Myths of manufacturing
10/01/2007
Myths of manufacturing
T he biggest challenge the chipmaking industry faces when transitioning from go-it-alone strategies to collaborative models may come not from any external sources, but rather from internal misconceptions about the the extent to which best practices from other businesses apply to semiconductor manufacturing. This theme was sounded by several key presenters at the recent SEMICON West conference.
In his opening keynote address, Douglas Grose, AMD’s SVP of technology development, assailed one such misconception that “semiconductor manufacturing is unique among all industries,” the corollary to which is that many successful principles learned in other industries do not apply . “There’s an assumption in our industry that the complex and delicate processes of semiconductor fabrication can’t be streamlined because there’s too much risk in tinkering with production lines, given that the steady shrinking of transistors is what produces regular productivity enhancements,” he said. “But these are faulty beliefs that keep us locked into processes that limit our growth.”
Realizing the need to cut rising costs, manage fluctuating profit margins, and deal with other factors that are clearly not limited to chipmaking, AMD turned to the automotive industry, which faced similar challenges. In particular, the company’s search for solutions led them to Toyota, whose lean-manufacturing philosophy enabled the automaker to reduce the average vehicle development time to 24 months, half the industry average, and to Porsche, whose lean practices doubled productivity and cut defects and inventory by 90%.
Applying these lean techniques to its fab in Dresden, Germany, last year, AMD re-architected the facility’s transportation and delivery systems. As a result, wafer starts rose 31%, cycle time per mask layer fell 33%, productivity increased 77%, and overall wafer costs dropped by 26%, according to Grose. Similarly, at AMD’s Singapore facility, the company restructured the fab’s backend lines to increase output by 75,000 wafers, shrink the physical footprint of the lines by 25%, and reduce cycle time by 47%.
Several other such manufacturing misconceptions were aired during SEMICON West’s opening day Market Symposium by featured speaker Steve Longoria, VP of semiconductor platforms, IBM Systems and Technology Group. He argued that success in semiconductor manufacturing today can only be achieved through the kind of collaboration and innovation that is paying off across a wide range of industries. As evidence, he cited the results of IBM research studies, conducted in 2004 and again in 2006, that asked CEOs across multiple markets worldwide to report on the role innovation and collaboration play in solving key business challenges.
According to Longoria, the study revealed that one common belief he sees in the semiconductor industry surrounding the collaborative innovation agenda - namely, that “innovation means inventing new products” - is clearly a myth. Indeed, the CEOs surveyed report that innovation that confers a competitive advantage has far less to do with product development than with the business model. Of the more than 400 CEOs surveyed, the “outperformers” in their industries had devoted twice as much effort to innovating their business models, compared to the underperformers, while giving relatively lower priority to innovating their products. As one CEO noted, “Products and services can be copied; the business model is the differentiator.”
Yet another pervasive misperception in semiconductor manufacturing is that “innovation is the responsibility of the brand and product managers alone.” In fact, successful CEOs from other industries feel that the innovation agenda needs to be set at the top, explained Longoria, adding that “80% want to foster a culture of innovation and collaboration within their companies.” Moreover, two-thirds reiterated the need to focus on innovating their business model, which represented a dramatic shift in priority since 2004, when the majority stated that the focus was on enabling growth simply through cost reductions and asset management.
Yet another faulty assumption is that “innovation is too critical to share with others.” The reality is that most innovation comes from outside a company’s walls, Longoria said. In fact, the survey showed that only two of the top seven sources of innovation were internal to a company, while the remainder included business partners, customers, consultants, associations, and competitors.
 Phil LoPiccolo Editor-in-Chief |
Longoria noted that IBM has applied lessons from the research about innovation and collaboration to its highlysuccessful Common Platform Alliance. The most effective strategy, the partners have found, is to go after the market together and win one for the alliance, he said. “We look at how to grow more meat on the bone, rather than try to eat each other’s meat off the bone.”