Michel Villemain, CEO, Presto Engineering, Inc.

The semiconductor industry is moving from a PC-centric, digital era to a communication and mobile world. This, combined with integration, is driving chips to interact more with the real world and to become increasingly analog. It has a profound impact on test and automated test equipment (ATE). Test equipment used to be rated by speed and timing accuracy, and priced by pins, but those are no longer defining features. The ability to support a wide range of analog and RF measurements is now the critical specification of a modern test solution.

Not so long ago the critical elements were the timing chip and the pin electronic IC. Both were advanced ASICs and defined the price of the equipment. Today, FPGAs support most speed and timing test requirements of current system on chip (SOC) devices, while bench instruments support most analog and RF demands. Bench systems are expensive and do not scale cost-effectively—especially for parallel test. The challenge is therefore to package instrumentation into application-specific test hardware that offers a cost-effective, per-channel solution that can be scaled into multi-site test solutions. The successful test solutions of tomorrow will be those that can offer a portfolio of dedicated analog and RF options, and provide variations as quickly as the market itself evolves.

The second major back-end transformation, driven by communication and mobility, is packaging. More analog circuitry means not only new, multidimensional packages (including 2.5D and 3D), but also more bare die that are directly integrated into modules. As traditional test flows include wafer sort (primarily for fab yield control) and final test (quality insurance), bare die require a known-good die flow implemented by wafer-level test (WLT).  New standards (802.11ad, 100/400G) and new RF bands will require probe technologies that can support up to 90GHz, combining reliable ohmic contact (signal integrity) with a gentle mechanical touch–especially on aluminum pads used by SiGe and CMOS processes.

Addressing these two challenges, for quickly deployed, dedicated analog/RF test solutions and reliable probing technologies, will allow cost-effective semiconductor solutions, then, in turn, deployment in volume of high-speed, high-bandwidth electronics solutions for communication and mobility.

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Rich Goldman, Vice President, Corporate Marketing and Strategic Alliances, Synopsys

Keeping up with Moore’s Law has always required significant investment and ingenuity, and this era brings additional challenges in device structures, materials and methodologies. As costs rise, a dwindling number of semiconductor companies can afford to build fabs at the leading edge. Those thriving include foundries, which spread capital expenses over revenue from many customers, and fabless companies, which leverage foundries’ capital investment rather than risking their own. Thriving, leading-edge IDMs are now the exception. From a market perspective, companies focused on segments such as mobile, automotive, mil-aero and medical are prospering.

With this environment as a backdrop, we see five trends dominating the year ahead and expect companies leading in or well positioned to address these areas to do well.

FinFETs. Chipmakers will no doubt keep us well informed as they progress through FinFET tapeouts and deliver production FinFET processes, touting their power and speed advantages for customers. Those early to market will press their advantage by pursuing aggressive FinFET roadmaps.

IP & subsystems. As devices grow more complex, integrating third-party IP has become mainstream. The trend for reuse of integrated, tested IP is beginning to expand upwards to systems, so that designers no longer need to redesign well-understood systems, such as memory, audio and sensor systems.

Internet of Things/sensors. The Internet of Things is poised to ignite huge growth in 2014. Sensors will emerge as a key enabler, connecting our physical world to computation in products that allow us to remotely control our surrounding environment. Meanwhile, a wide variety of sensor types will enable the mobile phone to continue subsuming and disrupting markets from cameras, satellite navigation systems and fitness devices, to flashlights and other applications.

Systems companies bringing IC design in house. Large companies successful in system-level design and development, such as Google, Microsoft and others, are bringing IC specification and/or design in house in the belief that that they can do the best job of IC design for their specific needs.

Advanced designs at both emerging and established process nodes. While leading-edge semiconductor makers drive forward on emerging process nodes, others are finding success by focusing on established nodes (28nm and above) that deliver required performance at reduced risk. Thus, challenging designs will emerge at both ends of the spectrum.

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Randhir Thakur, Executive Vice President, General Manager, Silicon Systems Group, Applied Materials, Inc.

