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It’s chilly!


January 16, 2019

By Walt Custer

4Q’18 World Electronic Supply Chain – Slowing Electronic Equipment Growth

Custer Consulting Group has its first estimate of global electronic equipment growth in 4Q’18 vs. 4Q’17. Chart 1 compares the combined sales of a 213-company OEM composite to regional electronic equipment shipments. The composite is based on individual company financial reports. While fourth-quarter results for this group won’t be available until February, the regional model (driven by early reported Taiwan/China results) points to world electronic end market growth declining from +10% in 3Q’18 vs. 3Q’17 to +2% in 4Q’18 vs. 4Q’17.

These results are still preliminary, but Chart 1 gives an early indication of the magnitude and trajectory of slowing electronic equipment growth.

Chart 2 shows consolidated monthly sales from our regional electronic equipment model where December 2018 global revenues declined 1.8% vs. December 2017 and were down 0.9% sequentially vs. November 2018. Note the very predictable seasonality and the apparent “peaking” of 2018 sales in November – with a likely sharp drop in early 2019.

Sources: Company financial reports and USA, Europe, Japan, China/Taiwan and South Korea regional data as analyzed by Custer Consulting Group.

Wafer Foundry Sales – Leading Indicator for Semiconductors and Semiconductor Equipment

December monthly sales have been reported by Taiwan-listed wafer fabs.

  • Wafer foundry revenues dropped in December, suggesting a coming decline in global semiconductor and semiconductor equipment shipments (Chart 3). Foundry sales have historically been a leading indicator for both chips and semiconductor equipment.

  • Taiwan wafer foundry revenues, world semiconductor sales and the Global Purchasing Managers Index 3/12 growth rates all point to further slowing ahead (Chart 4).

Source: Company financial reports

Semiconductor Industry Business Cycles

Semiconductor shipment growth (although still positive) peaked in early 2018 (Chart 5).  Globally it was up only 4.6% in November 2018 versus the same month a year earlier and its trajectory is pointing down. This compares to +23.7% growth in December 2017.

Semiconductor equipment shipments (Chart 6) actually contracted 0.6% globally for just the month of November 2018 vs. November 2017. They are traditionally more volatile than semiconductor sales.

The normal winter seasonal industry slowdown is upon us and it is being overlaid with economic softness, political uncertainty, product (memory) shifts and general industry weakening.

Walt Custer of Custer Consulting Group is an analyst focused on the global electronics industry. He can be reached at [email protected].

Rudolph Technologies, Inc. (NYSE: RTEC) announced today that it has received orders for over $15 million of legacy and new process control systems from a memory manufacturer based in Asia. The systems will be used by a top-tier memory chip maker as they rapidly transition high-end DRAM (DDR4, DDR5) and HBM DRAM packaging from wire bonding to advanced packaging architectures. The shift from wire bonding is needed to achieve higher data speeds, superior power distribution and thermal properties using copper pillars, micro-bumps, and through silicon vias (TSVs) for stacked chip-to-chip interconnects.

Delivery of systems will be completed by the end of the first quarter, with additional orders expected throughout 2019 as memory manufacturers transition their high-speed DRAM from wire-bonded architecture to advanced packaging.

“Rudolph began working with our customers’ R&D teams nearly ten years ago to develop 2D/3D measurements of the emerging copper bump process. That long-term customer engagement has resulted in systems and software that we believe to be the industry standard for advanced packaging metrology,” stated Cleon Chan, vice president of global field operations at Rudolph. “Stacking die using TSVs and micro-bumps for HBM DRAM packages requires precise control of the copper features that will ultimately make the electrical connections between the stacked memory chips and the logic chip in the same package. After significant development in the package and the process control methods, these devices are now beginning high-volume manufacturing, which is being driven by the data speed and capacity demands from big data servers and graphics applications. These new, non-wire bonded memory architectures are creating a very healthy demand for our back-end process control systems. This customer is also using Rudolph systems for post-saw film-frame inspection looking for package defects.”

