Technology development and commercialization velocity

11/01/2009

David Lazovsky,
Intermolecular Inc.,
San Jose, CA USA

Financial performance for memory companies (DRAM and NAND Flash) has always been closely linked to time-to-market with leading-edge technology. But this correlation between volume production of leading-edge devices and profitability has now been amplified.

The recipe for success in memory has historically been fairly straightforward—maximized bit density delivers maximized bit production at the lowest cost. Most memory companies over the past decade have been able to maintain a pace of technology development that allowed for new high-volume manufacturing solutions to be qualified at the cadence dictated by Moore's Law.These technological advancements, coupled with ramping capacity, usually delivered increasing streams of profitable revenue.

The ability for IC manufacturers to sustain this pace of innovation, however, is now being threatened by the ever-increasing cost and complexity of advanced semiconductor R&D.

In fact, overall R&D expenditures increased at a 12.7% compound annual growth rate between 1990 and 2007, while semiconductor sales grew at a 9.9% CAGR during the same period. As R&D expenses significantly outpace product revenue growth, R&D return on investment (ROI) has become the number one priority for many IC manufacturers. Clearly, the time has come to assess alternative methods and models to boost R&D efficiency and effectiveness.

Semiconductor product development and production qualification have become significantly more complex because of new materials and device-architecture requirements. Utilizing traditional R&D methodologies for new materials evaluation, qualification, and integration introduces tremendous technical risks and delays in bringing advanced devices to market.

Moreover, given the fact that device performance is now driven more by innovations other than dimensional scaling, such as novel materials and device architectures, a new gap in development capability has emerged.

This has created the need for a fundamentally different approach to technology development and commercialization. New development methods and collaboration models to improve R&D efficiency and effectiveness are being aggressively pursued to enable competitive differentiation in memory, and across most sectors of the semiconductor industry.

Companies that have the ability to accelerate learning cycles to address new materials integration challenges have a differentiating competitive advantage. This advantage stems from the ability to rapidly gain an understanding of the relationship between process integration parameters for new materials, new device structures, and the resulting device performance (parametric and/or reliability).

It's worth noting that other industries, such as biotech, energy, pharmaceuticals, and materials, have significantly improved R&D efficiency and effectiveness with the application of combinatorial technologies. In fact, a breakthrough in DNA sequencing was enabled in part by Affymetrix's combinatorial technology, which resulted in the Human Genome being sequenced far faster than previously expected.

Combinatorial development methods are especially useful in the memory sector because operating margins are low, and the difference between profit and loss is driven not by production capacity but by the technology mix of that capacity in the fabs. The value of technology acceleration for the remaining players in the memory sector can be measured in the hundreds of millions of dollars per month.

The traditionally vicious memory cycle is undergoing a prolonged recovery. Low consumer confidence and reduced demand for consumer electronics are weighing down ASPs. Only those companies that are at or within 12 months of the leading edge in DRAM and NAND Flash will survive as stand-alone businesses in this market. Given current economic conditions and the glimmers of improvement in the industry that would spur demand for new devices in the months ahead, the importance of implementing cost-effective R&D strategies is obvious.

Efficient, successful R&D programs enable chipmakers to gain a competitive advantage by quickly bringing advanced, higher ASP, lower-cost devices to market—with the ROI being measured in profits. For memory companies, however, improving R&D is no longer merely a strategy to improve market position. It's a matter of survival.

David Lazovsky, founder, president & CEO, Intermolecular Inc., 2865 Zanker Road, San Jose, CA 95134 USA; [email protected]

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