Category Archives: Wafer Level Packaging

The health of the IC industry is increasingly tied to the health of the worldwide economy. Rarely can there be strong IC market growth without at least a “good” worldwide economy to support it. Consequently, IC Insights expects annual global IC market growth rates to closely track the performance of worldwide GDP growth. In the recently released The McClean Report 2016, IC Insights forecasts 2.7% global GDP growth for 2016, only marginally ahead of what is considered to be the recession threshold of 2.5% growth.

Figure 1 puts the worldwide electronics and semiconductor industries into perspective. The top figure, worldwide GDP, represents all global economic activity. Essentially, the worldwide total available market (TAM) for business (i.e., GDP) was $78.4 trillion in 2015.

In many areas of the world, local economies have slowed. For example, economic growth in China slipped below 7% in 2015. China, which is the leading market for personal computers, digital TVs, smartphones, new commercial aircraft, and automobiles, is forecast to lose more economic momentum in 2016. Its GDP is forecast to increase 6.3% in 2016, which continues a slide in that country’s annual GDP growth rate that started in 2010.

While the U.S. economy is far from perfect, it is currently one of the most significant positive driving forces in the worldwide economy. The U.S. accounted for 22% of worldwide GDP in 2015. U.S. GDP is forecast to grow 2.5% in 2016. Given its size and strength, the U.S. economy greatly influences overall global GDP growth. An improving employment picture and the low price of oil are factors that should positively impact the U.S. economy in 2016.

Other noteworthy industry highlights from the 2016 edition of The McClean Report include the following:

• Global semiconductor sales decreased 1% in 2015 but are forecast to grow 4% in 2016. IC Insights expects the worldwide IC market to increase 4% in 2016, and sales of optoelectronics, sensors, and discrete (OSD) devices collectively to register 5% growth.

Figure 1

Figure 1

• Total semiconductor unit shipments (including IC and OSD devices) reached almost 840-billion units in 2015 and are expected to exceed one trillion units in 2018. After increasing 4% in 2015, IC unit shipments are forecast to grow 5% in 2016. Analog devices are forecast to account for 53% of total IC unit shipments in 2016.

• A stable IC pricing environment is expected through 2020 due in part to fewer suppliers in various IC markets (i.e., DRAM, MPU, etc.), lower capital spending as a percent of sales, and no significant new IC manufacturers entering the market in the future (the surge of Chinese IC companies that entered the market in the early 2000’s is assumed to be the last large group of newcomers.

• Semiconductor industry capital spending grew to $65.9 billion in 2015. IC Insights forecasts semiconductor capital spending will decrease 1% in 2016. Spending on flash memory and within the foundry segment is forecast to increase in 2016 but spending for all other market segments, including DRAM, is expected to decline. Semiconductor capital spending as a percent of sales is forecast to remain in the mid- to high-teens range through 2020. IC Insights believes spending at this level will not lead to an industry-wide overcapacity during the forecast period.

• Semiconductor R&D spending increased 1% in 2015 to new record high of $56.4 billion. Intel dedicated $12.1 billion to R&D in 2015 (24.0% of sales) to remain the largest semiconductor R&D spender in 2015. R&D spending at TSMC, the industry’s biggest pure-play foundry rose 10% in 2015, ranking it 5th among top R&D spenders. TSMC joined the group of top-10 R&D spenders for the first time in 2010, giving an indication of just how important TSMC and other pure-play foundries have become to the IC industry with continuing technological progress.

Further trends and analysis relating to the IC market are covered in the main 400-plus page 2016 edition of The McClean Report.

Presto Engineering Inc. announced this week that it has significantly expanded its turnkey capabilities with the opening of two new manufacturing hubs and a world-wide logistics center in Asia.

As an outcome of its partnership with Inside Secure, announced April 2015, Presto Engineering is taking on the facilities in Asia, adding footprint; significant expertise; and a new, enhanced suite of services for Presto’s customers. Presto Engineering now offers a complete and comprehensive turn-key product engineering and production management solution for integrated circuits (IC), from GDSII hand-off (design output) to finished ICs shipped directly to end customers, targeted at the latest in high-speed communication, Internet of Things (IoT) and secured elements markets.

