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NXP-Freescale merger to result in world’s eighth largest chip maker

March 18, 2015

The recent acquisition of Freescale Semiconductor by NXP Semiconductors would catapult the merged entity into the world’s eighth-largest chipmaker, positioning the newly minted giant for an even more formidable presence in key industrial sectors, according to IHS, a global source of critical information and insight.

Prior to the merger, NXP ranked 15th in revenue and Freescale 18th. With combined revenue last year of approximately $10 billion, the resulting new company would have surpassed Broadcom. Only Intel, Samsung Electronics, Qualcomm, SK Hynix, Micron Technology, Texas Instruments and Toshiba would have been bigger, as shown in the table below.

Global Top 10 Semiconductor Makers’ Revenue Share

2014	Company	Revenue Share
Rank
1	Intel	14.14%
2	Samsung Electronics	10.77%
3	Qualcomm	5.46%
4	SK Hynix	4.56%
5	Micron Technology	4.56%
6	Texas Instruments	3.46%
7	Toshiba	2.90%
8	NXP-Freescale (Merged)	2.83%
9	Broadcom	2.38%
10	STMicroelectronics	2.10%

“The merged company’s strength will be especially apparent in automotive-specific analog applications,” said Dale Ford, vice president and chief analyst at IHS. “Automotive products clearly will be the biggest convergence resulting from a merged product portfolio of the Dutch-based NXP and its smaller U.S. rival.”

The amalgamated NXP-Freescale would place the company in second place in the area of microcontroller units (MCUs), which are integrated circuits for embedded and automatically controlled applications, including automotive engine-control systems. The merged company could also affect the digital signal processing (DSP) market, where Texas Instruments reigns supreme. DSPs are an important component in the audio and video handling of digital signals used in myriad applications, including mobile-phone speech transmission, computer graphics and MP3 compression.

“While both NXP and Freescale boast diverse portfolios with complementary products, the high-performance lines of the two chipmakers have very different target solutions,” said Tom Hackenberg, senior analyst for MCUs and microprocessors at IHS.

Freescale has been a key strategic provider of high-reliability automotive, telecomm infrastructure and industrial solutions, including both application-specific and general-purpose products that go after high-performance applications. NXP’s broad portfolio, by comparison, has strategically targeted precision analog and low-power portable-device applications, most of which are directed at portable wireless, automotive infotainment, consumer components and a complementary base of industrial components, including secure MCUs for smart cards. Even in the auto industry, where the two companies both focus on infotainment, their technologies harmonize: NXP dominates the radio market, while Freescale fills a large demand for low- to midrange center-stack processors and instrument cluster controllers.

“The most significant processor competition will likely occur in low-power connectivity solutions, where both chipmakers offer competitive connectivity MCUs,” said Hackenberg. “In particular, the newly merged company will be well-positioned to make groundbreaking advances in the human-machine interface market.”

Freescale recently began developing its portfolio of vision-related intellectual property with Canadian maker CogniVue, used in advanced driver assistance systems (ADAS). For its part, NXP has solid voice-processing expertise. Both companies overall have strong sensor fusion intellectual property, with each maker tending toward different applications. “The resulting combination could offer strategic symmetry in combined vision-, voice- and motion-controlled systems,” Hackenberg added.

Another important aspect of the merger is that Freescale is a near-exclusive source for power architecture processors and processor intellectual property. Although its market share overall is small compared to x86 and ARM, Freescale plays a significant role in the military aerospace industry, where many high-reliability equipment controls rely on power architecture. “While the acquisition of Freescale by a foreign owner is unlikely to be a deal breaker, the development could have some bearing on the approval process in the military, as it will now involve a non-U.S. company possessing ownership of its primary source of military aerospace specific Power Architecture,” Hackenberg noted.

Process Watch: Know your enemy

March 18, 2015

By Douglas G. Sutherland and David W. Price

Author’s Note: This is the fifth in a series of 10 installments exploring the fundamental truths about process control—defect inspection and metrology—for the semiconductor industry. Each article in this series introduces one of the 10 fundamental truths and highlights their implications.