A combination of Rudolph’s 2D/3D inspection systems and metal metrology systems provide a total process control solution to help assure that height, diameter, location and coplanarity of copper micro-bumps, pillar bumps, and TSVs are precisely controlled. After the packages are molded and separated by sawing, additional Rudolph inspection systems provide outgoing quality checks for sidewall delamination and/or hairline cracks, which are considered killer defects for advanced memory packages.

Broadcom Inc. (NASDAQ: AVGO) announced today that its board of directors has appointed Diane M. Bryant as an independent director, and as a member of its compensation committee.

Ms. Bryant has more than three decades of executive leadership in the global semiconductor, enterprise IT solution development and deployment, and cloud computing services industries. Most recently, Ms. Bryant served as the Chief Operating Officer of Google Cloud, where she focused on accelerating the scale and reach of Google Cloud’s business, including optimization of the global supply chain, acceleration of customer adoption, and development of next generation information technology solutions.

Prior to Google Cloud, Ms. Bryant spent 32 years at Intel, most recently serving as Group President of Intel’s Data Center Group, the worldwide organization that develops server, storage and network platforms for the digital services economy, in 2017, having led that group since 2012. Before becoming Group President, Ms. Bryant served as Intel’s Corporate Vice President and Chief Information Officer, responsible for the corporate-wide information technology solutions and services that enable Intel’s business.

Ms. Bryant also serves on the board of directors of United Technologies Corporation, and on its audit and finance committees, and on the U.C. Davis Chancellor’s Board of Advisors and U.C. Davis College of Engineering Board of Advisors.

“Diane is a deeply experienced technologist and proven business leader with tremendous operational and strategic knowledge in cloud computing and enterprise IT which will be invaluable to Broadcom as we continue to expand our product offerings,” said Henry Samueli, Chairman of Broadcom’s board of directors.

Ms. Bryant received her bachelor’s degree in electrical engineering from U.C. Davis in 1985. She attended Stanford Graduate School of Business, completing the Executive Program in 2011. Ms. Bryant holds four U.S. patents in mobile computing.

SIA today filed comments to the Department of Commerce Bureau of Industry and Security (BIS) in response to an advanced notice of proposed rulemaking of controls for “emerging” technologies. In accordance with requirements of the Export Control Reform Act of 2018 (ECRA), enacted into law as part of the defense authorization bill, BIS is required to establish export controls on certain “emerging and foundational technologies.” The SIA comments respond to the request for comments on “emerging” technologies, and we expect BIS to commence a separate rulemaking on “foundational” technologies sometime this year.

Maintaining a strong U.S. semiconductor industry is critical to our country’s economic and national security. Semiconductors are America’s fourth-largest export, and the semiconductor industry has a highly complex, specialized, and geographically widespread global supply chain. For these reasons, it is important for government and industry to work together to ensure U.S. export control policies both enhance our national security and continue to allow the U.S. semiconductor industry to grow and innovate. SIA has long collaborated with the U.S. government to support reforms and modernization of export control policy, particularly with respect to semiconductors.

The SIA comments outline the statutory framework set forth in ECRA and call on BIS to carefully consider each of the factors set forth in the statute in crafting narrowly tailored controls on emerging technologies. Among other things, ECRA calls on BIS to consider controls only on technologies essential to national security, whether these technologies are exclusive to the U.S. or are available from foreign sources, and the effectiveness of proposed controls. It also directs BIS to consider the impact of unilateral controls on specified technologies on domestic research and development and the economy as a whole. SIA’s comments provide detailed recommendations on how BIS can best implement these statutory mandates.

We are confident BIS, by following the statutory criteria set forth in ECRA and considering the input of affected stakeholders, will enhance national security while at the same time enabling the semiconductor industry in the U.S. to grow and innovate.

