Cleaner lines in the new ElectroIQ.com

Hello again readers! I recently told you about some new functionalities on the ElectroIQ.com website, but that's only part of our redesign work. Looks are important too, and organization even more so.

Very soon, you'll see a lighter color scheme on ElectroIQ.com. We've pared down the blue and red in favor of a cleaner palette on the site, with a lot of grey and white. Does this matter? Not in the strict sense of will the information you're reading, watching, or listening to be affected, but the new color scheme is here to make it easier for you to consume information from ElectroIQ without distractions.

Speaking of paring down, we've also eliminated the barrier between "Current Articles" and "Industry News" that appeared throughout the site. Let's say you're visiting the Semiconductors channel page. you'll see all the more recent stories in one column. Are we abandoning industry news stories, or technical articles about process steps? Certainly not. We've decided to group content with the fewest barriers possible so you can find it more easily.

Another quick note on those channel and topic center pages: We've renamed "Wire News" to "Live News Stream."

As always, you can email me with questions or suggestions at meredithc@pennwell.com. Keep an eye out for our new look!

Your digital media editor,
Meredith Courtemanche

Reading into INTC's 4Q downdate: HDDs, PCs, and SSDs

The impact of the Thailand flooding has, as expected, spread throughout the tech supply chain, and now appears to be affecting even chip giant Intel. The company now says its 4Q11 sales will be about -7% below estimates ($13.4B-$14B, vs. $14.2-$15.2B) due to ramifications from the disaster. Gross margins are seen fractionally lower at ~64.5%. (Barclays' CJ Muse notes that $1B in lower sales, paired with $95 ASPs, suggests 10.5M fewer unit shipments -- which he translates to an -11% decline in 4Q11, instead of previous 1.5% expectations.)

PC sales are still expected to be up sequentially, but inventories are vanishing in the global supply chain as hard-disk drives are increasingly scarce (a big chunk of global HDD production is in the flooding-ravaged areas and has been knocked offline). Intel expects HDD shortages to linger into 1Q12, after which MPU inventories need to be rebuilt through 1H12.

Analysts' Take

Given the breadth of the Thai flooding's industrywide impact (from HDDs to chip packaging services), nobody seems very surprised that INTC is now being affected. Earlier this week IHS iSuppli calculated nearly a 4M unit shortfall in 1Q11 PC shipments as a result of the floods, exacerbating what is already a seasonally slow post-holiday period for PC demand. (The firm says HDD supplies should rebound by 2Q12, though -- and might even achieve oversupply before the year's out.)

Analysts also seem to be more comfortable with where Intel's numbers are relative to (what they believe is) sentiment among the greater PC sector. (Remember how analysts previously tried to overlay PC weakness onto INTC, to no avail?) FBR Research's Craig Berger points out that Intel's been "disconnected from the rest of the PC supply chain for at least a couple quarters," but both he and Barclays' Muse agree that Intel's adjusted outlook is now better aligned with end-market demand, from deteriorating ODM build data to PC demand assumptions to pre-flooding PC sales warnings from Dell and HP.

Muse, Sterne Agee's Vijay Rakesh, and Citi's Glen Yeung await the other shoe to drop for AMD's 4Q11 results (1%-5% expected growth, for now) and 1Q12 outlook (Rakesh is also watching Nvidia.) AMD, though, seems not to be worried about HDD supply issues for now; "In 1Q and 2Q, maybe you see some manifestations," according to new CEO Rory Read, but right now AMD isn't seeing any "major pressure in terms of the quarter."

Others wonder if the HDD shortage is drawing attention away from bigger problems with end-demand. Credit Suisse's John Pitzer suggests 1H12 demand will also be soft due to Windows 8 "anticipatory pause," ongoing worries about ARM competition, plus continued "macro headwinds and the likelihood of another INTC miss." At least the problems would seem to be cyclical and not structural in nature, with PC growth expected to accelerate again in 2Q/3Q12. FBR's Berger sees other warning signs that could pinch PC margins in 2012 (and perhaps trickle down to INTC and other component suppliers): Chinese labor costs (10%-30% higher in 2011, another 30%-50% in 2012); commodity inflation (e.g. gold, Cu, metal casings); and more competition from tablets (iPad et al, assuming 2.5 tablets cannibalize one PC).