In the last installment we discussed the idea that uncertainty in measurement is part of the process. Anything that degrades the quality of the measurement also degrades the quality of the process because it introduces more variability into the Statistical Process Control (SPC) charts which are windows into the health of the process. In this paper we will expand upon those ideas.

The fifth fundamental truth of process control for the semiconductor IC industry is:

Variability is the Enemy of a Well Controlled Process.

In a wafer fab there are many different types of variability — all of them are bad.

Variability in the lot arrival rate, the processing time and the downtime of processing tools, to name just a few sources, all contribute to increased cycle time
Variability in the physical features (CD, film thickness, side-wall angle, etc.) contribute to increased leakage current, slower part speed, and yield loss
Variability in the defect rate leads to variability in the final yield, in the infant mortality rate, and in long-term reliability
Most importantly, variability degrades our ability to monitor small changes in the process – the signal must be greater than the noise in order to be detectable

There is nearly always some way to adjust the average of a given measurement, but the range of values is much harder to control and often much more important. For example, if a man has his feet in an oven and his head in a freezer, his average body temperature may well be 98^o F but that fact won’t make him any less dead. Variability kills, and any effort to reduce it is usually time and money well spent.

Variability in Defect Inspection

Figure 1 below shows two simulated SPC charts that monitor the defect count at a given process step. Each chart samples every fifth lot (20 percent lot sampling). Both charts have an excursion at lot number 300 where a defect of interest (DOI) that makes up 10 percent of the total suddenly increases by three-fold. In the left chart the excursion would be caught within 8.5 lots on average, but in the right chart the same excursion would not be caught, on average, until 38.6 lots passed. The only difference is that the chart on the right has twice as much variability.

In general, for an excursion to be caught in a timely fashion it must be large enough to increase the average total defect count by an amount equivalent to three standard deviations of the baseline. If the baseline defect count is very noisy (high variability) then only large excursions will be detectable. Often people think this is the purpose of excursion monitoring: to find the big changes in defectivity. It is not.

Figure 1. Two identical SPC charts showing the defect count at a given step but the chart on the left has half the variability of the chart on the right. The excursion at lot number 300 is detected on the left chart within 8.5 lots (on average) but the same excursion is not detected for 38.6 lots on the chart on the right. Increasing the variability by 2x increases the exposed lots by over 4.5x

In our experience it is nearly always the smaller excursions that cause the most damage simply because they go undetected for prolonged periods of time. The big excursions get a lot of attention and generate a lot of activity but the dollar value of their impact is usually quite small in comparison. It is not uncommon to see low-level excursions cause upwards of $30,000,000 in yield loss. Large excursions are usually identified very quickly and usually result in a few million dollars of loss.

Other sources of variability in inspection data are low capture rate (CR) and poor CR stability. Defect inspection tools that have low CR will inherently have low CR stability. This means that even if the exact same defects could be moved to a different wafer you would not get the same result because of the different background signal from one wafer to the next. This adds significant variability into the SPC chart and can severely impair the ability to detect changes in the defect level.

It’s similar to looking at the stars on two different nights. Sometimes you see them all; sometimes you don’t. The stars are still there—it’s just that the conditions have changed. Something analogous happens with wafers. The exact same defects may be present but the conditions (film stack, CD, overlay, etc.) have changed. An inspection tool with a tunable wavelength allows you to filter out the background noise in the same way that a radio telescope allows you to see through the clouds. Inspection tools with flexible optical parameter settings (wavelength, aperture, polarization, etc.) produce robust inspections that effectively handle changes in background noise and take the variability out of the defect inspection process.

Variability in Metrology

Figure 2 shows two different distributions of critical dimension (CD). The chart of the left shows a distribution that spans the full range from the lower control limit (LCL) all the way to the upper control limit (UCL). Any change in the position of the average will result in some part of the tail extending beyond the one of the control limits.

Figure 2. The distribution of CD values. The left chart shows a highly variable process and the right chart shows a process that has low variability.

The right hand chart has much less variability. Not only can the average value change a bit in either direction but there is enough room that one may deliberately choose to shift the position of the center point. Depending on the step this may allow one to tune the speed of the part or make trade-offs between part speed and leakage current.

