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Fueled by heavy government investment, IC packaging and testing in China generated $29 billion in revenue in 2017, making China the world’s largest consumer of packaging equipment and materials, according to SEMI’s recent China Semiconductor Packaging Industry Outlook report. The report, based on research conducted between July 2017 through the end of January 2018, also revealed that China’s IC packaging and testing industry is more mature than its IC manufacturing and design sectors, though IC packaging and testing revenue growth has slowed in recent years.

SEMI surveyed 87 semiconductor packaging- and assembly-related companies for the research report, including key semiconductor packaging manufacturers in China. More than 100 companies compete in China’s packaging and assembly market, including leading multinational companies and emerging domestic players. More than half of China’s packaging companies are located in the Yangzi delta region, while midwestern China has emerged as a hotbed for packaging plants.

Additional report highlights:

  • Compared to other world regions, China’s investments in IC packaging and testing saw the fastest growth over the past decade, with domestic manufacturers securing strong support from both national and local governments to ramp capacity and technical capabilities.
  • The top three domestic packaging companies – JCET, Huatian, and TFME – all entered the top 10 global OSAT rankings following expansions and acquisitions from 2012 to early 2016.
  • Packaging companies such as SPIL, TFME, NCAP continue to build new plants.
  • As a major manufacturing region for LED products, China has become more prominent within the semiconductor packaging industry. China’s LED product sector grew to $13.4 billion (half of IC packaging) in 2017.
  • In 2017, China accounted for about 26 percent of the global packaging materials market, with China’s packaging materials revenue forecast to exceed $5.2 billion in 2018.
  • In 2017, the China assembly equipment market reached $1.4 billion in revenue, remaining the world’s largest with 37 percent share.
  • In 2017, assembly equipment manufactured in China (including assembly equipment made by foreign-owned companies and JVs) accounted for 17 percent of China’s assembly equipment market.
  • With the fast growth in the semiconductor packaging market, domestic packaging materials suppliers are expanding with the industry and now starting to serve leading international packaging houses.

The SEMI report also elucidates the importance of both central and local government support, guidelines and policies on China’s semiconductor industry. The National Fund and local IC funds, created in 2014, and the Made in China 2025 policy provided a second boost to China’s IC industry growth. For packaging and testing enterprises, maintaining strong communications and relations with relevant government bodies and industry associations is essential to securing both political and financial support, in part because China’s semiconductor manufacturers and IC assembly and packaging companies are expected to purchase equipment and materials made in China.

 

The semiconductor industry closed out 2017 in blockbuster fashion, posting the highest year-over-year growth in 14 years. Global semiconductor revenue grew 21.7 percent, reaching $429.1 billion in 2017, according to IHS Markit (Nasdaq: INFO).

Recording year-over-year growth of 53.6 percent, and its highest semiconductor revenue ever, Samsung replaced Intel as the new market leader of the semiconductor industry in 2017. Intel was followed by SK Hynix, in third position.

“2017 was quite a memorable year,” said Shaun Teevens, semiconductor supply chain analyst, IHS Markit. “Alongside record industry growth, Intel, which had led the market for 25 years, was supplanted by Samsung as the leading semiconductor supplier in the world.”

Among the top 20 semiconductor suppliers, SK Hynix and Micron enjoyed the largest year-over-year revenue growth, growing 81.2 percent and 79.7 percent, respectively. “A very favorable memory market with strong demand and high prices was mainly responsible for the strong growth of these companies,” Teevens said.

Qualcomm remained the top fabless company in 2017, followed by nVidia, which moved into the second position, after growing 42.3 percent over the previous year. Among the top 20 fabless companies, MLS enjoyed the highest market share gain, moving from number 20 to number 15 in the IHS Markit revenue ranking.