SEMI, the global industry association serving the electronics manufacturing supply chain, today announced that Mike Russo has joined SEMI as vice president of Global Industry Advocacy, based in the company’s Washington D.C. office. Reporting to SEMI President and CEO Ajit Manocha, Russo oversees SEMI’s government relations program and advocacy efforts worldwide, leading the development and execution of strategies to strengthen SEMI’s public policy program and the association’s initiatives addressing the broader semiconductor industry’s talent gap, a top SEMI priority.

“In light of the changing geopolitical dynamics around the world seriously impacting our industry, we are thrilled to welcome government affairs veteran Mike to SEMI,” said Manocha. “His arrival at SEMI to support SEMI’s Global Advocacy mission is very timely. Mike is a high-impact leader with rich public policy experience in the semiconductor industry and an invaluable asset to SEMI and our members as we advocate for the industry across trade, tax, technology and talent. Already, Mike is broadening the scope of SEMI’s advocacy work with global programs that address the industry’s critical need to build the workforce of the future.”

Russo’s experience as a government affairs executive in the semiconductor industry includes spearheading strategic initiatives in supply chain innovation, infrastructure development, education and workforce development. Most recently, he served as president of Entregar Consulting Group, a firm focused on strategic, public-private partnerships in manufacturing and technology.

For nearly a decade, Russo led the U.S. corporate office of government affairs for GLOBALFOUNDRIES, the nation’s largest global contract semiconductor chipmaker. In that role, Russo oversaw government relations, regulatory affairs and strategic initiatives.

In government, Russo served as a senior staff member in both the Senate and House and has served in various capacities as an advisor to the U.S. government on manufacturing industrial base policy, including leading the national advisory group for the former National Network of Manufacturing Innovation (NNMI), now Manufacturing USA, under the President’s Council of Advisors on Science and Technology  for Advanced Manufacturing Partnership (AMP).

The Semiconductor Industry Association (SIA), representing U.S. leadership in semiconductor manufacturing, design, and research, today announced worldwide sales of semiconductors reached $41.4 billion for the month of November 2018, an increase of 9.8 percent from the November 2017 total of $37.7 billionand 1.1 percent less than the October 2018 total of $41.8 billion. Monthly sales are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.

“The global semiconductor industry continues to post solid year-to-year sales increases, and year-to-date revenue through November has surpassed annual sales from all of 2017, but growth has slowed somewhat in recent months,” said John Neuffer, SIA president and CEO. “Year-to-year sales increased in November across all major regional markets, with the China market standing out with growth of 17 percent. Double-digit annual growth is expected for 2018 once December’s sales are tallied, with more modest growth projected for 2019.”

Regionally, year-to-year sales increased in China (17.4 percent), the Americas (8.8 percent), Europe (5.8 percent), Japan(5.6 percent), and Asia Pacific/All Other (4.4 percent). Compared with last month, sales were up in Asia Pacific/All Other (1.1 percent), Europe (0.5 percent), and Japan (0.4 percent), but down slightly in the Americas (-2.2 percent) and China(-2.7 percent).

Unwavering in its drive to build a strong, self-sufficient semiconductor supply chain, China plans more new fab projects than any other region in the world from 2017 to 2020, and its expansion of fab capacity recently picked up pace on the strength of new foundry and memory projects from both domestic and foreign companies, according to SEMI’s 2018 China Semiconductor Silicon Wafer Outlook report. China’s installed fab capacity is forecast to grow at a 12 percent CAGR from 2.3 million wafers per month (wpm) in 2015 to 4 million wpm in 2020, faster than all other regions.

Well known for its semiconductor packaging prowess, China in recent years shifted its focus to front-end semiconductor fabs and a few key material markets. In 2018, the region’s surge in fab investment thrust it past Taiwan as the second largest capital equipment market in the world, behind only Korea.

However, China’s semiconductor manufacturing growth faces strong headwinds. Chief among them is the tight supply of silicon wafers over the past two years due in large part to the sector oligopoly’s firm control of global production, with the top five wafer manufacturers accounting for over 90 percent of market revenue. In response, China’s central and local governments has made the development of its domestic silicon wafer supply chain a key initiative, funding multiple silicon wafer manufacturing projects.