Up to 10 percent of the breadth of these distributions comes from the CD tool used to measure the value in the first place. Contributions to the variability—total measurement uncertainty (TMU) —come from static precision, dynamic precision, long-term stability and matching. Clearly, metrology tools that have better TMU allow more latitude in the fine tuning of process control. This becomes especially important when using feed forward and/or feedback loops that can compound noise in the measurement process.

Obviously the best way to reduce variability is with the process itself. However, process control tools (inspection and metrology) and process control strategies can contribute to that variability in meaningful ways if they are poorly implemented. Metrology and inspection are the windows into your process: they allow you to see what parts of the process are stable, and more importantly, what parts are changing. The expense of implementing a superior process control strategy is nearly always recouped in terms of reducing variability and making the measurements more sensitive to small changes that can cause the most financial damage.

About the authors:

Dr. David W. Price is a Senior Director at KLA-Tencor Corp. Dr. Douglas Sutherland is a Principal Scientist at KLA-Tencor Corp. Over the last 10 years, Dr. Price and Dr. Sutherland have worked directly with more than 50 semiconductor IC manufacturers to help them optimize their overall inspection strategy to achieve the lowest total cost. This series of articles attempts to summarize some of the universal lessons they have observed through these engagements.

Read more Process Watch:

The most expensive defect

Process Watch: Fab managers don’t like surprises

Process Watch: The 10 fundamental truths of process control for the semiconductor IC industry

Process Watch: Exploring the dark side

“The Dangerous Disappearing Defect,” “Skewing the Defect Pareto,” “Bigger and Better Wafers,” “Taming the Overlay Beast,” “A Clean, Well-Lighted Reticle,” “Breaking Parametric Correlation,” “Cycle Time’s Paradoxical Relationship to Yield,” and “The Gleam of Well-Polished Sapphire.”

Poised for more growth

March 17, 2015

By Christian G. Dieseldorff, Industry Research & Statistics Group, SEMI

The most recent edition of the SEMI World Fab Forecast report — which tracks fab spending for construction and equipment, as well as capacity changes, and technology nodes transitions and product type changes by fab — reveals a positive forecast. The report shows that fab equipment spending in 2014 increased 20 percent, is expected to rise 15 percent in 2015, with another increase of 2-4 percent in 2016. Spending on construction projects, which typically represents new cleanroom projects, will see a significant decline in 2015 with -32 percent, but is expected to increase by 32 percent in 2016. Since its last publication in November 2014, about 270 updates were made including data on 17 new facilities.

Fab Equipment/Fab Construction (2013-2016)

	2013	2014	2015	2016
Fab equipment*	$29.4	$35.2	$40.5	$41 to $42
Change % Fab equipment	-10.0%	19.8%	15.0%	2% to 4%
Fab construction US$	$8.8	$7.7	$5.2	$6.9
Change % construction	13.6%	-11.0%	-32.0%	+32.0%

* Chart US$, in billions; Source: SEMI, March 2015; SEMI World Fab Forecast and its related Fab Database reports track any equipment needed to ramp fabs, upgrade technology nodes, and expand or change wafer size, including new equipment, used equipment, or in-house equipment and spending on facilities for installation.

The SEMI World Fab Forecast and its related Fab Database reports track any equipment needed to ramp fabs, upgrade technology nodes, and expand or change wafer size, including new equipment, used equipment, or in-house equipment and spending on facilities for installation.

Fab spending, such as construction spending and equipment spending, are fractions of a company’s total capital expenditure (capex). Typically, if capex shows a trend to increase, fab spending will follow. Capex for most of the large semiconductor companies is expected to increase by eight percent in 2015, and grow another three percent in 2016. These increases are driven by new fab construction projects and also ramp of new technology nodes. Spending on construction projects, which typically represents new cleanroom projects, will experience a significant -32 percent decline in 2015, but is expected to rebound by 32 percent in 2016.

With worldwide capex growth of 8 percent, fab equipment spending is expected to increase by 15 percent in 2015. At this point, SEMI’s data predict a slowdown of fab equipment spending in 2016 to low single digits. No negative change is currently expected in our forecast scenario. Looking back to the last 25 years, after two years of growth a negative year typically followed. This may not be the case this time. Developments in the industry are pointing to a small but positive 2016.

