The semiconductor industry is big and getting bigger. Revenues were roughly $310 billion in 2011, including semiconductors (logic and microprocessors), LEDs and MEMS. This is expected to grow 6-10% in 2012. Most chipmakers are expected to spend about 15% of their revenue on capex, down from about 19% in previous years. In 2011, it was only 13.5%, coming in at $42 billion (including front-end and packaging equipment). The other part of the supply chain, the materials, represents a market approaching $45 billion (packaging materials alone is $23 billion). That's about $87 billion in yearly revenue for equipment and materials suppliers. So what's wrong with this picture?
The problem is that the semiconductor industry has "matured". At SEMI's ISS meeting, leaders of the biggest companies in the industry ??? Intel, Applied Materials and Lam Research -- were looking for inspiration from other industry that matured long ago, such as the airline industry and the automotive industry. Lam's Steve Newberry, for example, looked to the automotive industry for inspiration, particularly the relative efficiency of their R&D efforts brought about by cost-sharing between manufacturers and suppliers. Intel's Paolo Gargini spoke glowingly of the airline industry, noting that there were only two main manufacturers, served by only three engine suppliers. "They don't design the engines and hope they find a use for them," he said, noting the need for close collaboration. Mike Splinter, CEO of Applied Materials, spoke about consolidation as one of the "three Cs" of the industry, the other two being collaboration and coordination.
In order for the industry to move to 450mm wafers while also continuing to shrink dimensions to 10nm and below with new device structures and many new materials, a new level of collaboration and cost-sharing will be necessary, much as it is done in other "mature" industries. However, I don't see why consolidation is considered a good thing (although it's clearly happening). The competition that has for so long been such a wonderful source of innovation is gone, and manufacturers are placing their bets on one or two companies that may or may not deliver (EUV, anyone?).
The industry may soon get down to a handful of manufacturers, serviced by a select group of suppliers -- if it's not there already -- but I prefer to look at the exciting and still immature growth and emerging markets (GEMs) for inspiration. It is areas such as flexible electronics (see our lead news story) that could shake up the status quo.
Solid State Technology, Volume 55, Issue 2, March 2012