Semi Equipment Companies Need to Boycott 450mm Development

The planned transition to 450mm diameter silicon wafers for semiconductor production will be disastrous for the equipment industry, according to the report 300mm/Copper/Low-K Convergence: Timing, Trends, Issues, Market Analysis, recently published by The Information Network.

MEMC (NYSE: WFR) recently announced planned layoffs of 200 employees and a speeding up of 450mm diameter wafer R&D. MEMC joins a litany of wafer suppliers and semiconductor manufacturers pushing for the transition. The strategy would enable semiconductor manufacturers to reduce costs because 2.25 times more chips can be made on a 450mm wafer compared to a 300mm wafer.

That same argument was pushed forth by the semiconductor companies during discussions on the transition from 200mm wafers to 300mm wafers about 10 years ago.

So, who were the winners and losers in the 200-to-300mm transition and why would the 300-to-450mm transition be any different? Take a look at the chart below (click to enlarge images):

In 2002, 38.2% of equipment purchased by the semiconductor manufacturers was for 300mm production, and 1.4% of silicon wafers processed were 300mm in diameter. In 2008, 92.1% of equipment purchased was for 300mm production and 37.4% of silicon wafers were 300mm. Within that time, semiconductor revenues increased from about $10 billion per month at the start of 2002 to $20+ billion in December 2008. In contrast, semiconductor equipment bookings started off 2002 at $645 million, reached a peak of $1.8 billion in June 2006, and ended 2008 at about $800 million.

Quite a disconnect. Semiconductor sales took off while equipment sales have remained essentially flat. No wonder semiconductor manufacturers and Sematech are pushing for 450mm wafers.

Both the semiconductor and equipment industries prior to 2001 worked in tandem in a cyclical fashion of peaks and valleys every 2 years or so as shown below. After 2001, the industry changed, and the semiconductor industry continued a relentless growth while the equipment industry has been relatively flat, save for the peaks and valleys reminiscent of the 90s.

What about the silicon wafer manufacturers? If we look at the chart below, revenues for wafer manufacturers tended to follow semiconductor sales more closely than equipment sales. The dramatic upturn in 2006 is largely a result of the high cost of polysilicon brought about by a shortage on the market. Part of it was also due to the increase in 300mm wafer production as stated above.

Clearly the semiconductor equipment manufacturers were the losers in the 200-to-300mm transition, and there is no rational explanation that I can think of that will change the picture in the 300-to-450mm transition. Only the largest equipment companies with the deepest pockets, who can even afford 450mm tool development in the first place, will survive.

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Comments

[MellowGuy]

The initial 450 mm wafers will be expensive ruling out solar cell manufacturing. Many circuits aren't produced in very high volume, making Intel the poster child for such large wafers.

2009 Apr 17 09:55 AM

[azbadger]

Well as a semiconductor capital equipment product manager, I really have to chuckle at this push to 450 mm. The semiconductor companies run rough shot over their equipment suppliers, fail to honor their contracts and purchase orders as routine business, and now, as the number of equipment suppliers dwindles as a result of this and the simple cost of developing equipment, they basically demand they develop 450 mm equipment.

From my view point, the shoe will soon be on the other foot, as fewer or only one equipment supplier exists for key process technologies. AMAT has already said forget 450 mm; without AMAT on board, does anyone think that 450 mm will really happen any time soon. Not me.

2009 Apr 17 11:00 AM

[WTSUPP]

Lets not forget what AMAT others have done to their supply base. The supply base is in shambles and those who make it through won't be so kind on the upswing. The previous two down turns 2008 & 2003 have been brutal. Who really wants to play in this arena anymore?


On Apr 17 11:00 AM azbadger wrote:

> Well as a semiconductor capital equipment product manager, I really
> have to chuckle at this push to 450 mm. The semiconductor companies
> run rough shot over their equipment suppliers, fail to honor their
> contracts and purchase orders as routine business, and now, as the
> number of equipment suppliers dwindles as a result of this and the
> simple cost of developing equipment, they basically demand they develop
> 450 mm equipment.
>
> From my view point, the shoe will soon be on the other foot, as fewer
> or only one equipment supplier exists for key process technologies.
> AMAT has already said forget 450 mm; without AMAT on board, does
> anyone think that 450 mm will really happen any time soon. Not me.
>

2009 Apr 18 05:21 AM