Analysts see deja-vu chip growth in 2007, before peak in 2008
02/01/2007
Analysts surveyed by SST generally reviewed 2006 as a decent year for the semiconductor industry, if you take away a “bloodbath” in microprocessors and a surprising weakness in ASPs. Holiday electronics sales seem to have been good-not great, but also not as sluggish as had been feared-which helps quiet concerns over inventories heading into the new year. All this sets the stage for growth in 2007 about at or even slightly better than this year’s pace, followed by what most industry watchers think will be the next cyclical peak in 2008, and a slowdown in growth in 2009.
The past year was particularly tough for the microprocessor segment, which unlike most years saw declines in both ASPs and revenues. Offsetting that were impressive strength in handsets, a rebound in DRAM pricing (which balanced plunging NAND flash ASPs), and strong unit demand for all semiconductors, buoyed by a generally healthy economic outlook (global GDP was ~3.9%), according to industry watchers. They expect decent high-single-digit growth in 2007, although the future will be hazy until late 1Q when post-holiday inventories and 4Q06 ASP trends can be tallied.
 Forecast range narrows to low end in 2007 |
Top areas to watch in 2007 include stabilizing ASPs, handset demand, and an anticipated PC upgrade cycle due to Microsoft’s Vista OS. Handsets are a particular concern, with some analysts believing growth cannot be sustained after nearly a billion units were shipped in 2006, and some openly question whether consumers really desire high-end models or just want a device that makes phone calls.
The global economic picture has become an increasingly influential factor on the chip industry. Generally, industry watchers think the US economy will “muddle through” the year, with enough safeguards in place to prevent a big slide into recession, although if end demand disappoints and the economic situation decays, a larger inventory correction could loom. Meanwhile, emerging regions, not the “big four” (US, Japan, Europe, and China), will play a bigger role economically.
Most analysts project a “pause” in 2007 will set the stage for a push to a cyclical peak in 2008, figuring the Microsoft Vista OS upgrade cycle won’t really impact PC growth until then. Nearly everyone expects a downward slide in 2009, largely due to concerns about overcapacity and a very weak memory market, particularly for NAND flash. - J.J.M.
WORLDWIDE HIGHLIGHTS
Elpida Memory Inc. and Powerchip Semiconductor Corp. (PSC) have agreed to establish a new joint venture that will ultimately operate four 300mm DRAM fabs with 240,000 wafers/month total capacity. The companies laid out plans calling for each firm to invest $1.24 billion to establish the new venture, which will start by taking over PSC’s under-construction Fab 12C 300mm facility in the Taichung Houli Science Park. Equipment installation is planned for 2Q07, and a first stage ramp to 30,000 wafers/month, using Elpida’s 70nm process technologies, is expected by 3Q07.
ASML Holdings has agreed to buy privately held computational lithography software provider Brion Technologies for $270 million (about €203 million), plus other noncash charges of ~€29 million in 2007. Brion, a venture-backed startup boasting eight of the top 10 chipmakers as customers, will operate as a wholly owned subsidiary of ASML, and continue to support its current product offering and customer base-including to all three top litho tool providers.
Dow Corning Corp. and Tokyo Ohka Kogyo Co. Ltd. (TOK) say they have developed a bilayer photoresist, incorporating Dow’s silicon polymer into TOK’s photosensitive material, that uses a silicon polymer in the imaging layer to improve etch selectivity, and eliminates the need for a separate hardmask layer. The new material eliminates the need to use organic chemistry-based photoresists in conjunction with other layers to provide necessary etch resistance, and exhibits no detectable levels of outgassing during the lithography process, the companies said. TOK claims the photoresist has been used with 35nm line/space patterns under immersion lithography conditions.
Evans Analytical Group LLC, Sunnyvale, CA, a provider of surface analysis and materials characterization services, has acquired Advanced Materials Engineering Research and the semiconductor and microelectronics services operations of Materials Analytical Services, which offer a variety of semiconductor microscopy, analysis, and testing services. The deals add a presence in mainland China as well as capabilities for transmission electron microscopy and nondestructive measurements of thin films on 300mm wafers, as well as more testing capabilities for failure analysis.
USA
AMD and the state of New York have finalized a two-year window (July 2007-July 2009) to begin groundbreaking for AMD’s proposed 300mm wafer fab in the Luther Forest Technology Campus north of Albany.
Bolstering its high-growth image sensor business, Micron Technology Inc. has acquired Avago Technologies’ image sensor business for approximately $53 million. The deal includes select imaging products and IP, as well as about 90 employees from facilities in Oregon, Colorado, San Jose, and Malaysia.
Mercury Computer Systems Inc. and Mentor Graphics Corp. have agreed to jointly develop an integrated electronic design automation platform based on the Cell Broadband Engine processor that can deliver more than an order of magnitude performance improvement for 45nm and below devices.