“This expansion provides the local production capacity and hands-on expertise that we need in Asia to offer our customers a fast, secure, cost-effective, and comprehensive production solution,” states Michel Villemain, CEO, Presto Engineering. “We now have fully-trained staff and substantial local capacity with our own test equipment in place in Asia. This both strengthens and complements our capabilities in the U.S. and Europe, enabling us to provide responsive, on-site and in-region technical support for optimum visibility on customer projects, where and when it counts.”

Jon Lanson, Presto’s Vice President of WW Sales & Marketing adds, “There is no doubt that security is a major concern in the IoT market. Building a hardware-based secure solution, like what’s done in the payment world, is one of the leading IoT security approaches. With Presto’s new secure capabilities in Europe and Asia, we are ready to address this manufacturing issue now, by either assisting clients with developing their own specific solution, or executing an existing turnkey process.”

The new operations are located in Bangkok, Thailand; Kaohsiung, Taiwan; and Hong-Kong, SAR. To Presto’s existing capacity in the US and Europe, they add 20+ probe test cells, advanced die prep capabilities, and payment module manufacturing in secured (EAL5+/EAL6) floors, ready to support large projects with unit volumes of 10 million or more.

TowerJazz, the global specialty foundry leader, announced today that it completed its previously announced acquisition of an 8-inch wafer fabrication facility in San Antonio, Texas, United States from Maxim Integrated Products, Inc. This acquisition will expand TowerJazz’s current worldwide manufacturing capacity, cost-effectively increasing its production by about 28,000 wafers per month. The availability of capacity is needed to serve the Company’s current and forecasted robust customer demand.

As part of the transaction, the companies signed a long-term supply agreement of 15 years, under which TowerJazz will manufacture products for Maxim in the San Antonio facility, in quantities which will allow for a gradual ramp of third party products. As previously announced, Maxim received as consideration $40 million paid with approximately 3.3 million ordinary shares of TSEM, representing approximately 3% of company’s fully diluted share count. This was calculated based on the average closing price of TSEM in NASDAQ during the last 15 trading days.

Russell Ellwanger, TowerJazz Chief Executive Officer, commented: “We already performed first qualifications of our high demand and high volume flows, with Maxim’s approval, confirming the outstanding engineering and manufacturing capabilities of the San Antonio fab personnel. We are now excited to have San Antonio staff and geography join us; they are a great addition to the TowerJazz family. We look forward to continuing to drive customer success and company growth through committed performance and execution.”

“We needed a trusted partner to manage our proprietary process technology who also shared our commitment to the employees in San Antonio. TowerJazz has a proven track record with Maxim and similar beliefs about employees, so this is a natural fit. I look forward to our continued partnership over the coming years,” said Vivek Jain, Senior Vice President of Maxim Integrated’s Technology and Manufacturing Group. “With this arrangement, we will continue to support our customers for years to come, improve utilization in our Oregon fab, and advance our manufacturing flexibility.”

SET, Smart Equipment Technology, the supplier in high accuracy die-to-die and die-to-wafer bonders, today announced its participation in the 3D integration consortium of IRT Nanoelec, which is headed by CEA-Leti.  SET joins Leti, STMicroelectronics and Mentor Graphics to develop advanced 3D die-to-wafer stacking technologies, using direct copper-to-copper bonding.

Based in Grenoble, France, IRT Nanoelec is an R&D center focused on information and communication technologies (ICT) using micro- and nanoelectronics. 3D integration is one of its core programs.

The 3D integration program was launched in 2012. It brings together, under a single roof, expertise and equipment addressing the entire 3D integration value chain: technology, circuit architecture, EDA tools, packaging and test. Mentor Graphics (EDA), ST (foundry) and Leti are the founding members of the consortium.

“All SET employees, and in particular the team involved in the 3D project, are proud and enthusiastic to join IRT Nanoelec,” said Pascal Metzger, CEO of SET. “Our integration in this program is a logical continuation of the collaboration initiated with CEA teams 35 years ago on different bonding projects, including laboratory high-precision bonder for Cu-Cu direct bonding. One of the key factors for SET joining this consortium is the opportunity to meet and discuss with experts from different specialties.”

