Maximizing capital productivity is key to the ‘fast follower’ strategy
12/01/2006
The semiconductor industry requires a tremendous amount of investment. It takes some creativity and careful planning, but there are ways to generate better returns on that investment. The term “capital productivity” refers not only to the traditional financial metric of return on investment (ROI), but also the added benefits of increased flexibility and greater technical expertise from the investment. Silterra has implemented a set of strategies that have achieved excellent results.
While the responsibility of driving the industry forward, whether it is perfecting the 45nm process or inventing advanced lithographic tools, rests on the shoulders of industry titans, it is essential for corporate executives, no matter the size of their companies, to understand the marketplace and differentiate their company from others. In semiconductor manufacturing, it is advisable for a relatively small company to stay in the sweet spot of the marketplace rather than attempting to explore the extreme edge; it has always been and will always be that way. A far more important contribution for small companies is to focus on supporting end customers, from start-ups to top-tier semiconductor suppliers, to produce innovative products and help expand the industry.
Having established the “fast follower” strategy, companies would be able to plan their R&D projects and capital expenditure accordingly to increase their effective returns. A key part of such a strategy is to purchase second generation (not used) equipment rather than the early models put together for initial development purpose. The “2G” equipment set is usually much more refined and far more capable and stable than that of their older cousins. The result of this approach is a facility that maintains higher throughput, achieves better yield and utilization rates, and has much more capable equipment for the same investment. A case in point is how Silterra has addressed migration to smaller geometries.
Silterra had purchased the newest 0.18µm equipment available several years ago and had planned to run 0.13µm frontend production once the process was ready. Only the backend copper metallization tools, which were 90nm compatible, were needed to complete the entire 0.13µm production tool set. Having multiple-generation tools that can support initial production and the capability to bring up the next process node quickly and inexpensively is immensely valuable.
Another important consideration is R&D expenditures. Wafer foundries normally license their process technologies from large integrated device manufacturers (IDM) at exorbitant prices, typically in the range of several hundreds of million of dollars. Silterra, however, chose to partner with IMEC, a renowned global semiconductor R&D organization based in Belgium, to develop the 0.13µm process at a fraction of the cost. The joint development project worked so well that high yielding 8-Mbit SRAM test wafers were produced in Silterra’s Malaysian fab within five months from the initial launch of the project at IMEC. That achievement was faster than many expensive direct technology transfer programs that other foundries have followed.
The down side of the fast follower strategy is being slightly behind the technology curve and missing the initial production ramp of a new process generation when wafer prices are high. The slight delay is acceptable, however, because there is a large sweet spot where many high volume products are based. A recent estimate by a leading semiconductor industry research firm projected that >50% of foundry wafer shipments are based on mainstream technologies, which include the 0.25, 0.18, and 0.13µm nodes for the next several years. The percent of addressable market actually grows over time if the N-1 technology strategy is followed.
The ability to address a large portion of the target market at substantially lower investment results in high capital productivity and is a direct benefit of insightful business planning. Corporate executives can improve the return on capital significantly by making wise and timely investment decisions. Making limited financial resources work smarter is essential for the success of a company, especially a small wafer foundry.
For more information, contact Bruce Gray, CEO, Silterra Malaysia Sdn. Bhd., Kulim Hi-Tech Park, 09000 Kulim, Kedah, Malaysia; e-mail [email protected].
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Bruce Gray Silterra Malaysia Sdn. Bhd., Kulim, Kedah, Malaysia