Innovations in mobile computing and communications will continue to be a driving factor for the semiconductor equipment industry. To enable high performance chips for new and exciting applications, our foundry/logic and memory customers that manufacture semiconductors are migrating from lithography-enabled 2D transistors and 2D NAND to materials-enabled 3D transistors and 3D NAND.  These device architecture inflections require significant advances in precision materials engineering in conformal materials deposition, materials removal, and materials modification.  Selective materials processes will play a more prominent role.  Smaller features and atomic-level thin films also make interface engineering and process integration more critical than ever.

Some significant ongoing industry developments to highlight are the new materials and architectural changes in the transistor to reduce power consumption and drive performance gains. The increased complexity of the 3D FinFET architecture in combination with continued scaling requires great precision in structure formation, especially when forming the gate. More advanced atomic-level process technologies in selective epitaxy, metal gate, implant, anneal, etch, and planarization are needed. Also critical to meeting the industry’s precision engineering requirements are improved materials that offer more choices for increasing selectivity, control and performance. And, let’s not forget the advances underway to develop new higher mobility channel materials.

Another exciting inflection in 2014 is our memory customers’ transition from planar two-dimensional NAND to vertical three-dimensional NAND. 3D technology holds the promise of terabit-era capacity and lower costs by enabling denser device packing, the most fundamental requirement for memory. There are complex device performance and yield challenges, such as distortion-free high aspect ratio etching, staircase case patterning with precise step-width control, uniform and repeatable gate stack deposition.

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Denny McGuirk, president and CEO, SEMI

For most of the past 15 years, the industry has displayed a fairly predictable pattern of fab equipment spending, characterized generally by two years of decline followed by two years of positive growth. In 2012 and 2013, the fab equipment market contracted, while 2014 and 2015 are expected to be positive. According to the SEMI World Fab Forecast, the 2014 wafer fab equipment market is expected to grow over 28% to $32.2 billion. Taiwan will lead in spending (over US$9 billion), while Korea and the Americas will each spend at least $6 billion, and China and Japan will each spend about $4 billion. Spending for packaging and test equipment will also rebound in 2014 to $2.5 billion (4.2% growth over 2013) and $2.95 billion (5% growth) respectively. Spending on semiconductor materials will mirror semiconductors unit growth reaching an estimated $45 billion (2.5% growth)

In terms of construction, across the industry, there were 40 major projects on-going in 2013, and 28 are predicted for 2014. Construction spending growth for 2013 was about 40% (to $7.5 billion). By 2014, this will drop by 15% (to $6.4 billion). Several large construction projects are already underway or expected to start soon, but construction spending is expected to decline in both years. The two industry segments predicted to add the most capacity, based on demand, are foundries and NAND. Other segments, such as DRAM, analog, and logic, are not expected to add new capacity. MPUs may add some new capacity this year.

The coming year may add more clarity to uncertain technology roadmaps. The economics of technology nodes are increasingly dependent on the continued source power and throughput improvements on EUV lithography. These uncertainties, including the roll-out of 450mm wafer processing, have impacted plans and schedules for high-volume production. Penetration of 2.5D and 3D stacked ICs into high-volume applications are also dependent on continued process technology improvements. New materials and process innovations will continue to unfold in non-planar transistor architectures, and new test methodologies and flows will develop to meet the needs of leading-edge devices, including 3D stacked devices.

With increasing economic and technological uncertainty, the industry will continue to develop and evolve methods for more effective collaboration and expanded public-private partnerships. In addition to tighter supply chain engagement on next generation nodes, 450mm wafer processing and 3D-IC, both the European Union with its 10/100/20 program, and the U.S. Government, through the National Network Manufacturing initiative, will offer increased visibility and support for microelectronics manufacturing in the coming year.

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Mike Corbett, Linx Consulting and Duncan Meldrum, Hilltop Economics

We approach 2014 with a combination of positive policy, financial, and economic forces that will push world growth up to a +3% range.  With positive developments on the U.S. policy and jobs front, slow progress in Europe, and stabilization in Asia, the outlook for reasonable global growth in 2014 looks better than it has since the first year of recovery from the recession of 2008-09.

For the last few years, economic forecasts from most private and public forecasting groups were downgraded consistently as time passed as forecasters adjusted their longer term forecasts downward for the weaker capital accumulation that has occurred in this recovery.   That process finally appears to be ending.  The latest forecast revisions by Consensus Forecasts have been much more balanced, resulting in a barely perceptible upward revision to the world growth outlook.