Figure 1

Figure 1

Memory was the strongest industry category

Memory integrated circuits proved to be the strongest industry category, growing 60.8 percent in 2017 compared to the previous year. Within the category, DRAM grew 76.7 percent and NAND grew 46.6 percent — the highest growth rate for both memory subcategories in 10 years. Much of the revenue increase was based on higher prices and increased demand for memory chips, relative to tight supply.

“The technology transition from planar 2D NAND to 3D NAND drove the market into an unbalanced supply-demand environment in 2017, driving prices higher throughout the year,” said Craig Stice, senior director, memory and storage, IHS Markit. “Entering 2018, the 3D NAND transition is now almost three-quarters of the total bit percent of production, and it is projected to provide supply relief for the strong demand coming from the SSD and mobile markets. Prices are expected to begin to decline aggressively, but 2018 could still be a record revenue year for the NAND market.”

Excluding memory, the remainder of the semiconductor industry grew 9.9 percent last year, largely due to solid unit-sales growth and strong demand across all applications, regions and technologies. Notably, semiconductors used for data processing applications expanded 33.4 percent by year-end. Intel remained the market leader in this category, with sales almost two times larger than second-ranked Samsung.

 

Combined sales for optoelectronics, sensors and actuators, and discrete semiconductors (known collectively as O-S-D) increased 11% in 2017—more than 1.5 times the average annual growth rate in the past 20 years—to reach an eighth consecutive record-high level of $75.3 billion, according to IC Insights’ new 2018 O-S-D Report—A Market Analysis and Forecast for Optoelectronics, Sensors/Actuators, and Discretes. Total O-S-D sales growth is expected to ease back in 2018 but still rise by an above average rate of 8% in 2018 to $81.1 billion, based on the five-year forecast of the new 375-page annual report, which became available this week.

In 2017, optoelectronics sales recovered from a rare decline of 4% in 2016, rising 9% to $36.9 billion, while the sensors/actuators market segment registered its second year in a row of 16% growth with revenues climbing to $13.8 billion, and discretes strengthened significantly, increasing 12% to $24.6 billion.  The new O-S-D Report forecast shows optoelectronics sales growing 8% in 2018, sensors/actuators rising 10%, and discretes growing 5% this year (Figure 1).

Figure 1

Figure 1

Between 2017 and 2022, sales in optoelectronics are projected to increase by a compound annual growth rate (CAGR) of 7.3% to $52.4 billion, while sensors/actuators revenues are expected to expand by a CAGR of 8.9% to $21.2 billion, and the discretes segment is seen as rising by an annual rate of 3.1% to $28.7 billion in the final year of the report’s forecast.  In the five-year forecast period, O-S-D growth will continue to be driven by strong demand for laser transmitters in optical networks and CMOS image sensors in embedded cameras, image recognition, machine vision, and automotive applications as well as the proliferation of other sensors and actuators in intelligent control systems and connections to the Internet of Things (IoT).  Power discretes (transistors and other devices) are expected to get a steady lift from the growth in mobile and battery-operated systems as well as good-to-modest global economic growth in most of the forecast years through 2022, the report says.

Combined sales of O-S-D products accounted for about 17% of the world’s $444.7 billion in total semiconductor sales compared to less than 15% in 2007 and under 13% in 1997.  Since the mid-1990s, total O-S-D sales growth has outpaced the much larger IC market segment because of strong and relatively steady increases in optoelectronics and sensors. However, this trend was reversed recently mostly due to a 77% surge in sales of DRAMs and 54% jump in NAND flash memory in 2017.

The 2017 increase for total O-S-D sales was the highest growth rate in the market group since the 37% surge in the strong 2010 recovery year from the 2009 semiconductor downturn.  In addition, 2017 was the first year since 2011 when all three O-S-D market segments reached individual record-high sales, says IC Insights’ new report.  The 2018 O-S-D Report also shows that sales of sensor and actuator products made with microelectromechanical systems (MEMS) technology grew 18% in 2017 to a record-high $11.5 billion.

