Wednesday, March 21, 2012

Are Japan's Fabs stuck above 28nm Process Technology?

One of the casualties of the $10 Billion cost of developing new semiconductor technologies is Japan's semiconductor industry as is detailed below.

Ron Maltiel

Japan's aging semiconductor industry revealed by 2011 earthquake

March 20, 2012 -- One year ago, Japan's semiconductor industry was rocked by a devastating earthquake and tsunami. However, the real disaster for Japan's chip industry occurred during the years before the earthquake -- a period when the country lost its status as one of the world's leading semiconductor manufacturing regions, according to the IHS iSuppli Semiconductor Value Chain Service.

The limited impact of the quake on the global semiconductor industry dramatically illustrated Japan diminished status in the worldwide chip hierarchy and underscored the pressing need for the country to revitalize its business in this area, said Len Jelinek, director and chief analyst for semiconductor manufacturing at IHS.

Suppliers headquartered in Japan accounted for more than one quarter of global semiconductor revenue in 2003, commanding a 27% share. During the next eight years, Japan's share suffered a general decline, dropping 8 points to 19% in 2011 (see the figure).

Semiconductor Revenue

2003 2004 2005 2006 2007 2008 2009 2010 2011 % of Global

27.0% 25.4% 23.4% 22.3% 23.4% 23.5% 21.4% 20.4% 18.7%

Figure. Share of Global Semiconductor Revenue Held by Suppliers Headquartered in Japan (Share of Global Revenue in U.S. Dollars). SOURCE: IHS iSuppli March 2012.

Of the major global semiconductor manufacturing regions, Japan now has the smallest number of number of advanced 300mm wafer fabs and the largest number of mature 6" wafer fabs. Companies in Japan have resisted the trend of closing mature facilities and either outsourcing manufacturing or rebuilding manufacturing facilities to current state-of-the-art facilities. Once one of the worlds most advanced semiconductor producers, Japans semiconductor manufacturing operations have become senescent relative to the rest of the world.

In the aftermath of the disaster, the immediate concern was that the semiconductor supply chain would grind to a halt. Massive component shortages were predicted with the potential for recovery pushed out as far as a year. However, by most accounts, things are now back to normal. Of the damaged manufacturing facilities, only one operated by Freescale Semiconductor was shut down permanently after the disaster.

Freescale previously had announced that it intended at the end of 2012 to close the fab in Sendai, an older 6-inch facility that originally manufactured analog products. The earthquake simply hastened the closure.
It is now clear that the impact of the earthquake and tsunami on the global semiconductor market fell far short of some prognosticators' dire predictions.

Unfortunately for Japanese semiconductor companies, the disaster uncovered an issue that had been known but not openly acknowledged: Japan is no longer in a leadership position for the manufacturing of semiconductor components. The long-overdue revitalization of the Japanese semiconductor industry has surfaced as the real issue.

In February, a proposal emerged to address Japan's semiconductor industry weakness that called for the consolidation of manufacturing operations at semiconductor giants Renesas, Fujitsu and Panasonic.

The plan separates out design and manufacturing into two separate companies. Furthermore, the proposal calls for a large capital injection to revitalize the manufacturing company.
Sadly, the plan is really a well-disguised roadmap for significant reduction in semiconductor manufacturing.

Can the plan actually lead to the revitalization of wafer manufacturing in Japan? IHS believes it is highly unlikely.

As the leading chip manufacturing companies transition to sub-28-nanometer manufacturing, Japan is facing the fact that it currently has no company capable of volume manufacturing using this advanced technology node. History has shown that success is driven by experience. Without a strong technical platform on which to gain experience and move forward, there is little chance of the country achieving the transition to sub-28-nanometer production.

How will the semiconductor industry reshape itself? Will Japan's focus shift to design?

Only time will determine the answer, but the probability of Japan successfully sustaining its mature manufacturing engine diminishes with each passing day.

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