“Maintaining high accuracy for components assembly as well as good control of the parameters, while increasing dramatically the throughput, is a real challenge, but we are eager to start the daily work together with IRT teams to reach our mutual goals,” said Nicolas Raynaud, project manager at SET.

Séverine Chéramy, director of IRT Nanoelec’s 3D integration program, said the objective is to offer designers 3D die-to-wafer stacking at an aggressive pitch – less than 10µm – at high speed, at room temperature and without pressure or underfill.

“I’m particularly proud to welcome SET, a French SME, to the program, because it shows the complementarity of the scope of work,” she said. “The collaboration with SET on die-to-wafer bonding, using copper-to-copper bonding at very high accuracy and high speed, is really exciting and challenging. The consortium’s knowledge of such bonding techniques, combined with expertise on high-accuracy SET equipment, offers many opportunities for heterogeneous 3D integration that address a wide range of potential applications. These include imaging, sensors, logic and photonics.”

Nanoelec Research Technological Institute (IRT), headed by CEA-Leti conducts research and development in the field of information and communication technologies (ICT) and, specifically, micro- and nanoelectronics

The mobile sector is driving production and market growth; however a new market driver, IoT is on the horizon and is expected to have a significant impact on the advanced packaging industry.

“IoT driven semiconductor industry consolidation, is reflecting into a highly dynamic advanced packaging landscape,” commented Andrej Ivankovic, Technology & Market Analyst, Advanced Packaging & Semiconductor Manufacturing at Yole Développement.

And he added: “Numerous packaging options developed by the industry leaders, are being explored as new IoT applications arise.”

In parallel, Yole Développement’ analysts highlight the noteworthy demand for advanced packaging solutions and the increasing number of shipped wafers: focus is turning to integration and wafer level packages to enable a functionality driven roadmap and revive the cost/performance curve.

ap platforms

Yole Développement (Yole), the “More than Moore” market research and strategy consulting reinforces its market positioning within the advanced packaging area with the release of its first report “Status of the Advanced Packaging Industry”. This first edition brings a thorough analysis including dynamics and disruptions of the market, market forecasts per packaging platform and device type from 2014 to 2020, market shares…This analysis also presents a detailed analysis of the advanced packaging supply chain, financial evolutions and mergers & acquisitions. Yole’s advanced packaging team proposes a packaging technology segmentation and highlights with this new analysis, the impact of Internet of Things and the adoption of 2.5D/3D, Fan-Out and Fan-In solutions.

“A transformation of the semiconductor industry is under way,” said Andrej Ivankovic, Yole. “Advanced packaging is part of the scaling and functionality roadmaps.”

The latest events in the technology market indicate that 2015 marks the beginning of an exciting new era for the IT and electronics industry. At semiconductor supply chain level, the industry entered a profound consolidation phase with high M&A activity reshaping the business landscape. FEOL device scaling and related cost reduction are deviating from the path they followed for the past few decades, with Moore’s law in its foundation. Advanced nodes do not bring the desired cost benefit anymore and R&D investments in new lithography solutions and devices below 10nm nodes are rising substantially.

As the smartphone market matures, new forces are appearing in the form of IoT. While the mobile sector continues to drive the market, the scent of IoT is already spreading in the consumer sector with products such as wearables and first smart home appliances. IoT market, application and technology segmentation has begun. Companies across the industry are restructuring, merging and acquiring in order to adjust their portfolio, enable a complete platform offer and establish leading positions on the market.

Yole’s advanced packaging analysts also identified other market dynamics. They announced:
•   The foundry involvement is no longer a dent in advanced packaging production.
•   Increased activity of Chinese capital on the market.
•   And more

At the level of technology, as profitability of FEOL scaling options remains uncertain and IoT promises application diversification, the spotlight is now turning to advanced packages for cost reduction, performance boost and functional integration.

In order to answer market demands, the advanced packaging segment focuses on integration and WLP. Emerging packages such as Fan-Out WLP, 2.5D/3D IC and related System-in-Package solutions aim to bridge the gap and revive the cost/performance curve.

How will the advanced packaging industry evolve, which changes in the semiconductor supply chain are taking place and which packaging technologies will be most critical in the years to come? Yole proposes with this new technology and market analysis, a deep understanding of the advanced packaging technical and market challenges. Under this new report, the market research and strategy consulting company brings a thorough analysis of the advanced packaging industry and its future development covering platforms Fan-Out WLP, Fan-In WLP, Flip Chip and 2.5D / 3D.