Most fab equipment spending in 2015 is for foundry, memory, and Logic+MPU. Discretes including LED remain at about 4 percent share, MEMS/Other about 2-3 percent and Analog at less than1 percent. Distribution will not change for 2016, except for foundry spending, which continues to increase year-over-year.

Comparing regions across the world, according to SEMI, the highest fab equipment spending in 2015 will occur in Taiwan, with US$ 11.9 billion, followed by Korea with US$ 9 billion. The region with third largest spending, the Americas, is forecast to spend about US$ 7 billion. Yet growth will decline in the Americas, by 12 percent in 2015, and decline by 12 percent in 2016 again. Fourth in spending is China, with US$ 4.7 billion in 2015 and US$ 4.2 billion in 2016. In other regions, Japan’s spending will grow by about 6 percent in 2015, to US$ 4 billion; and 2 percent in 2016, to US$ 4.2 billion. The Europe/Mideast region will see growth of about 20 percent (US$ 2.7 billion) in 2015 and over 30 percent (US$ 3.5 billion) in 2016. South East Asia is expected to grow by about 15 percent (US$ 1.3 billion) in 2015 and 70 percent (US$ 2.2 billion) in 2016.

New facilities beginning construction in 2015 and 2016 will start equipping in 2016 or later. SEMI’s data show that seven new facilities will start construction in 2015 (including one LED and one shell). In 2016, construction will possibly begin on five or six new fabs.

2015 is expected to be the second consecutive year in equipment spending growth. Our positive outlook for the year is based on spending trends we are tracking as part of our fab investment research. As noted in some of the examples cited above, the “bottom’s up” company-by-company and fab-by-fab approach points to strong investments by foundries and memory companies driving this year’s growth. Learn more about the SEMI fab databases at: www.semi.org/MarketInfo/FabDatabase.

SEMI reports 2014 global semiconductor equipment sales of $37.5B

March 17, 2015

SEMI, the global industry association for companies that supply manufacturing technology and materials to the worlds chip makers, today reported that worldwide sales of semiconductor manufacturing equipment totaled $37.50 billion in 2014, representing a year-over-year increase of 18 percent. 2014 total equipment bookings were 8 percent higher than in 2013. The data are available in the Worldwide Semiconductor Equipment Market Statistics (WWSEMS) Report, now available from SEMI.

Compiled from data submitted by members of SEMI and the Semiconductor Equipment Association of Japan (SEAJ), the Worldwide SEMS Report is a summary of the monthly billings and bookings figures for the global semiconductor equipment industry. The report, which includes data for seven major semiconductor producing regions and 24 product categories, shows worldwide billings totaled $37.50 billion in 2014, compared to $31.79 billion in sales posted in 2013. Categories cover wafer processing, assembly and packaging, test, and other front-end equipment. Other front-end includes mask/reticle manufacturing, wafer manufacturing, and fab facilities equipment.

Spending rates increased for all the regions tracked in the WWSEMS report, except for Taiwan. Even with the annual decrease, Taiwan remained the largest market for new semiconductor equipment for the third year in a row with $9.41 billion in equipment sales. The North American market held onto the second place with $8.16 billion in sales; South Korea maintained its third position with total sales of $6.84 billion. China moved up in the rankings, surpassing Japan with $4.37 billion in sales.

The global assembly and packaging segment increased 33 percent; total test equipment sales increased 31 percent; other front end equipment segment increased 15 percent; and the wafer processing equipment market segment increased 15 percent.

Semiconductor Capital Equipment Market by World Region (2013-2014)

(Dollar in U.S. billions; Percentage Year-over-Year)

	2014	2013	% Change
Taiwan	9.41	10.57	-11%
North America	8.16	5.27	55%
South Korea	6.84	5.22	31%
China	4.37	3.37	30%
Japan	4.18	3.38	24%
Europe	2.38	1.91	25%
Rest of World	2.15	2.07	4%
Total	37.50	31.79	18%

Source: SEMI/SEAJ March 2015
Note: Figures may not add due to rounding.