By David W. Price, Douglas G. Sutherland and Jay Rathert

Author’s Note: The Process Watch series explores key concepts about process control—defect inspection, metrology and data analysis—for the semiconductor industry. This article is the second in a five-part series on semiconductors in the automotive industry. In the first article, we introduced some of the challenges involved in the automotive supply chain and showed that the same defects that cause yield loss are also responsible for reliability issues. In this article, we discuss the connection between baseline yield and baseline reliability and present ways that both can be improved.

The strong correlation between semiconductor IC yield and reliability has been well studied and documented. The data shown in figure 1 demonstrates this relationship. Similar outcomes have been shown at the lot, wafer and die location level. Simply put, when yield is high, reliability follows suit. As discussed in the first article of the Process Watch Automotive series, this yield-reliability correlation is not unexpected, since the defect types that cause die failures are the same as those that cause early reliability problems. Yield and reliability defects differ primarily by their size and where they occur on the device pattern in the die.

Figure 1. Data demonstrating the strong correlation between IC device reliability and yield.1

Figure 1. Data demonstrating the strong correlation between IC device reliability and yield.1

It follows that reducing the number of yield-killing defects in the IC manufacturing process will increase baseline yield and simultaneously increase device reliability in the field. Recognizing this fact, fabs serving the automotive market are faced with two critical questions. The first is economic in nature: what is the appropriate level of investment of time, money and resources in yield improvement to create the needed reliability gains? The second question is technical: what are the best defect reduction methodologies for boosting the baseline yield to the necessary levels?

For fabs that make consumer devices (ICs for mobile phones, tablets, etc.), “mature yield” is defined as the point where further improvements in yield no longer warrant the investment of time and resources. As a product matures, yield tends to stabilize at some high value, but usually well below 100%. Instead of pursuing higher yield, it makes more economic sense for the consumer fab to reallocate resources to developing the next design node’s processes and devices, or to reducing costs to improve the profitability of their legacy node.

For automotive fabs, the economic decision on whether to invest more to increase yield extends beyond the typical marginal revenue determination. When there is a reliability issue, the automotive IC manufacturer will likely bear the cost of expensive and time-consuming failure analysis, and will be held financially liable for field warranty failures, recalls and potential legal liabilities. Given that automotive IC reliability requirements are as much as two to three orders of magnitude higher than consumer IC requirements, automotive fabs must achieve higher baseline yield levels. This requires a new way of thinking about what constitutes “mature yield.”

Figure 2 highlights the difference in mature yield between consumer and automotive fabs. As either type of fab moves up the yield curve, almost all systematic sources of yield loss have been resolved. The remaining yield loss is primarily due to random defectivity, contributed by either the process tools or the environment. A consumer fab may adopt a “good enough” approach to yield and reliability at this point. However, in the automotive industry, fabs employ a continuous improvement strategy to push the yield curve even higher. By driving down the incidence of yield-limiting defects, automotive fabs also reduce latent reliability defects, thereby optimizing their profits and mitigating risk.

Figure 2. In a consumer device fab (yellow line), the top of the yield curve (Yield versus Time) is limited by diminishing returns to profitability for increased investment in defect reduction. The automotive fab yield curve, shown by the blue dashed line, also factors in reliability. Additional improvement to baseline yield must be made by automotive fabs to meet the parts per billion quality requirements. The purple shaded area highlights the difference in yield between consumer and automotive fabs – a difference that’s primarily related to process tool defectivity.

Figure 2. In a consumer device fab (yellow line), the top of the yield curve (Yield versus Time) is limited by diminishing returns to profitability for increased investment in defect reduction. The automotive fab yield curve, shown by the blue dashed line, also factors in reliability. Additional improvement to baseline yield must be made by automotive fabs to meet the parts per billion quality requirements. The purple shaded area highlights the difference in yield between consumer and automotive fabs – a difference that’s primarily related to process tool defectivity.