Fairchild Semiconductor Corp. aims to make a splash in the market for AC/DC offline power conversion applications, with a $200 million tender offer for System General Corp., a Taiwanese supplier of analog power management semiconductors.
ASIAFOCUS
The Taiwan government has finally relaxed its restrictions governing the transfer of chip process technology across the strait to China, now down to 0.18µm/200mm operations. Long-delayed applications for investment from memory chipmakers Powerchip Semiconductor Corp. and ProMOS Technologies Inc. have been approved; TSMC, the only Taiwanese chipmaker authorized to invest in China, already operates a 0.25µm facility on the mainland. In a quid-pro-quo agreement, all three companies will launch major investment projects in Taiwan over the next several years.
Shanghai-based Advanced Micro-Fabrication Equipment Inc. has partially decloaked, saying it plans to offer “proprietary etch and chemical vapor deposition systems” targeting the 65nm and 45nm nodes and beyond, with R&D and manufacturing done in-house in Asia. Products are still in R&D, with beta shipments planned to unidentified customers in 1Q07. Board members and advisors possess experience from Applied Materials, Lam Research, Novellus, TEL, Intel, and Toshiba Semiconductor.
Sparkling growth in DRAM and foundry business will boost the production value of Taiwan’s semiconductor industry to more than 20% in 2006, vs. the global average of ~8.5%, according to The Industrial Economics and Knowledge Center (IEK), under the government-backed Industrial Technology Research Institute, reported by the Taiwan Economic News. The IEK projects Taiwan’s overall semiconductor production value will rise to $42.36 billion in 2006. By sector, manufacturing will post $23.11 billion in sales, design $9.65 billion, packaging $6.72 billion, and testing $2.87 billion. For 2007, the IEK is projecting nearly 14% growth to $48.21 billion.
Rohm and Haas Electronic Materials, Microelectronic Technologies, says it has completed a $30 million expansion at its facility in Chonan, South Korea, which will enable advanced R&D for 193nm photoresists, organic anti-reflectants, and silicon hardmask technologies. The site now includes advanced 193nm and 248nm lithographic clusters along with leading-edge defect and metrology toolsets. More growth is planned throughout 2007 as R&D programs accelerate.
United Test and Assembly Center Ltd. plans to invest $100 million over the next three years on its operations in Bangkok, including a third plant (UTL3) to house test operations and a distribution center, with production beginning in 2H07. UTAC aims to consolidate leadframe-based packaging activities in Thailand over the next few years, freeing the company’s Singapore operations to focus on substrate-based packaging.
Samsung Electronics Co. Ltd. says it has developed a monolithic 1Gb mobile DRAM memory using 80nm process technology, and expects to ramp to mass production by 2Q07. The company also is sampling 16Gbit NAND flash memory devices made with 50nm process technology, with mass production planned for this quarter.
Elpida Memory Inc. says it has begun mass production of 1Gbit and 512Mbit DDR2 SDRAMs using 70nm process technology at its main fab in Hiroshima, with product shipments expected to start this quarter.
EUROFOCUS
Atmel Corp. has officially embraced a “fab-lite” business model, selling off two more fabs (North Tyneside, UK, and Heilbronn, Germany) and significantly reducing manufacturing costs and laying off nearly half its workforce. After recording a one-time charge in excess of $200 million in 4Q06, Atmel expects cost savings of $70-$80 million next year and $80-$95 million annually starting in 2008. The company already has sold manufacturing sites in Grenoble and Nantes, France, involving image sensor and aerospace semiconductors.
UK wafer supplier IQE plc has agreed to acquire Singapore’s MBE Technology Pte. Ltd., a manufacturer of compound epitaxial wafers, for about $14.9 million, expanding its reach into Asian and wireless markets and establishing dual-source capabilities for making RF products.
STMicroelectronics is reorganizing its product segments into three areas, essentially creating a separate flash memory group to address “industry consolidation and financial deconsolidation.” Industry watchers speculate the decision to segregate ST’s NOR flash activities could be a preface to combining the business with that of another chipmaker, and/or catalyzed by a third investment partner.
Meanwhile, ST has inaugurated a new 200mm wafer fab line at its Agrate site near Milan, Italy, dedicated to manufacturing MEMS devices. The company says it spent about $40 million to upgrade the former 150mm line, which also supports MEMS R&D activities based in the company’s design center in nearby Castelletto. The line currently has about 1300 sq. m eventually will nearly double in size to 2500 sq. m depending market demand.
As part of a pledge to restore its frontend operations to profitability, ASM International NV has sold its NuTool business, including copper plating, planarization, and electrochemical mechanical deposition processes, to an unidentified third party.