Recovering economies driving growth in the industrial semiconductor market

March 16, 2015

The industrial semiconductor market will post a 9.7 percent compound annual growth rate (CAGR) over the next several years as revenue rises from $34.8 billion in 2013 to $55.2 billion in 2018, according to IHS, a global source of critical information and insight. Increased capital spending by companies and continued economic growth, especially in the United States and China, and will help spur demand and drive sales growth for industrial semiconductors.

Based on the latest information from the Q4 2014 Industrial Semi Market Report from IHS Semiconductors and Components Service, factory automation, building and home control and commercial aircraft are driving demand for industrial semiconductors. In fact, industrial semiconductor sales posted 4.7 percent growth in the third quarter (Q3) of 2014 alone compared to the previous quarter. By the end of 2014 the market grew an estimated 16.8 percent over the previous year. Demand was especially strong for optical LEDs, which grew 23.4 percent, rising from $6.3 billion to $7.7 billion. Discrete power transistors and thyristors posted 13.4 percent growth, rising from $5.5 billion in 2013 to $6.3 billion in 2014.

Industrial OEM factory revenues were expected to grow 8.3 percent in 2014 on increased sales in the building and home-control market. High-growth categories include LED lighting and IP cameras and other digital video surveillance products.

“Because of strong growth in the industrial segment, semiconductor companies are paying more attention to this market as more chips are being used in applications that did not previously use semiconductors,” said Robbie Galoso, principal analyst for IHS. “Growth in the industrial segment has also been buoyed by a gradual acceleration in the global economy, which continues to boost industrial equipment demand, especially from the United States and China.”

The global economy was strong in 2014 and, led by the United States, it is expected to flourish through 2018. U.S. economic growth is broad-based than in other regions, with a more stabilized housing market, improved consumer finances and credit, and increased capital spending. U.S real gross domestic product (GDP) growth is expected to reach 2.4 percent in 2014, 3.1 percent in 2015 and 2.7 percent in 2016.

The United States accounted for 30.5 percent of all semiconductors used in industrial applications in 2013. China is the second largest industrial chip buyer, purchasing about 14 percent of all industrial semiconductors. Its economy will grow 7.3 percent in 2014, 6.5 percent in 2015 and 6.7 percent in 2016.

“Stronger economic growth and increased capital spending in the United States and China is good news for industrial semiconductor manufacturers because they are the leading purchasers of industrial semiconductors,” Galoso said. “A solid economy and robust industrial equipment demand will further boost sales of optical semiconductors, analog chips and discretes, which are the three largest industrial semiconductor product segments.”

LED demand shines

Revenue from optical chips for industrial applications will grow from $8.6 billion in 2013 to $15.9 billion in 2018. The optical chip segment includes LEDs for general lighting, which represented 72 percent of the optical category in 2013, and will reach 78.4 percent in 2018. Optocouplers used in motor drives in factory automation and energy distribution, conversion and storage, is the second biggest product category within optical integrated circuits (ICs).

Analog semiconductor revenue will increase from $6.7 billion 2013 to $9.9 billion in 2018, while discretes increase from $6.4 billion to $8.6 billion. The analog semiconductor segment includes voltage regulators and reference, data converters, amplifiers and comparators, and interface ICs, which are used in factory automation, motor drives, and energy conversion and storage.

Image sensors are the smallest category in the optical chip segment. These sensors are currently transitioning from charge-coupled-device (CCD) image sensors to complementary metal-oxide-semiconductor (CMOS) image sensors that are widely used in security cameras, medical imaging equipment and military devices.

Industrial semiconductors with the strongest compound annual growth rates from 2013 through 2018 will include logic semiconductors at 13.4 percent, optical semiconductors at 13 percent and sensors and actuators at 10.8 percent.

Logic ICs are widely used in automation, including programmable logic controllers, digital control systems and communication and networking that extend across various markets, machine vision, and military applications.

Growth drivers

“The robust growth in demand for industrial semiconductors over the next three years will be driven by a wide range of products and segments,” Galoso said. “These products include 3D printers, factory automation products, commercial aircraft, LED lighting, digital IP cameras, climate control devices, renewable energy products, medical electronics and wireless application-specific testers.