The automotive supply chain – from OEMs to Tier 1 suppliers to IC manufacturers – is adopting a mindset that “every defect matters” in pursuit of a Zero Defect strategy. They recognize that when latent defects escape the fab, the cost of discovery and mitigation increases as much as 10x at every additional level of the supply chain. As such, the existing over-reliance on electrical test needs to be replaced by a strategy where latent failures are stopped in the fab where the cost is lowest. Only by implementing a methodical defect reduction program will a fab move towards the Zero Defect goal and be able to pass the stringent audits required by automobile manufacturers.

In addition to robust inline defect control capability, some of the defect reduction methods that automotive purchasing managers look for include:

  • Continuous Improvement Program (CIP) for baseline defect reduction
  • Golden Tool Work Flow
  • Dog Tool Programs

Continuous Improvement in Baseline Defect Reduction

The foundation of any rigorous baseline defect reduction plan is the inline defect strategy. To successfully detect the defects that affect yield and reliability of their design rules and device types, a fab’s inline defect strategy must include both an appropriate process control toolset and an adequate sample plan. The defect inspection systems utilized must produce the required defect sensitivity, be maintained to specifications and utilize well-tuned inspection recipes. The sample plan must be set for the right process steps at sufficient frequency to quickly flag process or tool excursions. Additionally, there should be sufficient inspection capacity to support a control plan that expedites excursion detection, root cause isolation and WIP-at-risk traceability. With these elements, an automotive fab should achieve a successful baseline defect reduction plan that can demonstrate positive yield trends over time, provide goals for further improvement, and equal industry best practices.

Within a baseline defect reduction plan, one of the biggest challenges is answering the question: where did this defect come from? The answer is often not straightforward. Sometimes the defect is detected many process steps away from the defect source. Sometimes the defect becomes apparent only after the wafer has gone through several other process steps that “decorate” it – i.e., make it more visible to inspection systems. A Tool Monitoring strategy helps resolve the question surrounding a defect’s origin.

In Tool Monitoring / Tool Qualification (TMTQ) applications, a bare wafer is inspected, run through a specific process tool (or chamber) and then inspected again (figure 3). Any new defects found on the wafer with the second inspection must have been added by that specific process tool. The results are unequivocal; there is no question about the defect’s origin. Automotive fabs pursuing a Zero Defect standard recognize the benefit of a Tool Monitoring strategy: with sensitive inspection recipes, appropriate control limits and out-of-control action plans (OCAP), the sources of random yield loss contributed by each process tool can be revealed and addressed.

Figure 3. After baselining the bare wafer with a “pre” inspection, it can be cycled through some or all process tool steps. The “post” inspection reveals defects added by the process tool.

Figure 3. After baselining the bare wafer with a “pre” inspection, it can be cycled through some or all process tool steps. The “post” inspection reveals defects added by the process tool.

Furthermore, when a process tool’s contribution of adder defects is plotted over time, as in figure 4, it provides a record of continuous improvement that can be audited and used to set future defect reduction goals. The defects from every tool in the fab can be classified to generate a defect library that can be referenced for failure analysis of field returns. This approach requires very frequent tool qualification – at least once per day – and is usually used in conjunction with a Golden Tool Work Flow or Dog Tool Programs, discussed below.

Figure 4. Continuous improvement in tool cleanliness over time. The source of the problem is unambiguous and objective defect reduction targets can be set on a quarterly or monthly basis. In addition, comparing the defectivity of two process tools can show which tool is cleaner. This helps guide tool maintenance activities to pinpoint the cause of the differences between the tools.

Figure 4. Continuous improvement in tool cleanliness over time. The source of the problem is unambiguous and objective defect reduction targets can be set on a quarterly or monthly basis. In addition, comparing the defectivity of two process tools can show which tool is cleaner. This helps guide tool maintenance activities to pinpoint the cause of the differences between the tools.