If HDD supplies are a problem, is this a window of opportunity for solid-state drives (SSD)? Not really, Intel says; ODMs probably are reevaluating their options as the HDD supply situation evolves, but SSD demand probably won't accelerate until the end of 2012. -- J.M.

ElectroIQ.com is getting a new look

You're going to notice some changes around ElectroIQ.com soon, and may have seen some of them already. We'll be adding new coverage areas, streamlining the topics in each of our "Channels," and revamping the site design for a better user experience. We'll talk about all of these changes here in the editors' blog as we transition through the upgrade.

Our redesign is already underway, as you can see from the new "Translate" functionality on every page. The semiconductor and photovoltaics manufacturing supply chains are global like few other industrial sectors. On top of this, students in the Asia-Pacific, Mexico, Eastern Europe, and other locations are studying engineering. With our parent company, PennWell Corp., the ElectroIQ team hosts and attends tradeshows and conferences from Las Vegas to Shenzhen.

We wanted a translator that was easy to use and included as many languages as possible, so no surprise that we turned to Google. Whether you're on the electroiq.com homepage, reading a news story, or on any other page, you'll be able to set your preferred language, and we'll keep it that way for the duration of your site visit (unless you decide to switch it up).

You can use the Google Translate function now (and let us know what you think), and when the new site design goes live in the next few days, you'll see links to our international publications right along the top of the site. Want to read our in-depth technical magazine content in Chinese? It's all right there for you.

This new design is not a one-day change, and we'll keep you up-to-date on all the new things you'll see come on-line. If you have questions or suggestions, email me at meredithc@pennwell.com.

Your digital media editor,
Meredith

IEDM "app" plots your schedule

Just after posting our IEDM slideshow sneak-peek, a reader emailed us to point out something he thinks can help this year's IEDM attendees -- and anyone who regularly goes to industry conferences/trade shows. You know the drill: obtain the event schedule and program/abstracts in advance, mark the talks you want to see -- then identify all the conflicts, mourn the tough decisions, lament the papers you'll have to miss, brace for room-room and hall-hall sprints, etc. It's pure "drudgery," Aneesh Nainani tells SST: "Going back and forth between the conference leaflet and the abstract booklet, and then discovering that their [sic] exists an conflict between the papers I wanted to attend and finally loosing [sic] the piece of paper with my schedule on the first day of the conference." Next week's IEDM in Washington DC is a prime example of such conference chaos: three days, 36 sessions, over 200 presentations.

Fear not, intrepid travelers: Aneesh has devised a free app for iPhones/iPads/iTouch that purposefully targets next week's IEDM: browse the conference schedule, flag papers you want to attend, show where all the session are at a particular time slot, browse papers by category, find the room for the next paper presentation, etc. You can also search across extended abstracts to narrow down to a specific topic (e.g. flash memory) or presenter (e.g. Stanford U.) The app is downloadable for free at the App Store here.


Aneesh is a Stanford PhD grad (2010), during which time he pursued summer research stints at Leti, IBM, SEMATECH, and AMAT. He's currently a senior device engineer at AMAT. He's also a presenter at this year's IEDM, describing a high-k pMOSFET made with 3% GeSn (Paper #16.6: "GeSn Technology: Extending the Ge Electronics Roadmap"). -- J.M.

Early 450mm orders: Tire-kicking or seat-warming?

As formal efforts to prove 450mm cost-effectiveness get underway, we're starting to see the announcements from tool vendors joining the fray. Neither company is outing its customer(s), but the news has generated some interesting analysis about the state of 450mm progress. German supplier Innolas, for example, says it will deliver a 450mm system for wafer sorting/laser marking to a customer's site in 1H12 for development and fine-tuning. Klaus Jotz, Innolas technical information manager, didn't identify the customer but did confirm that it's a single entity.