Worldwide semiconductor capital spending is projected to decline 4.7 percent in 2016, to $59.4 billion, according to Gartner, Inc. (Table 1). This is down from the 3.3 percent growth predicted in Gartner’s previous quarter’s forecast.

“The 2016 outlook for the semiconductor manufacturing equipment market reflects a bleaker outlook for end-user electronics demand and the world economic environment,” said David Christensen, senior research analyst at Gartner. “Capital investment policies of leading semiconductor vendors have remained cautious against the background of sluggish electronics demand. However, the long-term outlook shows a return to growth, although the wafer-level manufacturing equipment market is expected to enter a gentle down cycle in 2016 due to the loss of the supply and demand balance in the DRAM market.”

Table 1

Worldwide Semiconductor Capital Spending and Equipment Spending Forecast, 2014-2018 (Millions of Dollars) 

 

2014

2015

2016

2017

2018

Semiconductor Capital Spending ($M)

64,569.5

62,291.3

59,360.8

63,622.1

69,182.0

Growth (%)

11.6

-3.5

-4.7

7.2

8.7

Wafer-Level Manufacturing Equipment ($M)

33,684.1

33,713.2

32,903.2

35,699.0

39,129.1

Growth (%)

16.2

0.1

-2.4

8.5

9.6

Wafer Fab Equipment ($M)

31,953.0

31,906.5

31,097.6

33,630.3

36,689.8

Growth (%)

16.3

-0.1

-2.5

8.1

9.1

Wafer-Level Packaging and Assembly Equipment ($M)

1,731.1

1,806.7

1,805.6

2,068.7

2,439.2

Growth (%)

14.3

4.4

-0.1

14.6

17.9

Source: Gartner (January 2016)

2016 spending on wafer-level manufacturing equipment is forecast to decline 2.4 percent. Within the forecast, different segments are expected to fare differently in response to varying end-market conditions. For example, the lithography segment will grow 1.4 percent, while the etch, clean and planarization equipment markets in 2016 are expected to decline by 2.9 percent. The deposition equipment segment will improve slightly in 2016 with negative 3.2 percent growth. Beyond 2016, the market turns positive, with relatively strong growth forecast through 2018.

This research is produced by Gartner’s Semiconductor Manufacturing program. This research program, which is part of the overall semiconductor research group, provides a comprehensive view of the entire semiconductor industry, from manufacturing to device and application market trends. Additional analysis on the outlook for the semiconductor market can be found at “Forecast Analysis: Semiconductor Capital Spending and Manufacturing Equipment, Worldwide, 4Q15.”

Technavio’s market research analysts estimate the semiconductor capital spending market in the US, to grow at a CAGR of around 9% between 2015 and 2019. The most prominent segment in global semiconductor industry has been memory, logic, MPU and analog, which made up almost 75% of the total semiconductor demand. Semiconductor technology is continuously growing with emergence of advanced technology, leading to increased investments in this segment.

The new market research report from Technavio provides a breakdown and analysis of the semiconductor capital spending market segments by technology.

“One of the interesting trends gaining traction in the market is the rise in China’s semiconductor industry. China’s semiconductor industry has a significant influence on the capital spending in the US semiconductor industry. Even though, there are a large number of local semiconductor components manufacturers in China, more than 80% of the semiconductor requirements in China is fulfilled by US semiconductor companies, such as Intel and Global Foundries,” said Asif Ghani, Lead Analyst, Hardware & Semiconductor, Technavio Research.

The semiconductor capital spending market in the US is driven by numerous drivers, of which, the most prominent among of all is the accelerated capex in memory and foundry segments. Collectively, memory and foundry represent close to two-third of the total semiconductor capital spending market. With such accelerated capital investments on a global scale, the outcome will have a considerable impact on the semiconductor industry worldwide.

The key vendors in the semiconductor capital spending market in the US include Global Foundries, Intel, Micron, Samsung Electronics, and SK Hynix. The competition in the semiconductor capital spending market in the US is rigid. And the main reason for such intense completion is the evolution of technology. With the pace of technological advancements in the US market, vendors are involved in substantial capital spending, hence, the market comprises of players with strong technological proficiency.

