450mm: It's Different This Time

The move to 450mm semiconductor wafer size will inevitably be an inflection point for the industry, with enormous ramifications for the complete semiconductor ecosystem. Those firms with 450mm capability will enjoy a huge competitive advantage of staying on the More Moore node development roadmap, a potential 30 percent lower die cost advantage, and a more efficient manufacturing tool platform. The remaining 300mm platforms will be squeezed into increasingly overcrowded niches.

Transistor design complexity, new structures, and increasingly tighter design rules will mean that semiconductor firms will be forced to choose a lifetime foundry partner: Divorce and second-sourcing will become too expensive for all but the very biggest firms to even contemplate. Only a handful of chip firms will have early access to next-generation foundry technology, giving them at least a one-year advantage over their competitors. This means many of today's Tier 1 ex-IDMs (integrated device manufacturers) will become Tier 2 foundry accounts -- quite a humbling and significant competitive demotion.

The era of abundant leading-edge capacity is over; a deliberate over-investment strategy would be recklessly suicidal, even for an industry not best known for its rationality. Buying capacity upfront will become the new industry norm, eventually to be enhanced by upfront contributions to future capacity investment costs and effectively co-owning portions of the capacity -- a kind of IDM-lite model.

From an equipment industry perspective, financing new tool development will mirror the airline industry model, whereby customers make long-term upfront commitments with deposits and partial payments to ensure both delivery and their place in the queue. The combined effect that these changes will have on the semiconductor supply chain will be both far-reaching and profound, and a very different industry will emerge by the end of the decade.

No longer will the industry simply muddle through the various challenges. New business models will emerge built increasingly on cooperation and partnerships, with an ever-increasing need for all parties to share the technology risks and costs. The past adversarial-driven supplier-customer relationship will no longer be appropriate: For the first time in the industry's history, across-the-board consolidation is unavoidable.

The industry might even finally break with the short-term fixation of making the quarterly number.

The issues addressed here will be debated more deeply at the International Electronics Forum 2011 in Seville, Spain, starting on Wednesday through Friday this week under the general theme "New Rules for Old... Achieving Success In The Age of Nano Tech."

The event will focus on what we see as the immense paradigm shifts currently occurring in the industry as it squares up to the various technological challenges of embracing the nano-tech age (450mm, EUV, 3D transistors); the need for new business models (what Future Horizons has termed "the broken SC industry model"); and the new design methodologies necessary to deal, not just with the technology and manufacturing complexities, but with the system-related challenges as well.