, will result in growth for semiconductor equipment and materials in 2014. Clarity in the overall economy and in demand growth for electronics will determine just how strong investment and spending growth will unfold for the year.

The SEMI/Gartner Market Symposium at SEMICON West on Monday, July 7 will provide an update on the semiconductor market outlook. In addition to presentations by SEMI and Gartner analysts, Sunit Rikhi, VP of Technology and Manufacturing Group and General Manager, Intel Custom Foundry, will present on “Intel Custom Foundry – Competing in Today’s Fabless Ecosystem.”

Other upcoming SEMICON exhibitions and conferences include SEMICON Russia (May 14-15), SEMICON Taiwan (September 3-5),SEMICON Europa (October 7-9), and SEMICON Japan (December 3-5).

The market for large-sized liquid-crystal display (LCD) panels is set for a moderate seasonal decline in the first quarter after a busy end-of-year in 2013 that saw record shipments for TV and tablet panels, according to a new report from IHS Technology.

Global LCD panel shipments for the first quarter of 2014 will reach an estimated 222.0 million units, down 9 percent from 244.4 million at the end of the fourth quarter last year. Despite the drop, considered normal at this time of the year, the latest shipment projections for the first three months point to a robust market, with forecast volume larger than those of either the first or second quarter of 2013 and nearly equaling the third’s.

“After completion of the pre-stocking and rush orders in the fourth quarter, market demand for LCD panels will not be as strong in January, which will affect overall volume for the first quarter,” said Ricky Park, senior manager for large-area displays at IHS. The findings are contained in the report, “Tablet Shipments Again Set Record High,” from the Display Materials & Systems service of IHS.

There will also be fewer working days for panel manufacturers in China at the end of January during the Lunar New Year, when it is customary to take a break from work for a week or longer. As a result, panel shipments will be impacted until February for large-sized LCD panels, which pertains to the display market for TVs, monitors, notebooks and tablets.

A mighty December overall

December proved an exceptional month for the TV as well as tablet panel segments, and sufficiently strong for the notebook panel market. Only the monitor panel sector, which continues to lose ground, did not show growth for the month.

For TV panels, shipments in December reached 20.2 million units, the first time since May that volume exceeded the 20.0 million mark, thanks to solid year-end promotions by TV brands. The 50-inch-and-above size grew its share of the TV panel market in the fourth quarter to 14 percent, up from 10 percent in the third quarter—more evidence of demand for larger-sized panels among consumers.

Panel makers also created a volley of new sizes to pitch to the market. Using economical glass-cutting processes and efficient utilization, panel makers like Innolux from Taiwan introduced the 39.5-inch TV panel, while Chinese makers BOE and CSOT each supplied a new 48-inch panel. South Korea’s LG Display also joined in the fray, launching the 49-inch, prompting a similar response from CSOT.

The tablet panel market was likewise a big performer in December as shipments surged to 31.1 million panels for the month, up 43 percent from the same time a year ago. Japan’s Sharp enjoyed the largest growth after shipments grew a phenomenal thirteenfold from November, thanks to orders from Apple for its 7.9-inch iPad mini tablet.

The unbranded white-box tablet market in China also proved sturdy during the period, propelling large increases in tablet panel shipments for Taiwanese panel makers CPT, HannStar Display and Innolux.

In the notebook panel market, Hewlett-Packard was a big customer. Because of HP, notebook panel orders climbed for the market’s four main notebook panel suppliers: Innolux, AUO from Taiwan, LG Display and fellow South Korean maker Samsung Display. Total notebook panel shipments in December reached 16.7 million units, up 4 percent for the month.

Among the four major panel markets, only the monitor segment continued to underperform in December. LCD panel shipments for monitors amounted to 13.7 million units, down nearly 2 percent from the month before—and off by an even larger 8 percent from a year ago in December 2012.

The weak shipments from monitors notwithstanding, overall December shipments for large-sized LCD panels rose to 82.4 million units, up slightly from 81.6 million in November, but growing by a heady 7 percent from year-ago levels.

Recognizing the changing dynamics of the microelectronics industry in Southeast Asia, SEMI today announced the expanded scope of its industry-leading SEMICON regional exposition which will now rotate between Singapore and other locations within Southeast Asia. Building on the twenty-year history of SEMICON Singapore, the expanded event — branded SEMICON Southeast Asia — will have its inaugural event in in Penang, Malaysia in 2015.  The announcement was made during SEMICON Singapore 2014 (www.semiconsingapore.org), which is currently being held from 23-25 April at the Marina Bay Sands.

“While Singapore continues to serve as the hub of the microelectronics industry in Southeast Asia, SEMI recognizes the growth and importance of the industry across the region requires a new vision for serving our members and other customers where they do business,” said Kai Fai Ng, president of SEMI Southeast Asia. “Through the rotation of SEMICON Southeast Asia between Singapore, Malaysia, and the region, we will open new business opportunities for our customers and foster stronger pan-regional engagement in our programs and other events serving the industry. On alternating years, we will continue to support the host regions through high-level executive conferences in Singapore and Malaysia.”

According to Gartner, the Southeast Asia microelectronics manufacturing market accounts for more than 27 percent of the world’s assembly, packaging, and test production and Malaysia alone represents over 10 percent of the global square footage, followed closely by the Philippines, Thailand and Singapore.  According to the SEMI (www.semi.org) World Fab Forecast, Southeast Asia is among the top four regions in terms of growth rate for capacity.  In 2014, approximately $800 million of front end fab spending will occur in Southeast Asia.

The new SEMICON Southeast Asia will continue to focus on the key trends and technologies in semiconductor design and manufacturing, adding emphasis in serving the needs of expanding applications markets in areas including mobile devices and other connected “Internet of Things” (IoT) technologies, many of which require development of specialized materials, packaging, and test technologies, as well as new architectures and processes — technologies addressed by a growing number of companies located across Southeast Asia.  SEMI will continue to maintain its regional headquarters in Singapore.

For more information on SEMICON Singapore 2014, visit: www.semiconsingapore.org.   To learn about SEMICON Southeast Asia 2015 exhibition opportunities, visit www.semiconsea.org.