Another announcement, however, has generated much more interest and speculation. Molecular Imprints says it received an order to build a 450mm nanoimprint (J-FIL) litho tool to be ready by 2H12, including a five-year multi-year wafer patterning services contract and an option to buy more such systems. Paul Hofemann, VP of marketing and bizdev, declined to name the customer except to hint that it is a "leading IC manufacturer [...] that has taken a lead role for most of the early 450mm tool procurement for this [G450c] consortium." [Readers can draw their own conclusions.] He also noted the tool will stay in MII's facility to eliminate any delays (e.g. shipping, installation, qualification, training, etc.), which "is consistent with the G450C virtual fab strategy in the early 450mm supply chain," he added. While current contractual commitments are to the one customer, "we had some indications that all members were being consulted during the process," he added.

Many tool vendors have been tinkering with and showing 450mm versions of their process tools, but the one glaring absence has been in litho. About a month ago, ASML offered its own outlook on 450mm adoption that was several years beyond the G450C plan (prototyping after 2016 and production after 2018); clearly ASML has bigger fish to fry (EUV) and will get to 450mm when it has the incentive (time/money) to do so.

Not content to wait, the 450mm players need to get some 450mm wafers patterned now to start their work -- so they're turning to nanoimprint. "Having early access to patterned wafers is in the critical path of 450mm transition and this tactic will shave many months of the schedule," explained MII's Hofemann. He also added that the process was "competitive."

MII and nanoimprint proponents doubtlessly view this as Center Stage to prove the technology's viability for next-gen litho use. In reality, though, analysts argue this is just a way to get 450mm work started, keeping the litho seat warm until ASML can come into the fold with an EUV and/or immersion platform. "Realistically the semis guys needed some way to get a reasonable pattern on a 450 wafer so that they can start looking at things like etch and dep uniformity," thinks Gartner VP/analyst Bob Johnson. Fellow Gartner VP/analyst Dean Freeman noted that nanoimprint's pricetag, compared with tens-of-millions immersion or EUV tools, makes it practically a "disposable" option. On the other hand, it's not the first alternative 450mm litho tool being trotted out; EV Group has printed some 450mm wafers too. Freeman added that we've seen this before at the 300mm transition, where some smaller companies stepped up for some early unique-tool work, but "faded to the background as the larger companies stepped in with products."

So on the one hand, the MII 450mm order does open a door to show nanoimprint can prove itself in a smaller-scale leading-edge environment, which could pave the way for some future business. "MII has a one-two year window of opportunity to demonstrate that they deserve a place in future semi manufacturing before the ASML juggernaut pushes them aside," Johnson says. But it's more likely just a quick fix to get some wafers running to see what other process tools can do, while keeping the seat warm until more heavily-adopted litho tools (i.e. ASML) can get ready. And MII isn't alone here, either; Freeman notes Oxford Instruments has a 450mm etch system but likely won't displace Lam or TEL. And Freeman pointed out that nanoimprint still has its own mask-set hurdles, e.g. 1X mask at 10-20nm and associated alignment challenges. "If it was a better solution we likely would have seen more shipments at 300mm," he points out.

Another interesting note is that both these 450mm tool announcements are to single customers with singular ownership. There likely is a gentleman's agreement among 450mm consortium participants about how tools can be shared, at least at the beginning, Freeman explained. "At this time it is difficult to say if this will be an exclusive club or anyone with a piece of 450mm gear will be able to participate and get the tires kicked on their equipment," he said. These two recent tool announcements going to individual customers, though, suggests that at least starting out, individual companies have the option to be responsible for their own wafer set for process development. If so they could very well stick with tool vendors that are particular to their own process flow, meaning the 450mm pilot line could end up being a smattering of equipment from different companies, he notes. Don't be surprised if much of the early 450mm work doesn't happen at Albany CNSE's new Nanofab X now being built, as the chipmakers keep any special configurations to themselves. "As the 450GC develops and we see how the companies play with each other we may see some surprising developments happen," he suggests. -- J.M.

AMAT 3Q11 preview: Trough over, incline ahead

Analysts give their expectations about Applied Materials' fiscal 4Q11 results, due out Nov.16 -- viewed as bellwether for the chip equipment industry as a whole, and more recently related ones e.g. solar and display manufacturing.