According to the 2018 China Semiconductor Silicon Wafer Outlook report, many of China’s domestic silicon suppliers capably provide wafers 150mm in size and smaller. And the while the region lags peers in 200m and 300mm processing technology and capacity, strong domestic demand and favorable policies have fueled progress in 200mm and 300mm silicon manufacturing with some Chinese suppliers having reached key large-diameter manufacturing milestones.

However, it will take these new suppliers several years before they can meet capacity and yield requirements of the larger-diameter silicon wafer market. Company plans and announcements indicate that by the end of 2020, total silicon supply capacity in China will reach 1.3 million wpm for 200mm, possibly leading to a slight oversupply, and 750,000 wpm for 300mm.

China’s equipment suppliers, particularly crystal furnace vendors, are also investing in the development of 300mm wafer manufacturing, and domestic tool suppliers have developed most of the necessary tools for wafer manufacturing, except for inspection.

While China’s silicon wafer suppliers continue to lag international peers in manufacturing capabilities, the region’s silicon manufacturing ecosystem is maturing and becoming better integrated. The sector’s growth is driven and accelerated by significant domestic market demand and favorable policies.

Intevac, Inc. (Nasdaq: IVAC) announced today it has received multiple new program awards that together increase Photonics backlog by over $35 million, to an expected five-year record level at year-end 2018. These awards include development programs for digital night vision cameras for the dismounted soldier, and a follow-on order for the U.S. Military’s leading attack helicopter platform.

“Over the last 25 years, Intevac has been driving our founder Norm Pond’s vision of enabling night vision systems with the power of digital technology,” commented Wendell Blonigan, president and chief executive officer of Intevac. “Intevac’s digital night vision camera systems are currently the solutions of choice for the premiere fighting platforms of the U.S. Military, and our largest recent award is the beginning stage of bringing our digital technology to the dismounted ground soldier.”

“This week we announced the largest contract award Intevac Photonics has ever received, which is a direct result of our digital night vison design and domain expertise,” added Timothy Justyn, executive vice president and general manager of Intevac Photonics. “Our product offerings will leverage the successful development work of our state-of-the-art, Low Light Level CMOS cameras accomplished over the past year.”

The awards together contribute over $35 million in increased backlog for Intevac Photonics, in multiple programs that include camera deliveries scheduled over the next two years. The helicopter program award consists of a continuation of the company’s gold-standard ISIE-11 digital night vision sensor. The development program awards for the dismounted soldier leverage Intevac’s next-generation ISIE-19 sensor currently under development.

IBM (NYSE:  IBM) today announced an agreement with Samsung to manufacture 7-nanometer (nm) microprocessors for IBM Power Systems, IBM Z and LinuxONE, high-performance computing (HPC) systems, and cloud offerings.

The agreement combines Samsung’s industry-leading semiconductor manufacturing with IBM’s high-performance CPU designs. This combination is being designed to drive unmatched systems performance, including acceleration, memory and I/O bandwidth, encryption and compression speed, as well as system scaling. It positions IBM and Samsung as strategic partners leading the new era of high-performance computing specifically designed for AI.

“At IBM, our first priority is our clients,” said John Acocella, Vice President of Enterprise Systems and Technology Development for IBM Systems. “IBM selected Samsung to build our next generation of microprocessors because they share our level of commitment to the performance, reliability, security, and innovation that will position our clients for continued success on the next generation of IBM hardware.”

Today’s announcement also expands and extends the 15-year strategic process technology R&D partnership between the two companies which, as part of IBM’s Research Alliance, includes many industry firsts such as the first NanoSheet Device innovation for sub 5nm, the production of the industry’s first 7nm test chip and the first High-K Metal Gate foundry manufacturing. IBM’s Research Alliance ecosystem continues to define the leadership roadmap for the semiconductor industry.

“We are excited to expand our decade-long strategic relationship with IBM with our 7nm EUV process technology,” said Ryan Lee, Vice President of Foundry Marketing at Samsung Electronics. “This collaboration is an important milestone for Samsung’s foundry business as it signifies confidence in Samsung’s cutting-edge high performance EUV process technology.”