Golden Tool Work Flow

A Golden Tool Work Flow is another strategy used by fabs to reach the Zero Defect standard required by the automotive industry. With a Golden Tool Work Flow or Automotive Work Flow (AWF), the wafers for automotive ICs only go through the best process tools in the fab, requiring that the fab knows the best tool for any given process step. To reliability determine which tool is best, fabs leverage data from inline and tool monitoring inspections, and then only use those tools for the Automotive Work Flow. Restricting automotive wafers to a single tool at each process step can lead to longer cycle times. However, this is usually preferable to sending automotive wafers through process flows that suffer from higher defect levels that can lead to reliability issues. When coupled with a methodical continuous improvement program, most fabs can usually get multiple tools qualified for AWF at each step by setting quarterly targets for defect reduction.

Because it is a difficult method the scale up, the Golden Tool Work Flow is best suited for fabs where only a small percentage of WIP is automotive. For fabs in high volume automotive production, a more methodical continuous improvement program, such as the Dog Tool approach described below, is preferred.

Dog Tool Programs

A Dog Tool Program is the opposite of a Golden Tool Work Flow as it proactively addresses the worst process tool – the dog tool – at any given process step. Fabs that have been most successful in driving down baseline defectivity often have done so by adopting a Dog Tool Program. They first take down the dog tool at every process step and work on that tool until it is better than the average of the remaining tools in that set. They repeat this process over and over until all tools in the set meet some minimum standard. An effective Dog Tool program requires that the fab has a methodical Tool Monitoring strategy to qualify each process tool at each step. At a minimum, this qualification procedure should be done daily on each tool to ensure there is sufficient data so that an ANOVA or Kruskal-Wallis analysis can identify the best and worst tools in each set. A Dog Tool Program, with planned process tool downtime, is the one of the fastest ways known to bring an entire fab up to automotive standards. By increasing yield and reliability, this strategy ultimately improves an automotive fab’s effective capacity and profitability.

Summary

Automotive manufacturers who demand high reliability often require the fab to change their mindset about what really defines mature yield. In this article we have discussed several ways that fabs can reduce their baseline defectivity and improve reliability and yield. In the next article in this series we will discuss some of the technical considerations regarding the sensitivity of defect inspection tools and how that helps ensure chip reliability.

About the Authors:

Dr. David W. Price and Jay Rathert are Senior Directors at KLA-Tencor Corp. Dr. Douglas Sutherland is a Principal Scientist at KLA-Tencor Corp. Over the last 15 years, they have worked directly with over 50 semiconductor IC manufacturers to help them optimize their overall process control strategy for a variety of specific markets, including automotive reliability, legacy fab cost and risk optimization, and advanced design rule time-to-market BKMs. The Process Watch series of articles attempts to summarize some of the universal lessons they have observed through these engagements.

References:

  1. Mann, “Wafer Test Methods to Improve Semiconductor Die Reliability,” IEEE Design & Test of Computers, vol. 25, pp. 528-537, November-December 2008. https://doi.org/10.1109/MDT.2008.174
  2. Price, Sutherland and Rathert, “Process Watch: The (Automotive) Problem With Semiconductors,” Solid State Technology, January 2018.

Research included in the March Update to the 2018 edition of IC Insights’ McClean Report shows that fabless IC suppliers accounted for 27% of the world’s IC sales in 2017—an increase from 18% ten years earlier in 2007.  As the name implies, fabless IC companies do not operate an IC fabrication facility of their own.

Figure 1 shows the 2017 fabless company share of IC sales by company headquarters location.  At 53%, U.S. companies accounted for the greatest share of fabless IC sales last year, although this share was down from 69% in 2010 (due in part to the acquisition of U.S.-based Broadcom by Singapore-based Avago). Broadcom Limited currently describes itself as a “co-headquartered” company with its headquarters in San Jose, California and Singapore, but it is in the process of establishing its headquarters entirely in the U.S. Once this takes place, the U.S. share of the fabless companies IC sales will again be about 69%.