Industrial 3D printers is a high growth category that will help drive industrial semiconductor usage in the coming years. It includes equipment used to manufacture objects through an additive process of laying down successive layers of material, until the entire object is created.

Avionics will continue to lead growth in the industrial segment. The commercial aircraft market offset the military aircraft market in the third quarter 2014. Total avionics revenue was expected to finish 2014 with 16.9 percent growth.

Led by China and the United States, the factory automation segment has grown over the past five quarters. The segment is forecast to reach 5.9 percent growth in 2014.

Light sensors market to grow 16 percent between 2013 and 2016

March 13, 2015

Samsung, Apple and Chinese OEMs will drive revenue in the light sensor market to grow 16 percent between 2013 and 2016, according to a new report released today from IHS Inc., a global source of critical information and insight.

The latest MEMS & Sensors report from IHS, Shining a Light on a Colourful Market, found that revenues will reach $767 million in 2016, a 16 percent rise in three years (2013 to 2016).

“Between 2013 and 2015, there has been a rapid adoption of light sensor units, mostly thanks to Samsung,” said Marwan Boustany, senior analyst for MEMS and Sensors at IHS Technology. “Samsung has led the mass adoption of RGB sensors, gesture sensors, optical pulse sensors and even UV sensors in this timeframe.”

Apple and Samsung lead the pack, but Chinese firms are on their heels

In 2014, Samsung accounted for 43 percent of light sensor spending in handsets. The company spent $271.8 million on light sensors in 2014, with a sizeable portion of this coming from the apathetically received pulse sensor.

Apple is the second largest buyer of light sensors after Samsung and spent $129.5 million in 2014. Apple accounted for 19 percent of light sensor spending in handsets in 2014 because Apple uses custom and high performance parts. IHS forecasts that by 2017, Apple will adopt a 3-in-1 package because solutions that offer both the size and performance it seeks should be available by this time.

Chinese Original Equipment Manufacturers (OEMs) represented 23 percent of light sensor spending in 2014, mostly on standard low cost components and a small percentage of high cost, high performance parts.

“The Chinese market remains a place where anything and everything can be tried as companies try to find any and every means to differentiate or at least match flagships from Samsung and Apple,” Boustany said. “Chinese OEMs are also characterized by preferring to have several suppliers for their sensors, ranging from three to six or more suppliers. The Chinese market is very competitive with price being the key element for most OEMs.”

Top sensor suppliers and new champions

Ams claimed the top spot in terms of revenue and units thanks to its range of customers and its key design wins with Samsung flagships and its spread across Apple products. Ams shipped 744 million sensors in 2014.

Maxim followed in second place. “Maxim managed to be a top performer in the consumer light sensor market, with 132 million light sensors shipped in 2014, with the majority of these being optical pulse sensors going into Samsung’s flagship devices.

The important news in 2014 is the rapid rise of companies like Sitronix, Elan and Everlight. “Sitronix has been successful at being a second or third source to a range of top tier companies, which means it can grow safely and rapidly,” Boustany said. “In 2014, it achieved about $25 million for a 69 percent revenue growth.”

Cypress and Spansion complete $5 Billion merger

March 13, 2015

Cypress Semiconductor Corp. and Spansion, Inc. yesterday announced that they have closed the merger of the two companies in an all-stock, tax-free transaction valued at approximately $5 billion. In a special meeting earlier today, Cypress shareholders approved the issuance of 2.457 shares of Cypress stock to Spansion shareholders for each Spansion share they own. Spansion shareholders approved the merger in a separate special meeting. The merger is expected to achieve more than $135 million in cost synergies on an annualized basis within three years and to be accretive to non-GAAP earnings within the first full year after the transaction closes. The combined company will continue to pay $0.11 per share in quarterly dividends to shareholders.

Cypress President and CEO T.J. Rodgers is scheduled to talk about the merger live on the Fox Business News program, “Opening Bell,” hosted by Maria Bartiromo, Friday morning at 7:30 a.m. PDT. A four-minute video of Rodgers and Spansion CEOJohn Kispert, describing the synergies of the merger and benefits for Cypress and Spansion customers, is available on the Cypress website atwww.cypress.com/NewCypress.