Samsung is a member of the OpenPOWER Foundation, a vendor ecosystem facilitating the development of IBM Power architecture-based customized servers, networking and storage for future data centers and cloud computing. Samsung is also a member of the Q Network to help advance the understanding of applications software in quantum computing for the industry.

Over a long period, industrial companies followed up at a distance the development of GaN-based solutions mainly managed by R&D institutes and laboratories. Today the context has changed.
Under the updated of its annual report, Power GaN: Epitaxy, Devices, Applications and Technology Trends, Yole Développement (Yole) identified, a lot of power electronics & compound semiconductor companies including leading players such as Infineon Technologies, STMicroelectronics… strongly engaged in significant projects of development. Some of them already introduce in their portfolio a GaN product. But it is not the majority. So what is the status of GaN technologies? Can we affirm a clear adoption of GaN products? What would be the main applications?… Business dream or reality, the power GaN industry has been deeply analyzed by the Power & Wireless team from Yole. The analysts propose you today to discover a snapshot of this industry.

Today, it is crystal-clear that, from theoretical point of view, GaN offers fantastic technical advantages over traditional Si MOSFETs; the technology is very appealing, and more and more players are entering; moreover the lowering of prices could make GaN devices a good competitor of the currently used Si-based power switching transistors.

“Nevertheless the technical panorama is not clear yet; every manufacturer presents its solution on die design and packaging integration. This brings to a strong competition which will accelerate technical innovations in terms of integration and better performances,” says Elena Barbarini, PhD, Head of Department Semiconductors Devices at System Plus Consulting.

Even though the current GaN power market remains tiny compared to US$32.8 billion silicon power market, GaN devices are penetrating confidently into different applications.

The biggest segment in the power GaN market is still power supply applications, i.e. fast charging for cellphones. This year, Navitas and Exagan introduced 45W fast-charging power adaptors with an integrated GaN solution. Then, LiDAR applications are high-end solutions that take full benefit of high-frequency switching in GaN power devices.

And what about the EV/HEV market? What is the status of GaN solutions in a market segment step by step dominated by SiC technology replacing Si IGBTs in main inverters? Therefore, Yole announces a US$450 million SiC market in 2023 in its Power SiC report.

“The accumulation of the market growth in various applicative markets, especially the power supply market segment which is the most important in that case, confirms our first scenario,” comments Ana Villamor, PhD, Technology & Market Analyst at Yole.“Under this Base Case scenario, GaN market is expected to grow steadily. At Yole, we announce a GaN market to grow with 55% CAGR between 2017 and 2023”.

However, this analysis is not the only way to see the tomorrow’s industry. Yole’s Power & Wireless team went further in their investigations. Is there any killer application that could cause the GaN power device market to explode? Yes possibly, Yole’s analysts said. As matter of fact, several industrial players confirm that the leading smartphones manufacturer, Apple could consider the GaN technology for its wireless charging solution.

“It goes without saying that the potential adoption of GaN by Apple or another smartphone giant would completely change the market’s dynamics and finally provide a breath of life to the GaN power device industry,” comments Ezgi Dogmus, PhD, Technology & Market Analyst and part of the Yole’s Power & Wireless team. “Indeed we imagine that after a company like Apple adopts GaN, numerous other companies would follow on the commercial electronics market.”

What could be the added-value of GaN technology? Various players, such as EPC and Transphorm, have already obtained automotive qualification in preparation for GaN’s potential ramp-up. In addition BMW i Ventures’s investment in GaN Systems clearly demonstrates the automotive industry’s interest in GaN solutions for EV/HEV technology… Globally, Yole’s second scenario, named Bull Case Scenario is much more aggressive, conditioned by the adoption of GaN wireless charging solution by leading consumer manufacturers.

According to the market research, in this context, the GaN power business could reach around US$423 million by 2023, with 93% CAGR between 2017 and 2023.