Industry watchers on average are generally looking for (overall): $2.16B revenues (-25% Y/Y) and $0.20-$0.21 EPS (-42%); that EPS prediction has sunk from $0.33 three months ago. FY11 revenue expectations are $10.53B, up 10%. AMAT's original guidance issued Aug. 24 was for a -15% to -30% decline in sales (i.e. $1.67B-$2.03B) and EPS $0.16-$0.24.

What the numbers should show, argues Barclays' CJ Muse (4Q11 revenues/EPS/orders: $2.20B/$0.20/$1.70B), is something entirely expected: that semiconductor equipment demand hit bottom this fall (July-Sept), and has been picking up toward the end of the year thanks to the chip-triumvirate of TSMC, Samsung, and Intel. And signs might indicate order growth momentum will carry right through 1H12. He notes, though, that an improving semiconductor business is offset by likely declines in both display and solar.

Part of the boost in AMAT's SSG (chip) business will come a full quarter inclusion of numbers from the Varian Semi. Equip. Assoc. business which it finally closed on Nov.10, and in which there is a pickup in business, Muse writes. (Most of VSEA's numbers will initially be embedded in the SSG group, he notes.) For AMAT's January 2012 quarter (fiscal 1Q12) he's more optimistic than he was a few weeks ago: $2.15B in sales (vs. $1.90B) and $0.19 EMS (vs. $0.16), with overall orders up 20% and VSEA-aided SSG up 35% (flat in solar and services, +20% in displays).

Credit Suisse's Satya Kumar (4Q11 revenues/EPS/orders: $2.13B/$0.20/$1.70B) warns that AMAT's competitors are enjoying an upswing too, and warns of "stagnant/declining" marketshare in WFE vs. KLA-Tencor, Lam Research, and ASML. He invokes Gartner data showing a steadily AMAT marketshare decline: 21% to 17+% from 2004-2010, and in 2011 down another 18% Y/Y in its core semi business while macro WFE has actually risen 5%. TSMC's filings indicate less AMAT business at that key account, too (25% in 2005 to 15% in 2011). Why? AMAT's market dominance, he explains, is in product areas (e.g. deposition) "that have not benefited as much from the increase in capital intensity," e.g. litho and inspection.

Aside from semiconductor manufacturing, Kumar also lays down some bets on AMAT's other businesses; 25% of AMAT's sales in the current calendar year are from solar and displays, but he sees this withering by half over the next 12 months. He sees display spending -17% in 2011 and "at similar levels next year," though AMAT could get a 10% uplift in display tool sales as OLED and high-resolution LCDs move to larger panel sizes where AMAT's share is more prominent -- LG, for example, is planning Gen-8 OLED production by mid-2012 and Samsung is budgeting 7T won (US $6.2B) for OLED in 2012.

One area of softness continues to be solar. Kumar points to persistent oversupply and weak demand as a bad combination for pricing and margins (more like negative margins for many suppliers), which has resulted in "a virtual standstill in capacity expansion," Kumar writes. He's modeling a punishing -73% dropoff in AMAT's EES (solar biz) 3Q sales, though he expresses doubt that AMAT will aggressively cut costs in this unit -- since any profits from the semi side of the biz can be used to "subsidize" EES costs (pun likely intended).

Like Muse, Kumar sees a 20% bump in Jan. quarter (F4Q11) orders, and a 70-100bps bump in AMAT's gross margins thanks to VSEA's higher margin profile and possibly lowering AMAT's tax rate. For 2012, he is a tad more bearish, though: $9.1B revenues and $0.82 EPS. -- J.M.

Deca lands a 1-2 WLCSP punch -- and you won't see it coming

Amid the elegance of T.J. Rodgers' (Cypress Semiconductor president & CEO) home and winery in Woodside, CA, a new company -- Deca Technologies -- was announced to the media. The company's 67 employees plan to transform the interconnect space by wielding a disruptive cost structure (left jab!) and lightning speed of execution (right hook!) to do new product introductions in minutes rather than days or weeks. The combination of speed, low cost, and flexibility tackles the problem of packaging costs that haven't come down commensurate with Moore's Law scaling progress.