Figure 1

Figure 1

Taiwan captured 16% share of total fabless company IC sales in 2017, about the same percentage that it held in 2010.  MediaTek, Novatek, and Realtek each had more than $1.0 billion in IC sales last year and each was ranked among the top-20 largest fabless IC companies.

China is playing a bigger role in the fabless IC market.  Since 2010, the largest fabless IC marketshare increase has come from the Chinese suppliers, which captured 5% share in 2010 but represented 11% of total fabless IC sales in 2017.  Figure 2 shows that 10 Chinese fabless companies were included in the top-50 fabless IC supplier list in 2017 compared to only one company in 2009. Unigroup was the largest Chinese fabless IC supplier (and ninth-largest global fabless supplier) in 2017 with sales of $2.1 billion. It is worth noting that when excluding the internal transfers of HiSilicon (over 90% of its sales go to its parent company Huawei), ZTE, and Datang, the Chinese share of the fabless market drops to about 6%.

Figure 2

Figure 2

European companies held only 2% of the fabless IC company marketshare in 2017 as compared to 4% in 2010. The loss of share was due to the acquisition of U.K.-based CSR, the second-largest European fabless IC supplier, by U.S.-based Qualcomm in 1Q15 and the purchase of Germany-based Lantiq, the third-largest European fabless IC supplier, by Intel in 2Q15.  These acquisitions left U.K.-based Dialog ($1.4 billion in sales in 2017) and Norway-based Nordic ($236 million in sales in 2017) as the only two European-based fabless IC suppliers to make the list of top-50 fabless IC suppliers last year.

The fabless IC business model is not so prominent in Japan or in South Korea.  Megachips, which saw its 2017 sales jump by 40% to $640 million, was the largest Japan-based fabless IC supplier.  The lone South Korean company among the top-50 largest fabless suppliers was Silicon Works, which had a 15% increase in sales last year to $605 million.

By Jay Chittooran, SEMI Public Policy

Following through on his 2016 campaign promise, President Trump is implementing trade policies that buck conventional wisdom in Washington, D.C. and among U.S. businesses. Stiff tariffs and the dismantling of longstanding trade agreements – cornerstones of these new actions – will ripple through the semiconductor industry with particularly damaging effect. China, a chief target of criticism from President Trump, has again found itself in the crosshairs of the administration, with trade tensions rising to a fever pitch.

The Trump Administration has long criticized China for what it considers unfair trade practices, often zeroing in on intellectual property. In August 2017, the Office of the U.S. Trade Representative (USTR), charged with developing and recommending U.S trade policy to the president, launched a Section 301 investigation into whether China’s practice of forced technology transfer has discriminated against U.S. firms. As the probe continues, it is becoming increasingly clear that the United States will impose tariffs on China based on its current findings. Reports suggest that the tariffs could come soon, hitting a range of products from consumer electronics to toys. Other measures could include tightening restrictions on the trade of dual-use goods – those with both commercial and military applications – curbing Chinese investment in the United States, and imposing strict limits on the number of visas issued to Chinese citizens.

With China a major and intensifying force in the semiconductor supply chain, raising tariffs hangs like the Sword of Damocles over the U.S. and global economies. A tariff-ignited trade war with China could stifle innovation, undermine the long-term health of the semiconductor industry, and lead to unintended consequences such as higher consumer prices, lower productivity, job losses and, on a global scale, a brake on economic growth.

Other recently announced U.S. trade actions could also cloud the future for semiconductor companies. The Trump administration, based on two separate Section 232 investigations claiming that overproduction of both steel and aluminum are a threat to U.S. national security, recently levied a series of tariffs and quotas on every country except Canada and Mexico. While these tariffs have yet to take effect, the mere prospect has angered U.S. trading partners – most notably Korea, the European Union and China. Several countries have threatened retaliatory action and others have taken their case to the World Trade Organization.