Worldwide semiconductor revenue totaled $333.7 billion in 2015, a 1.9 percent decrease from 2014 revenue of $340.3 billion, according to preliminary results by Gartner, Inc. The top 25 semiconductor vendors’ combined revenue increased 0.2 percent, which was more than the overall industry’s growth. The top 25 vendors accounted for 73.2 percent of total market revenue, up from 71.7 percent in 2014.

“Weakened demand for key electronic equipment, the continuing impact of the strong dollar in some regions and elevated inventory are to blame for the decline in the market in 2015,” said Sergis Mushell, research director at Gartner. “In contrast to 2014, which saw revenue growth in all key device categories, 2015 saw mixed performance with optoelectronics, nonoptical sensors, analog and ASIC all reporting revenue growth while the rest of the market saw declines. Strongest growth was from the ASIC segment with growth of 2.4 percent due to demand from Apple, followed by analog and nonoptical sensors with 1.9 percent and 1.6 percent growth, respectively. Memory, the most volatile segment of the semiconductor industry, saw revenue decline by 0.6 percent, with DRAM experiencing negative growth and NAND flash experiencing growth.”

Intel recorded a 1.2 percent revenue decline, due to falls in PC shipments (see Table 1). However, it retained the No. 1 market share position for the 24th year in a row with 15.5 percent market share. Samsung’s memory business helped drive growth of 11.8 percent in 2015, and the company maintained the No. 2 spot with 11.6 percent market share.

Table 1. Top 10 Semiconductor Vendors by Revenue, Worldwide, 2015 (Millions of Dollars)

Rank 2014

Rank 2015

Vendor

2014 Revenue 

2015 Estimated Revenue 

2014-2015 Growth (%)

2015 Market Share (%)

1

1

Intel

52,331

51,709

-1.2

15.5

2

2

Samsung Electronics

34,742

38,855

11.8

11.6

5

3

SK Hynix

15,997

16,494

3.1

4.9

3

4

Qualcomm

19,291

15,936

-17.4

4.8

4

5

Micron Technology

16,278

14,448

-11.2

4.3

6

6

Texas Instruments

11,538

11,533

0.0

3.5

7

7

Toshiba

10,665

9,622

-9.8

2.9

8

8

Broadcom

8,428

8,419

-0.1

2.5

9

9

STMicroelectronics

7,376

6,890

-6.6

2.1

12

10

Infineon Technologies

5,693

6,630

16.5

2.0

Others

157,992

153,182

-3.0

41.2

Total

340,331

333,718

-1.9

100

Source: Gartner (January 2016)

“The rise of the U.S. dollar against a number of different currencies significantly impacted the total semiconductor market in 2015,” said Mr. Mushell. “End equipment demand was weakened in regions where the local currency depreciated against the dollar. For example in the eurozone, the sales prices of mobile phones or PCs increased in local currency, as many of the components are priced in U.S. dollars. This resulted in buyers either delaying purchases or buying cheaper substitute products, resulting in lower semiconductor sales. Additionally, Gartner’s semiconductor revenue statistics are based on U.S. dollars; thus, sharp depreciation of the Japanese yen shrinks the revenue and the market share of the Japanese semiconductor vendors when measured in U.S. dollars.”

The NAND market continued to deteriorate throughout the year. As a result, revenue grew only 4.1 percent in 2015, fueled by elevated supply bit growth that resulted in an aggressive pricing environment. The tumultuous NAND pricing environment rippled through most of the NAND solutions, particularly solid-state drives (SSDs), which continue to encroach on hard-disk drives (HDDs). The ensuing price war in SSDs further pressured the profitability of the NAND flash makers amid the biggest technology transition in flash history — 3D NAND. While 3D NAND commercialization was modest, it was limited to only one vendor — Samsung. Modest revenue gains have not stopped investment in NAND flash and 3D technology, with all vendors continuing to spend aggressively in the technology and most with new fabs.

