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Shifting Winds of Power

Chief Mountain, Height: 9080ft - 2767m, Waterton-Glacier International Peace Park, Montana

VLSI RESEARCH INCWhere the Chip Making Industry Clicks to Find its Weather

ISS 2008



50 Years Since The Invention of the IC

• Introduction of the Planar Process and Si wafers.

• Emergence of new companies to exploit the technology.

• Foundation for today’s semiconductor manufacturing.



History of Wafer Sizes

Wafer Demand(worldwide demand, by wafer size in M wafers/year)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005

Mil

lio

ns

of

Waf

ers

.75"

1.25"

1.5"

2.0"

3.0"

4.0"

5.0"

6.0"

8.0"

12.0"



20 Years Since the Introduction of P5000

• First successful multi-process tool.

• Combined the productivity and precision.

• Made Applied the giant it is today.

• Power and process shifted to equipment suppliers.



Capital Productivity History

Wafer Fab Cost Trends

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Year

Dep

reci

atio

n C

ost

per

Sq

uar

e In

ch

of

Cap

acit

y in

$

P5000 Intro (1987)



Lessons from History

• Capital cost drives changes in the supply chain.– Cost escalation created Fabless/Foundry

supply.

• Design drives shifts in supply chain.– EDA drove designer efficiency.– Higher efficiency more complex designs.



New Pressure Fronts in Chip Making



Average Design Cost per Transistor(across all IC's, not including mask sets)

$-

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

1992 1994 1996 1998 2000 2002 2004 2006

Do

lla

rs

Copyright © 2007 by VLSI Research Inc. All rights reserved.

Design Cost reductions averaged 19% per year between 1992 and 2000.

This slowed to 5% between 2001 and 2006.

Factors: - Microchip to Nanochip transition. - Failure to foresee need for DFM. - Lack of investment.

Design Cost is No Longer Scaling



Design Expenditures are Increasing, while New Designs are Declining

Design Activity

0

2000

4000

6000

8000

10000

12000

14000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E

# o

f d

esig

ns

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Des

ign

exp

end

itu

re (

$M)

New Design Completions

Design Expenditure

Design expenditure:- '96 - '01 CAGR 9.5%- '02 - '07 CAGR 12.4%

RESTRICTED DATA: for access and use only w ithin your company. Copyright © 2007 by VLSI RESEARCH INC. All rights reserved.



As New Designs Decline, so do revenues and ASPs

Average IC Revenues Per Active Design

0

1

2

3

1992 1994 1996 1998 2000 2002 2004 2006

Revenues/Design in $M IC ASP in $

Copyright © 2007 by VLSI Research Inc. All rights reserved.



Specific Challenges for Foundry/Fabless Model

• The economics are stacking against small run designs.– Very expensive to design at 90nm & below.– Foundries are backing away from aggressive

scaling. Slower revenue growth.

• R&D costs escalating rapidly, yet foundries are lacking.

• Sub 100nm Yield Challenges at Foundries.



Chip Maker Specialization is Increasing

Chip Manufacturing Specialization(Top 25 chipmakers)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1996 2006

Specialist

Generalist




Wall Street Pressures for a Fab-Lite Strategy

• Better financial ratios (ROIC, ROA etc…).

• But where to get leading edge devices?– Nokia moving away from TI.– Opportunity for capable IDMs (IBM alliance or

Intel).

• Even Foundries are moving to fab-lite.– China Strategy.– 200mm expansion.



Efficient Use of Capital is Critical

Sales Growth vs. Capex

Intel

Samsung

Texas Instruments

Toshiba

Infineon

STMicroelectronics

Hynix

TSMC

IBM Alliance

TSMC (Full Mkt)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0% 5% 10% 15% 20% 25%

Sales Growth(2004 - 2007 CAGR)

20

07

Ca

pe

x t

o S

ale

s R

ati

o



… And Taiwanese DRAM Suppliers Are Not Efficient

Sales Growth vs. Capex

Intel

Samsung

Texas Instruments

ToshibaInfineon

STMicroelectronics

Hynix

TSMC

IBM Alliance

TSMC (Full Mkt)

Taiwanese DRAM Suppliers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

0% 5% 10% 15% 20% 25%

Sales Growth(2004 - 2007 CAGR)

20

07

Ca

pe

x t

o S

ale

s R

ati

o



Winners Still Focus On Scaling

Silicon Demand(kw pw , 300 mm eq vs. nano manufacturing share of total)

0

200

400

600

800

1000

1200

1400

1600

1800

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

KW

PW

300

mm

Eq

.

0%

10%

20%

30%

40%

50%

60%

70%

80%

Wafer Starts

Nano Manufacturing Share




Scaling is Difficult -- But

• It is still the best cost lever.

• Need for higher integration is greater than ever.

• Successful scaling creates opportunities.– Intel is moving to traditional fabless markets.

• Scaling creates barriers.– Foundries have fallen off Moore’s Law.– GPUs going IDM.



Summary

• Fabless/Foundry is at limits.

• Limit scaling limited financial returns.

• Nimble Logic IDMs can take advantage of weaker Fabless suppliers.

• Capex & R&D efficiency will be critical to pick winners.

• All Capex is not Equal.



Information is Going to Make the Winners

• Content and Context is important.– Right information, right format, right place.

• How you can align your operations with markets?– DRAM over investment was a result of poor

information.– Dinner with customer CEO does not yield best

information.

• Collaboration/Networking is critical for R&D.



Market Level Information

• Conferences play critical role.– ISS gives excellent sense where industry is heading.– What is hot and not.

• Market Research – Independent Voice.– Taiwanese would have easily prevented a DRAM glut by

spending ~$2M in market research.– Would have saved them $4B.

• Publications/News.– What is going on day to day.– 90% of Market Intelligence is Public Information.



Collaboration/Networking

• You can not succeed in today’s economy without extensive network.– It is critical for your business and personal

success.– You have to give in order to receive.

• New platforms allow you to promote and advance your capabilities.



Those Who Don’t . . .

Get Outsourced



VLSI RESEARCH INCWhere the Chip Making Industry Clicks to Find its Weather

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