Deca's first product is a series of WLCSP "derivatives" (see table below). The initial TAM for fan-in WLCSP is $2B by 2016 (a CAGR of 14.7% between 2010-2016) noted Deca's president & CEO, Tim Olson, citing data from Yole. Also invoked was Jan Vardaman's (president and founder of TechSearch International) projection that with respect to Deca's initial product offering, "WLPs will maintain double-digit unit growth with a CAGR of 12.5% and annual volumes exceeding 20 billion units by 2014."


Deca says it can go from design to manufacturing in under 60 minutes. And with respect to total manufacturing cycle time, by late 2012 or early 2013 Deca expects to have a three-day cycle time for wafers going through its autoline factory. In comparison, Olson said that the current Tier-1 SATS average about 17 days of manufacturing cycle time. Currently, six customers are engaged (five of the six are $1B+) with one customer already qualified for production. Three more customers are in the process of qualification, and the company expects the remaining two customers to begin qualification within 90 days. More customers are expected to sign on in 1Q12.

Don't expect any fab tours or boasting from equipment suppliers about what they just sold to Deca, however. With the financial roots of the company in Silicon Valley (Cypress Semiconductor invested $35M) -- an area that made paranoia a virtue -- Olson, said that two-thirds of the company's equipment wouldn't even be known or familiar to semiconductor manufacturers, or even found anywhere else in the world. Additionally, the equipment that is used is very low-cost, nowhere near approaching the high pricetags normally associated with fab equipment. The production line itself is set up along kanban principles based on SunPower's experience.

Most of the equipment has been customized/modified by Deca; unlike semiconductor fab equipment, Deca does not use batch-based equipment. And though no one external to the company -- not even customers -- are allowed inside the fab (located inside SunPower's fab in the Philippines), if you could go in, all the equipment is the same color; there are no name plates. You would be unable to figure out who made anything, said Olson. (Perhaps the moral of this story: if you can go from a design to manufacturing in under 60 minutes, you can rewrite the rules of engagement with customers and they will love it.) The company has either indefinite or multi-year exclusivity agreements with equipment suppliers. There are also strict terms that prevent equipment suppliers from the sale of the same or similar equipment. Olson also credited Cypress' equipment specification/procurement/qualification process as being a major factor in its success to date. The only equipment factoid Olson did acknowledge was that conventional lithography technology is not being used.

Further "cloaking" is achieved because the company is paranoid even with third parties who have NDAs; line access is highly restricted, and there is extreme sensitivity with respect to the company's trade secrets, said Olson. The only customer Deca is willing to divulge publicly is Cypress Semiconductor, but Olson said the company has contracts with several major high-volume manufacturers (they didn't go after the little guys, he noted). And though SunPower invested an undisclosed amount of capital in Deca, and gave Deca half of SunPower's fab space (Laguna Technopark, Philippines) to use, as well as human resources, and process/operational know-how (Deca has exclusive access to SunPower's IP in its domain) -- it is not a customer. (It wouldn't need to be, of course, because SunPower taught Deca what it knows about extremely fast HVM.) One of the contributing factors that brought the companies together was the realization that almost all of the back-end-of-line processes used by SunPower for its solar cell map are 1:1 with those used by Deca for its 4-series WLCSP (2× and ball drop) product: patterned polymer, cure, PVD seed, plating template, electroplate, and strip/etch/clean.

To its credit, Deca took another page from SunPower's playbook: it hires degreed engineers to run the fab equipment. The fact that these are operators who want solid engineering careers and not people who might drift from one company to another is seen as an asset, which further adds protection to the company's IP. Having engineers run things and not allowing equipment suppliers' field personnel to work on equipment prevents "leaks" in IP and process know-how, Rodgers added.

[Here's some more "back story" about the company: Part of the launch event was a tour of T.J. Rodgers' winery conducted by Rodgers himself. He designed some of the equipment used in his winemaking process -- metering techniques, piping, and such (some of his inventions for winemaking are patented). When Deca was designing its fab, he contributed some of what he learned from being a vintner to the fab design.]

When asked about the possibility that other packaging suppliers and foundries could copy Deca's strategy and model, Rodgers said that it would require a paradigm shift from the "fab mentality" -- i.e., batch-based equipment with high pricetags. He pointed out that, to date, no one has been able to copy SunPower's manufacturing approach. Even if competitors could figure out the kind of equipment and modifications needed to copy the methodology, Rodgers said Deca has too great a lead. "Getting a lead and being able to sustain it is huge," he said.