Trade is oxygen to the semiconductor industry, which grew by nearly 30 percent last year and is expected to be valued at an estimated $1 trillion by 2030. Make no mistake: SEMI fully supports efforts to buttress intellectual property protections. However, the Trump administration’s unfolding trade policy could antagonize U.S. trade partners.

For its part, SEMI is weighing in with USTR on these issues, underscoring the critical importance of trade to the semiconductor industry as we educate policymakers on trade barriers to industry growth and encourage unobstructed cross-border commerce to advance semiconductors and the emerging technologies they enable. On behalf of our members, we continue our work to increase global market access and lessen the regulatory burden on global trade. If you are interested in more information on trade, or how to be involved in SEMI’s public policy program, please contact Jay Chittooran, Public Policy Manager, at [email protected].

Originally published on the SEMI blog.

The ConFab — an executive invitation-only conference now in its 14th year — brings together influential decision-makers from all parts of the semiconductor supply chain for three days of thought-provoking talks and panel discussions, networking events and select, pre-arranged breakout business meetings.

In the 2018 program, we will take a close look at the new applications driving the semiconductor industry, the technology that will be required at the device and process level to meet new demands, and the kind of strategic collaboration that will be required. It is this combination of business, technology and social interactions that make the conference so unique and so valuable. Browse this slideshow for a look at this year’s speakers, keynotes, panel discussions, and special guests.

Visit The ConFab’s website for a look at the full, three-day agenda for this year’s event.

KEYNOTE: How AI is Driving the New Semiconductor Era

Rama Divakaruni_June_2014presented by Rama Divakaruni, Advanced Process Technology Research Lead, IBM

The exciting results of AI have been fueled by the exponential growth in data, the widespread availability of increased compute power, and advances in algorithms. Continued progress in AI – now in its infancy – will require major innovation across the computing stack, dramatically affecting logic, memory, storage, and communication. Already the influence of AI is apparent at the system-level by trends such as heterogeneous processing with GPUs and accelerators, and memories with very high bandwidth connectivity to the processor. The next stages will involve elements which exploit characteristics that benefit AI workloads, such as reduced precision and in-memory computation. Further in time, analog devices that can combine memory and computation, and thus minimize the latency and energy expenditure of data movement, offer the promise of orders of magnitude power-performance improvements for AI workloads. Thus, the future of AI will depend instrumentally on advances in devices and packaging, which in turn will rely fundamentally on materials innovations.

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IC Insights’ latest market, unit, and average selling price forecasts for 33 major IC product segments for 2018 through 2022 is included in the March Update to the 2018 McClean Report (MR18).  The Update also includes an analysis of the major semiconductor suppliers’ capital spending plans for this year.

The biggest adjustments to the original MR18 IC market forecasts were to the memory market; specifically the DRAM and NAND flash segments.  The DRAM and NAND flash memory market growth forecasts for 2018 have been adjusted upward to 37% for DRAM (13% shown in MR18) and 17% for NAND flash (10% shown in MR18).

The big increase in the DRAM market forecast for 2018 is primarily due to a much stronger ASP expected for this year than was originally forecast.  IC Insights now forecasts that the DRAM ASP will register a 36% jump in 2018 as compared to 2017, when the DRAM ASP surged by an amazing 81%.  Moreover, the NAND flash ASP is forecast to increase 10% this year, after jumping by 45% in 2017.  In contrast to strong DRAM and NAND flash ASP increases, 2018 unit volume growth for these product segments is expected to be up only 1% and 6%, respectively.

At $99.6 billion, the DRAM market is forecast to be by far the largest single product category in the IC industry in 2018, exceeding the expected NAND flash market ($62.1 billion) by $37.5 billion.  Figure 1 shows that the DRAM market has provided a significant tailwind or headwind for total worldwide IC market growth in four out of the last five years.