“We closed this merger even more quickly than originally anticipated, accelerating our strategic and financial roadmap,” Rodgers said. “From Day One, the new Cypress will capitalize on its expanded product portfolio and leadership positions in embedded processing and specialized memories to significantly extend its penetration of global markets such as automotive, industrial, consumer, wearable electronics and the Internet of Things.”

“Consider the automotive market, where Cypress has a dominant position in capacitive touch-sensing controllers and SRAMs for infotainment systems, and Spansion is the leading supplier of flash memory and microcontrollers for infotainment, body and climate control systems, instrument clusters and advanced driver assistance systems,” Rodgers said. “The new Cypress will be the No. 3 chip supplier worldwide of memories and microcontrollers to this business. You can think of the post-merger company truly in terms of the well-known equation: 1 + 1 = 3: No. 1 in SRAMs, No. 1 in NOR flash and No. 3 overall.”

“Spansion’s exceptional team and technology leadership in high-performance memory and MCUs will complement Cypress’s strong capabilities. This merger was an important step forward in Spansion’s transformation into a global embedded systems leader,” said Kispert, CEO of Spansion and a member of the Cypress board of directors. “Together, we can significantly enhance our value to our customers and deliver a more robust and broader product line to meet their embedded requirements.”

Strong fab equipment spending expected in 2015; Slowing but positive 2016

March 10, 2015

SEMI today announced an update of the SEMI World Fab Forecast report which updates outlooks for 2015 and 2016. The SEMI report reveals that fab equipment spending in 2014 increased almost 20 percent and will rise 15 percent in 2015, increasing only 2-4 percent in 2016. Since November 2014, SEMI has made 270 updates on its World Fab Forecast report, which tracks fab spending for construction and equipment, as well as capacity changes, and technology nodes transitions and product type changes by fab.

	2013	2014	2015	2016
Fab equipment*	$29.4	$35.2	$40.5	$41 to $42
Change % Fab equipment	-10.0%	19.8%	15.0%	2% to 4%
Fab construction US$	$8.8	$7.7	$5.2	$6.9
Change % construction	13.6%	-11.0%	-32.0%	+32.0%

* Chart US$, in billions; Source: SEMI, March 2015

Fab spending, such as construction spending and equipment spending, are fractions of a company’s total capital expenditure (capex). Typically, if capex shows a trend to increase, fab spending will follow. Capex for most of the large semiconductor companies is expected to increase by 8 percent in 2015, and grow another 3 percent in 2016. These increases are driven by new fab construction projects and also ramp of new technology nodes. Spending on construction projects, which typically represents new cleanroom projects, will experience a significant -32 percent decline in 2015, but is expected to rebound by 32 percent in 2016.

2015 is expected to be the second consecutive year in equipment spending growth. SEMI’s positive outlook for the year is based on spending trends tracked as part of our fab investment research. The “bottom’s up” company-by-company and fab-by-fab approach points to strong investments by foundries and memory companies driving this year’s growth.

The SEMI World Fab Forecast Report lists over 40 facilities making DRAM products. Many facilities have major spending for equipment and construction planned for 2015.

Stronger competition forecast for mobile phone display manufacturers this year

March 6, 2015

Global mobile phone display module shipments in 2015 are expected to rise just 4 percent year-over-year to reach two billion units, leading to even stronger competition among mobile phone display manufacturers. According to a new report from IHS, Chinese display module makers have resolved to increase their share of global mobile-phone display shipments. In fact in the third quarter (Q3) of 2014, BOE unseated Samsung Display to become the leading global mobile phone display module supplier.

“BOE has benefitted not only from Samsung’s LCD outsourcing strategy, but also by aggressively developing direct relationships with Chinese mobile phone makers,” said Terry Yu, senior analyst for small and medium displays and display technologies for IHS Technology, formerly DisplaySearch. “BOE, Tianma and InfoVision are all focusing their G5 capacity on the mobile phone market, placing strong emphasis on a-Si based mobile phone displays.”

