Consolidation in the semiconductor industry continues apace, with more than $100 billion in mergers and acquisitions announced in 2015, and more to come in 2016. ‚ÄúWith our industry growth rates being so low, it‚Äôs a lot cheaper to acquire market share than it is to invest and beat your competitor over the head,‚ÄĚ said analyst Bill McClean, speaking at SEMI‚Äôs Industry Strategy Symposium (ISS) in January.
One potentially negative impact of consolidation is reduced innovation, said Ivo J. Raaijmakers, Chief Technology Officer and Director of R&D at ASM International, speaking at ISS on consolidation in the equipment supplier market. ‚ÄúThe tail has been cut off. A lot of innovation happens in this tail,‚ÄĚ he said. ‚ÄúThe question we have to ask ourselves is how can be ensure efficient innovation in such a consolidating landscape of equipment suppliers?‚ÄĚ
The is compounded by exponentially increasing complexity and R&D spending. The diversity in the number of materials used is also increasing rapidly. This is important, since it most future innovations will require the use of these new materials.
‚ÄúMore and more innovations are needed per node, per year,‚ÄĚ Raaijmakers said. ‚ÄúLife was easy in the ‚Äė60s, ‚Äė70s and ‚Äė80s. In the ‚Äė90s, there were silicides added. In the 2000s, there were tantalum oxides, spin-on glasses and copper and low k. In 2010, we had high k and metal gate. We had porous low k materials, new barriers, SOI coming in. in 2015, we saw a lot of materials used for patterning. In 2020, we will attack the channel material, going from silicon to germanium to III-V materials and all associated materials.‚ÄĚ
Raaijmakers provided an equation that captures the mathematics of innovation:
dI/dt őĪ I x ő∑/ŌĄ
where I is the number of innovations being worked on: loosely relates to R&D budget
ő∑ is the average success rate: what fraction of projects are successful, and
ŌĄ is the time constant: how long does it take from innovation to production
Since R&D budgets are fixed at about 15% of the overall revenue, the only two knobs to turn are the success rate and affect the time constant. ‚ÄúWe are in deep trouble,‚ÄĚ he said, ‚Äúunless we manage ő∑ and ŌĄ.‚ÄĚ
Raaijmakers noted that industry consolidation lowers the number of innovation projects. At the same time, success rate decreases with complexity as does development time.
The time factor does not offer much potential. On average, most successful innovations take 7-10 years from concept to high volume manufacturing. ‚ÄúCan we decrease this by collaboration along the value chain?‚ÄĚ Raaijmakers asked. ‚ÄúI think it will be difficult and if you can do it, it will not be a huge gain.‚ÄĚ
On the other hand, there‚Äôs much to be gained by the other factor, which is increasing the efficiency. ‚ÄúCollaboration along innovation chain can significantly lower the risk of adoption. Are we all working on the right things to push through into manufacturing. How quick can you narrow down choices?‚ÄĚ said Raaijmakers. He added the such collaboration may increase the speed, but that‚Äôs not the major effect.
Collaboration across the chain increases R&D leverage and improves efficiency. ‚ÄúThat means that two parts in the supply chain are not doing competing things or different things. They are working on one solution which is the solution for the industry.‚ÄĚ
He said successful companies will bring R&D much closer to the fab and high volume manufacturing, but while not forgetting R&D. ‚ÄúYou have to be good at taking things into volume production and supporting it there. And you have to be good in R&D. Maintaining those two traits is not so easy, he said.