After 32.0 percent revenue growth in 2014, the DRAM market hit a downturn in 2015. An oversupply in the commodity portion of the market caused by weak PC demand led to severe declines in average selling prices (ASPs), and revenue contracted by 2.4 percent compared with 2014. The oversupply and the extent of ASP declines could have been significantly worse if Micron Technologies’ bit growth had performed in line with its South Korean rivals. Fortunately for the market, the company saw negative bit growth due to its transition to 20 nm, sparing the industry from an even more severe downturn.

Additional information is provided in the Gartner report “Market Share Analysis: Semiconductors, Worldwide, Preliminary 2015 Estimates.”

IC Insights has released its Global Wafer Capacity 2016-2020 report that provides in-depth detail and analysis of IC industry capacity by wafer size, by process geometry, by region, and by product type. The new report provides a ranking of the industry’s 25 largest IC manufacturers in terms of installed capacity as of December 2015.  The top 10 capacity leaders are shown in Figure 1.  Among the world’s top 10 capacity leaders in 2015 were four companies headquartered in North America, two companies based in South Korea and in Taiwan, and one company each from Europe and Japan. The list includes the world’s four largest memory suppliers, three largest foundries, the largest microprocessor supplier, and Texas Instruments and ST—the two biggest suppliers of analog ICs.

Figure 1

Figure 1

Collectively, the top 10 leaders had installed capacity of 11,737K wafers/month at the end of the year, which equates to 72% of global capacity and up slightly from 10,885K wafers/month or 71% in 2014.

  • As of December 2015, Samsung had the most installed wafer capacity with 2.5 million 200mm-equivalent wafers per month, which represented 15.5% of the world’s total capacity with most of it used for the fabrication of DRAM and flash memory devices.
  • Second in line was the largest pure-play foundry in the world TSMC with about 1.9 million wafers per month capacity, or 11.6% of total worldwide capacity.
  • Micron substantially increased its available capacity in recent years primarily through acquiring existing capacity from others. With the addition of the Elpida and Rexchip fabs as well as the extra Inotera capacity, Micron first became the third-largest wafer capacity holder in the world in 2013. Micron had the sixth-largest amount of wafer capacity in 2012, and in the beginning of that year the company acquired Intel’s stake in two IM Flash Technologies fabs, giving Micron access to all the capacity from those fabs.
  • The fourth-largest capacity holder at the end of 2015 was Toshiba with about 1.3 million in monthly wafer capacity (8.2% of total worldwide capacity), including a substantial amount of flash memory capacity for joint-investor/partner SanDisk.
  • Rounding out the top 5 companies was another memory IC supplier SK Hynix with 1.3 million wafers/month (8.1% of total worldwide capacity).
  • Intel’s capacity declined slightly in 2015 because of the company’s Fab 68 in China being taken off-line while it is converted from the production of logic chipsets to next-generation flash memory (3D NAND and XPoint).

Given the skyrocketing cost of new wafer fabs and manufacturing equipment and as more IC companies transition to a fab-lite or fabless business model, IC Insights expects that an even greater percentage of fab capacity will be in the hands of fewer suppliers through the end of the decade.

By Denny McGuirk, SEMI president and CEO

“In like a lion, out like a lamb” is just half the story for 2015.  While initial expectations forecasted a double-digit growth year, the world economy faded and dragged our industry down to nearly flat 2015/2014 results.

However, 2015 will be remembered for a wild ride that fundamentally changed the industry.  In 2015 a wave of M&A activity swept across the industry supply chain — unlike any single year before — with scores of transactions and notable multi-billion dollar companies being absorbed.  In 2016, we all will be working within a newly reconfigured supply chain.

Increasingly, in this business landscape, collaboration is required simultaneously across the extended supply chain — customers’ customers’ customers are now routinely part of the discussion in even unit process development.  Facilitating interaction and collaboration across the extended supply chain is part of what SEMI does and I’ll be updating you in next week’s letter on how, but first, let’s review what’s happened and what’s happening.

2015 Down 1%: “In Like a Lion, Out Like a Lamb”

2015 had an optimistic start with a strong outlook and good pace in Q1 and 1H.  In January 2015 forecasters projected semiconductor equipment and materials growing in a range of 7 percent to nearly 14 percent vs. 2014.  Global GDP, as late as May 2015, was pegged at 3.5 percent for 2015 after coming in at only 3.4 percent in 2014.  In August, estimates dropped to 3.3 percent, in November estimates dropped further to 3.1 percent for the year.

