Supporting Asia's rapid expansion raises stakes for fab suppliers
08/01/2004
When it comes to Asia, semiconductor industry suppliers face a daunting challenge in the current strong recovery cycle. Simply put, suppliers of wafer fab technologies and tools are under tremendous pressure to be in more places, supporting more leading-edge plants than ever before throughout the fast-growing, vast region.
Since the start of the last downturn four years ago, the Asia-Pacific region has surged to become the industry's largest marketplace for semiconductors. Monthly chip sales in Asia —excluding Japan —are now approaching $7 billion compared to about $2.5 billion five years ago, based on data from the World Semiconductor Trade Statistics (WSTS) group (see figure). In addition to the unprecedented growth, Asia's wafer fab technologies are advancing at breakneck speed, placing additional pressure on the world's supplier base to keep up with regional expansion.
 Semiconductor revenue history by regions. Data points at three-month moving averages, with the most recent from April 2004. (Source: WSTS) |
In 1999, when the semiconductor industry was heading into its last upturn cycle, the Asian chip-manufacturing landscape looked dramatically different than it does today. During the downturn and sluggish recovery elsewhere, Asia's chip industry has ramped 19 new wafer fabs into production in Taiwan, Singapore, and mainland China.
In addition, China has emerged as the main driver of growth. In the last upturn cycle, the majority of China's existing fabs demanded mostly lagging technologies, but a new aggressive wave of silicon foundry startups has shifted wafer-processing targets toward advanced technology nodes. Semiconductor Manufacturing International Corp. (SMIC), He Jian Technology, Grace Semiconductor Manufacturing Corp., and others are expected to close the technology gap with major chipmakers outside of China as soon as next year, according to recent projections. Shanghai-based SMIC and other leading Chinese foundries already require the same level of attention from fab tool suppliers as top IC manufacturers command in Taiwan, North America, or elsewhere in the world.
Major changes and growth continue in other Asian countries as well. For example, Malaysian fabs have ramped into 200mm volume production since the 1999 upturn cycle, while Singapore has become a center of 300mm wafer-processing activity and leading-edge copper technologies. Even in Taiwan, which continues to be the largest silicon foundry source in the world, new manufacturing activities are changing the semiconductor landscape. For instance, some of Taiwan's wafer fab expansion has shifted from the Tainan Science-Based Industrial Park, in the southern part of the island, to the newer Taichung park, where DRAM makers ProMOS Technologies Inc. and Winbond Electronics Corp. are launching 300mm fab projects.
No local supply base
Compounding the difficulties in keeping up with Asia's rapid growth and emerging fab centers is the fact that all of the major suppliers of semiconductor equipment are headquartered in other parts of the world. Unlike Japan, Europe, and North America, the Asia-Pacific region does not have a large home-grown base of tool and material companies. Only a few local suppliers exist in various locations. Until recently, the vast majority of industry suppliers were able to adequately support the region's growth through third-party distributor relationships and small local offices, but this has all suddenly changed.
Supporting the ramp of new fabs has changed the rules of the game in Asia for most semiconductor equipment and materials suppliers, which are working hard to establish a direct presence in the region. In some cases, this has led to acquisitions along with investments in new business units. In 2002, for instance, Axcelis acquired the semiconductor equipment division of China's Tritek International. After 20 years as an Axcelis distributor, the Tritek unit became the foundation of the Axcelis Technologies China operation in Shanghai.
Achieving success in the Asia-Pacific region is far more complicated than simply expanding local offices and building new operations, however, especially now in the strong upturn cycle that's fueling the territory's explosive growth. Fab technology suppliers have to attend to easily overlooked details in customer relationships to ensure that device makers get higher levels of quality service at every step along the way. Attempting to manage all this in the middle of an upturn can be a recipe for complete disaster or success, depending upon how it's handled by suppliers.
Coach local teams
In any customer relationship, there is very little room for error, especially in the initial stages of establishing business. After a supplier wins its first order for tools, execution becomes crucial when installing equipment and getting systems to run on the fab floor. This kind of challenge occurs regularly throughout Asia because so many operations are new startup ventures. Winning an order is one thing, but the measure of success quickly shifts to the ability to deliver consistent high levels of support.
 An Axcelis technician installs a high-energy implanter at a fab site in Taiwan. |
To ensure adequate support, Axcelis brings its local support teams back to the company's headquarters in Beverly, MA, for full training. The investment also includes temporarily relocating experienced field support personnel —along with their families —to Asia for a year, when necessary. The assignment of veteran support staff in the region offers a number of advantages. In addition to ensuring that nothing falls through the gap, experienced personnel can coach the local team in a real-time environment. Communications between headquarters and the local site are strengthened, and the experienced field staff can help to ensure that new tools are performing as promised.
Axcelis estimates that investments for field support in emerging regions can cost anywhere from 8%–10% of the price of the tool, depending upon the type of equipment and the specific location of the fab.
Another important element in maintaining support levels has been quality management procedures, which have been set up for the certification process of the International Organization for Standardization (ISO). Most industry suppliers are participating in the ISO certification program. Axcelis, for example, is in the final stages of upgrading its certification to ISO 9001:2000 standards. Launched in 2001, the three-year process has certified Axcelis' headquarters along with factory and field operations throughout North America, Taiwan, Singapore, and South Korea. The company's operations in China and Europe are preparing for certification audits later this year.
Let corporate culture be the guide
The many different cultures and customs in Asia also present a range of challenges. Industry suppliers from various parts of the world could find themselves inadvertently sending the wrong message because a certain product name or even a model number translates poorly in the marketplace. Customers could be unintentionally offended by gifts. For example, the number "4" is believed to be bad luck in many Asian countries, and a clock is considered a bad gift when you want to build long-term relationships.
Trust is paramount to building new customer relationships in Asia. Local cultures often dictate that suppliers should accept verbal agreements, and insisting upon written contracts could indicate a lack of trust. But when it comes time to agree on the sale of expensive fabs tools, verbal agreements can be misinterpreted, or worse, contradicted. Like most US companies, Axcelis conducts business in writing. This avoids the risk of wasting time and money if tools do not match customer requirements or if chipmakers never had intentions of buying systems in the first place. Fortunately for all parties involved, new US financial regulations require companies to document all customer agreements, and therefore, Asian semiconductor companies are more likely to be willing to use written contracts without being offended.
International suppliers also can face tricky personnel issues when setting up local offices and subsidiaries in the Asian markets. Compensation policies and practices vary in China, Korea, Taiwan, and elsewhere in the region compared to other industry locations worldwide. Axcelis follows local standards throughout Asia but within the company's corporate framework established in the United States. This enables the company to maintain a consistent corporate culture worldwide.
Despite the importance of understanding the nuances of doing business in various countries of Asia, it is important for multinational suppliers to follow their own guidelines and corporate culture as the overriding principles while attempting to manage expansion in fast-growing regions.
Eric Hsu is VP of Asia customer operations at Axcelis Technologies Ltd., #51, Park Ave. II, Hsinchu Based Industrial Science Park, Hsinchu, 300, Taiwan, R.O.C.; ph 886/3-564-8001, fax 886/3-579-4664, e-mail [email protected].