Display module makers in China also intend to improve their market share in the high-end mobile phone display market. For example in 2014, BOE, Tianma and China Star attracted industry attention, when they announced their G6 LTPS investment plans. Truly, a local traditional Chinese LC module maker, also announced it was investing in G4 AMOLED manufacturing capabilities. “Until these capacities are ready in China, however, stronger competition in the high-end mobile phone display market will be primarily centered on panel makers in other parts of Asia, especially among Japan Display, Sharp, and Samsung Display, all of which have aggressive plans for the Chinese smartphone market in 2015,” Yu said.

Reacting to lowered demand for handsets, OLED module makers have been aggressively promoting AMOLED products in China, but they still face competitive pricing pressure. For example, the average price for 5-inch HD (1280 x 720 294 PPI) AMOLED modules in China’s open market, excluding cover glass and lamination cost, has fallen from $43 in the first quarter (Q1) of 2014 to $25 in the Q1 2015; however, 5-inch HD display modules are widely used in handsets with high cost-performance (CP) value ratios, with retail prices that vary from $95 (599 CNY) to $160 (999 CNY). With increased competition, low-end high-CP value handset prices are expected to fall as low as $80 (499 CNY) in 2015, so $25 AMOLED module costs will still face bill of materials (BOM) cost-control challenges.

On the other hand, in order to differentiate their products, local Chinese brands plan to adopt FHD (1920 x 1080, normally over 400 PPI) displays on the higher-end of high-CP value handsets, with average prices of $160. In fact, local smartphone brand Meizu has already launched its first sub-brand handset, Noblue Note, which is equipped with a 5.5-inch FHD display, selling for $160 (999 CNY). According to Yu, “the pricing pressure of these FHD displays will lead to the even more intense competition among FHD resolution display module makers in 2015.”

“Local Chinese brands are now simplifying their handset models, in order to achieve better revenue performance,” Yu said. “Larger orders for each handset model will drive stronger competition among leading global panel makers.”

Samsung, LGE and Sony to account for nearly half of all TV display panels shipping in 2015

March 6, 2015

Leading global TV brands, Samsung Electronics, LG Electronics and Sony, gained market share and increased their year-over-year shares of LCD TV shipments by an average of 11 percent in 2014, which is higher than the market average. According to IHS (NYSE: IHS), the top three TV brands purchased more than one third (37 percent) of the total global TV panel supply in 2014, and they will continue to increase their share this year. Overall, the top three brands are expected to grow their LCD TV shipments 16 percent, year over year, to reach 110 million units or 42 percent of all TV panel shipments they want to secure from their suppliers in 2015.

“Based on very optimistic shipment targets, the panel-allocation dominance of these three companies — and Samsung, in particular — will be even more pronounced, which will put more competitive pressure on smaller competitors,” said Deborah Yang, display supply chain research director for IHS Technology, formerly DisplaySearch. “The three leading TV manufacturers will, therefore, have greater influence over the global panel supply this year, causing panel makers to list them as first priority customers.”

In the LCD TV industry, the companies controlling panel allocations during a shortage will garner the most market share. Companies that purchase panels at competitive prices during an over-supply can also save on costs, which helps raise profits. TV makers also prefer a shortage to an over-supply, because a shortage can stimulate consumer purchases; in an over-supply situation, prices fall quickly, which encourages consumers to postpone purchases, while they wait for even better bargains.

“For Samsung, LGE, and Sony, it makes sense to obtain large allocations and make the market tighter, especially when they dominate purchasing and can influence panel allocations,” Yang said. “Meanwhile, panel makers are encouraged to support them, because they must look for long-term winners, rather than just supporting smaller, niche players.”

The top three TV brands’ influence over certain panel sizes will also increase this year, according to the Quarterly LCD TV Value Chain & Insight Report from IHS. Based on 2015 LCD TV manufacturers’ business plans, the top three players will make up more than half of all panel allocations for six of the most popular panel sizes; if there are shortages, other TV manufacturers may have difficulty obtaining allocations for these sizes. “For 48-inch, 49-inch and 58-inch sizes, in particular, the purchasing power of the three TV market leaders is very strong,” Yang said. “As the largest companies’ panel allocations become even bigger, smaller players could be forced to take a niche approach or be squeezed out entirely.”