As our industry has matured, semiconductor equipment and materials growth rates are ever more tightly correlated to shifts in global GDP.  With global GDP unexpectedly dropping, the second half saw declining book-to-bill activity and the year will likely end flat or slightly negative for 2015.  Though nearly flat, the numbers are still impressive with a healthy $37.3 billion annual revenue for semiconductor manufacturing equipment and $43.6 billion for semiconductor materials.

An important change is since the 2009 financial crisis, electronics, chips, and semiconductor equipment and materials markets have been much more stable year-to-year than in the years prior to 2009.  Also, the movement of the three segments is much more synchronized compared to the earlier years of boom and bust. For SEMI’s members this means cycles are becoming more muted — enabling members to shift business models accordingly to better maintain prosperity.

Fab-Equipmt-600w Capital-Equip-600w

 

2015’s $125+ Billion M&A:  Inflection Point for Silicon Valley Icons and Global Titans

2015 is a year that will be viewed as an inflection point in our industry.  The unprecedented M&A volume (more than $125 billion for semiconductor related companies) and the size of individual deals through the electronics supply chain will forever  change the industry.

historic-proportions

While there have been waves of consolidation for semiconductor Integrated Device Manufacturers (IDMs) in the 1980s and 1990s, and semiconductor equipment and materials in the 1990s and 2000s, the fabless semiconductor companies are the latest wave undergoing consolidation.  Although, in 2015, not just fabless, but all segments saw major deals — even iconic chemical brands DuPont and Dow Chemical announced their intention to merge.

Large and familiar brands like Broadcom (Avago), SanDisk (Western Digital), Altera (Intel), Freescale (NXP), and KLA-Tencor (Lam Research) have been merged and will continue forward as part of their acquirers.  China is on the move with its ambitions to quickly grow its indigenous semiconductor supply chain with recent acquisitions of ISSI, OmniVision, NXP RF power unit, and notably Mattson in the semiconductor equipment segment.

In an age when new fab costs are pushing double-digit billions of dollars and leading-edge device tapeouts are surpassing $300 million per part, consolidation is a strategy to increase scale, leverage R&D, and compete better.  For SEMI’s members, the winner-take-all stakes increase and raise expectations for technology, product performance, application development, speed, and support.  This, in turn, means that SEMI members have an increased need for a newly drawn pre-competitive collaboration model along the extended electronics supply chain and for Special Interest Groups (SIGs) to drive collective action in focused sub-segments and for specific issues.

Collaboration-is-critical-6

Source: SEMI (www.semi.org), 2015

2016 Up ~1%: Stay Close to your Customer and your Customer’s Customer and …

Current projections for semiconductor equipment and materials suggest that 2016 will not be a high growth year.  The span of forecasts ranges from almost -10 percent to +5 percent.  At SEMI’s Industry Strategy Symposium (ISS), 10-13 January, we will be taking a deep-dive into the 2016 forecast and on the business drivers and will have a much better picture of the consensus outlook.

However, it is already quite clear that following this enormous wave of consolidation, the industry will look different and will offer new and different opportunities.  Listening to SEMI’s members, I’ve heard that during this period of upheaval it’s absolutely critical to stay close to one’s customers – but more than that – to have access and ongoing direct dialogue with the customer’s customer … and customers’ customers’ customers.

In light of the cost of research and development, the magnitude of risks, and the speed of new consumer electronics adoption, SEMI members find that they need to intimately know emerging requirements two to three steps away in the supply chain, and may require rapid and innovative development from their own sub-suppliers to meet product delivery in time.  In parallel, we see system integrators (electronics providers) staffing up with semiconductor processing engineers and equipment expertise, both for differentiation of their own products and for potential strategic vertical manufacturing.

2016 will mark an acceleration of collaboration and interdependence across the extended supply chain.  Next week, I’ll provide an update letter on SEMI’s related activities with an overview of what SEMI is doing to meet the realities of a reshaped industry.  SEMI’s role is evolving, and more important now than ever, in helping the industry achieve together, what it cannot accomplish alone.

SEMI-Infographic--Achieving

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