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The Daunting Economics of Innovation

The convergence of mobility, communication, and computing has produced multifunctional end applications that are placing huge demands on semiconductor manufacturers. These new devices require low power, high performance, and a lot of advanced manufacturing capacity at a low cost.

At the 2011 Semico Summit, Gregg Bartlett, senior vice president of technology and research and development at {complink 12822|GlobalFoundries Inc.}, talked about the economics of innovation, highlighting the daunting economic and technological hurdles that must be overcome to bring products to market. Here are a few of the major costs:

  • $1 billion to $2 billion in leading edge-process technology development
  • $40 million to $50 million in chip design costs
  • $250 million for design enablement such as libraries and IP
  • $5 billion to $7 billion for an advanced 300mm fab
  • 3 to 4 years of development

Today's market is a high-stakes game. It's no wonder, therefore, that the industry has embraced a collaborative environment at all levels.

Bartlett stated that the 20nm node is the sign of an inflection point in the development of technology. The process will be tightly coupled with the end-market application needs. GlobalFoundries is already working on 20nm and is planning on offering different techniques and options that will allow the customer to optimize the final solution. But that also means early-stage engagements to define the needs.

GlobalFoundries is leveraging the consortium approach in its development of extreme ultraviolet lithography (EUV). The first tool will be installed in the company's new Malta fab in the second half of 2012. Bartlett stated that double patterning has actually lowered the barrier to entry for EUV. Semiconductor wafer suppliers like GlobalFoundries offer higher product diversity, which means there will be some very low volume products. The cost of double patterning, including the amortized cost of the mask, could be prohibitive, forcing EUV into the picture.

It's now becoming evident that the economics of innovation are influenced by the limitations of existing options. Those with foresight already see the limitations of 300mm.

6 comments on “The Daunting Economics of Innovation

  1. Anand
    May 14, 2011

    Joanne,

     Thanks for the post. If we look at the major cost factors, most of the spending happens in leading edge-process technology development and advanced 300mm fab. This is the reason why companies like TI are going fabless for Digital. By turning over more control of logic process development to its foundry partners, TI is offloading some of the risk and and reducing investment cost.

  2. Mydesign
    May 16, 2011

         Now a day’s growth of technology is very faster and hence new innovations are also happening. For example, in television sector we had seen the fast transaction phases from CRT to latest 3D technology. All this transactions happened and dominated only for a short period. Here the technology is growing and inventions are also happening very rapidly. Since the transition time frames are faster, nobody is able to take advantages of these interim products. Sam thing is happening for other key technology areas too. Now it’s the time for miniaturization and all the existing products are rebuilding for handy products.

  3. jbond
    May 16, 2011

    I think you are dead on with your assessment of TI. I think many companies are going to be looking at using partners for various processes. With such a great investment needed, particularly for just one segment, it makes more financial sense to use their partners to help reduce costs and overall risks.

  4. eemom
    May 16, 2011

    jbond..I totally agree with your post.  Companies can't take on all the cost associated with innovation, they must share the costs with partners who can provide a value add.  A foundry can invest in a new state of the art fab benefiting a multitude of customers.  If each customer invested in their own processes from beginning to end, it would 1) be too costly and 2) redundant.

  5. Kunmi
    May 17, 2011

    This is true  of many companies. The level of growth of idea and upspringing innotation are far more that the financial strength of some of these companies. The best idea is to share the cost with other companies because it helps to bring the products to the market within an appreciable time.

  6. t.alex
    May 21, 2011

    For most companies that make consumer products, i believe the average time to bring new products to the market can be as low as 3 to 4 months. It is a must that companies need to be on the constant outlook for partners and vendors.

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