The DRAM market dropped by 8% in 2016, spurred by a 12% decline in ASP, and the DRAM segment became a headwind to worldwide IC market growth that year instead of the tailwind it had been in 2013 and 2014.  As shown, the DRAM market shaved two percentage points off of total IC industry growth in 2016.  In contrast, the DRAM segment boosted total IC market growth last year by nine percentage points. For 2018, the expected five point positive impact of the DRAM market on total IC market growth is forecast to be much less significant than it was in 2017.

Figure 1

Figure 1

Qualcomm Incorporated (NASDAQ: QCOM) received a Presidential Order to immediately and permanently abandon the proposed takeover of Qualcomm by Broadcom Limited (NASDAQ: AVGO). Under the terms of the Presidential Order, all of Broadcom’s director nominees are also disqualified from standing for election as directors of Qualcomm.

Qualcomm was also ordered to reconvene its 2018 Annual Meeting of Stockholders on the earliest possible date, which based on the required 10-day notice period, is March 23, 2018. Stockholders of record on January 8, 2018 will be entitled to vote at the meeting.

Broadcom’s official statement after receiving the order was to strongly disagree that its proposed acquisition of Qualcomm raises any national security concerns.

“This should be viewed as a very positive event not only for Qualcomm but also for the market as a whole,” said Stuart Carlaw, Chief Research Officer at ABI Research. “The combined entity would have had dangerously dominant positions in some core markets such as location technologies, Wi-Fi, Bluetooth, RF hardware and automotive semiconductors. A diverse supplier ecosystem will be key to supporting the IoT as well as vertical market developments such as smart mobility and smart manufacturing.”

The Presidential Order is available at: https://www.whitehouse.gov/presidential-actions/presidential-order-regarding-proposed-takeover-qualcomm-incorporated-broadcom-limited/.

 

The latest update to the SEMI World Fab Forecast report, published on February 28, 2018, reveals fab equipment spending will increase at 5 percent in 2019 for a remarkable fourth consecutive year of growth as shown in figure 1. China is expected to be the main driver of fab equipment spending growth in 2018 and 2019 absent a major change in its plans. The industry had not seen three consecutive years of growth since the mid-1990s.

Figure 1

Figure 1

SEMI predicts Samsung will lead in fab equipment spending both in 2018 and 2019, with Samsung investing less each year than in 2017.  By contrast, China will dramatically increase year-over-year fab equipment spending by 57 percent in 2018 and 60 percent in 2019 to support fab projects from both multinationals and domestic companies. The China spending surge is forecast to accelerate it past Korea as the top spending region in 2019.

After record investments in 2017, Korea fab equipment spending will decline 9 percent, to US$18 billion, in 2018 and an additional 14 percent, to US$16 billion, in 2019. However both years will outpace pre-2017 spending levels for the region. Fab equipment spending in Taiwan, the third-largest region for fab investments, will fall 10 percent to about US$10 billion in 2018, but is forecast to rebound 15 percent to over US$11 billion in 2019. (Details about other regions’ spending trends are available in SEMI’s latest World Fab Forecast.)

As expected, China’s fab equipment spending is increasing as projects shift to equipment fabs constructed earlier in this cycle.  The record 26 volume fabs that started construction in China in 2017 will begin equipping this year and next.  See figure 2.

Figure 2

Figure 2

Non-Chinese companies account for the largest share of fab equipment investment in China. However, Chinese-owned companies are expected to ramp up fabs in 2019, increasing their share of spending in China from 33 percent in 2017 to 45 percent in 2019.

Product Sector Spending

3D NAND will lead product sector spending, growing 3 percent each in 2018 and 2019, to US$16 billion and US$17 billion, respectively. DRAM will see robust growth of 26 percent in 2018, to US$14 billion, but is expected to decline 14 percent to US$12 billion in 2019.  Foundries will increase equipment spending by 2 percent to US$17 billion in 2018 and by 26 percent to US$22 billion in 2019, primarily to support 7nm investments and ramp of new capacity.