Linx Consulting and Hilltop Economics have worked to tie global economic output to silicon demand, through a proprietary modeling service. Silicon demand, expressed in terms of millions square inches (MSI) is now projected to grow 6.5% in 2014. This is stronger outlook is based on demand improving, some snap-back from the Q4 slippage, and lower uncertainty around policy.

While this growth is a welcome relief from the relative stagnation for the last few year, and we have seen prices increase in traditionally price sensitive markets such as DRAM, this does not mean that the industry is on the path to sustained profitability, as it is entering an era of unprecedented change. There is fundamental industry change as the market re-aligns itself to transition from the PC era to the mobile era as well as architectural and technology changes. Key architectural changes being implemented include changes in both memory and logic devices, with the introduction of FinFETs and 3D NAND and MRAM, etc. Key technology changes the implementation of EUV lithography, novel materials as well as the introduction of 450mm wafers.  All of which have inherent risk and need to be adequately funded and developed through to commercialization.

We already see the industry value chain re-aligning to face these major challenges.  There are fewer IDMs investing in advanced node manufacturing; consortia are being reorganized and set up to help with the basic research; OEMs are consolidating to produce the scale required to bring new technologies and processes on-line; and, the chemicals and materials suppliers are starting to gain more knowledge on upstream suppliers for quality issues and some are exploring their strategic options for their electronic chemicals and materials business.

The semiconductor industry has a long history of success based on continued innovations in the business model, advanced technological solutions and forward thinking vision.  Change is also a certainty in this industry.  In order to address the long list of challenges above, we believe that not only will new collaborative models be required, but they must be funded on a sustainable basis as well. Ensuring sufficient funding and profitable returns on R&D and capital investments will be a challenge for the entire industry.

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Bill McClean, President, IC Insights

In 2013, the IC industry emerged from a difficult 5-year period of minimal growth and started on its next cyclical upturn, a welcome piece of news.  From 2007-2012, the IC market grew at an average annual rate of just 2.1%.  In IC Insights’ opinion, the current cyclical upturn that started in 2013 will continue with several solid years of growth, peaking with 11% market growth in 2016.  The IC market CAGR is forecast to nearly triple to 5.8% in the 2013-2018 time period.  During this time, unit shipments are forecast to increase at an average annual rate of 6.3% and the total IC average selling price (ASP) is forecast to decline at an average rate of 1.0%.

IC Insights believes that IC industry cycles are becoming increasingly tied to the health of the worldwide economy.  It is rare to have strong IC market growth without at least a “good” worldwide economy to support it.   Consequently, over the next five years, annual global IC market growth rates are expected to closely mirror the performance of worldwide GDP growth.

After increasing 2.8% in 2013, global GDP is forecast to rise to 3.4% in 2014 (FIGURE 1), which is on par with the 30-year average.  The U.S., Japan, U.K., and the Eurozone (i.e., mature economic markets) are each forecast to experience improved, though still tempered, GDP growth in 2014.

In the U.S., the most significant factor holding back better GDP growth has been the high unemployment level.  The unemployment level gradually improved and stood at 7.0% in December 2013.  Some forecasts show it decreasing to 6.5% by the end of 2014.  An improving employment picture, strong orders for new equipment, and upward-trending economic indicators add up to positive momentum for the U.S. economy heading into 2014.

FIGURE 1. Global GDP is forecast to rise to 3.4% in 2014, which is on par with the 30-year average.

China, which is the leading market for personal computers, digital TVs, smartphones, and automobiles, is forecast to lose more economic momentum in 2014.  Its GDP is forecast to increase 7.5% in 2014, which continues an annual downward trend that started in 2010.  China’s GDP growth was 7.7% in 2013.   China’s new leadership is attempting to shift the country’s growth from being highly dependent on infrastructure investment and exports to one that relies more on consumer consumption.

The historical correlation between worldwide GDP growth and semiconductor industry growth is good, but IC Insights believes that this correlation will be very good in 2014. Using a worldwide GDP forecast of 3.4%, the most likely range for worldwide semiconductor market growth in 2014 is 2-12%, with IC Insights’ forecast calling for 7% growth in the 2014 semiconductor market.

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