(posted by Debra Vogler, senior technical editor)

3D IC needed? Making a case for 2.5D with Xilinx FPGA launch

During a product launch event in October 2011 for the Xilinx Virtex-7 2000T field programmable gate array (FPGA), a programmable logic device with 6.8 billion transistors, Liam Madden, corporate vice president of FPGA Development and Silicon Technology, spoke about the value of so-called "2.5D packaging." Xilinx connects several die to a silicon interposer to enable this FPGA.

The semiconductor packaging industry used to see 2.5 as stepping stone, Madden said. However, while 3D packaging is coming, there are restraints in real active-on-active die stacking: keepout zones, thermal hot spots, etc.

2.5D packaging gets disparate chips to communicate as if they are on one piece of silicon -- a real advance that many more companies are taking advantage of instead of or before a move to 3D, Madden said. He also points out that 2.5 will teach us a lot about 3D ICs.

See the device architecture details on the Xilinx Virtex-7 2000T FPGA here.

-- Meredith Courtemanche

US solar vs. China: Win to lose?

Taking full advantage of last week's Solar Power International spotlight, seven US-based c-Si solar panel manufacturers dubbed the "Coalition for American Solar Manufacturing" (CASM) said they are filing petitions with the US Department of Commerce and the International Trade Commission, alleging that Chinese rivals are "dumping" products into the market and are receiving "massive illegal subsidies" from their government. Any formal Commerce/ITC investigations could begin in November, with preliminary determinations coming by year's end or early 2012.

Reaction to the trade dispute has been immediate and reflects the complexity involved in such a dispute. On the one hand are US solar manufacturers who feel squarely in the crosshairs and want "significant duties" imposed (up to 100%) to level the playing field. (Also in their corner are local politicians, including Ed Markey/D-Mass who decried a "Manchurian manipulation.") In between are the materials and manufacturing equipment suppliers who have customers (and locations) on both sides. China, naturally, isn't taking the accusations lying down: Yingli, Suntech, and China's Ministry of Commerce [edit 10/27: plus Suntech, Trina and Jinko] have all spoken out publicly against the accusations and potential ramifications. (Firing back, the CASM calls Chinese accusations of US solar protectionism "absurd" coming from what it calls the planet's worst trade law violator: "China has for years been engaging in economic protectionism and a quiet economic war affecting all of its trading partners," the group states. And SolarWorld's president Kevin Kilkelly pointed to the recent Jinko Solar chemical pollution controversy as an example of allowed lack of transparency.)

What seems clear is that most of the industry is treading very carefully on the subject. Besides SolarWorld, the other six coalition members are keeping anonymous (as they are legally entitled to do in the US), likely fearful of ramifications in the high-growth China market. Equipment suppliers are understandably noncommittal; one told us merely that it wants to see "all of our customers around the world drive down the cost of solar electricity." The SEIA agrees that the US can compete given an even playing field -- though a SEIA report earlier this summer calculated the US as a $2B net exporter of solar products.

And note that this complaint is focused on c-Si only, and does not involve thin-film -- where US firm First Solar continues to set the benchmark for the supreme solar PV metric of cost/W manufacturing ($0.75/W). "What we believe in is free and open market access here and everywhere else in the world," FSLR's top exec Rob Gillette was quoted as saying at SPI. Not exactly taking up arms for the cause of US brethren.

The real issue is whether such action is in fact divisive and destructive to solar energy overall. A trio of solar executives speaking at last week's SPI event appeared skeptical that the move would do anything but disrupt and perhaps derail the US' anticipated strong solar growth over the next few years. Plunging module prices has been a key driver in lowering costs for installations, which spurs end-demand and creates jobs. Artificially raising prices by implementing tariffs could easily unravel end-market progress. "If module prices go up, installations are likely to suffer," notes Lux Research Aditya Ranade. And imposing tariffs on Chinese solar products may not even solve the problem, as Chinese firms may just seek lower-cost production elsewhere e.g. other Asian nations or Europe, agrees Paula Mints from Navigant Consulting. "Even if there were sanctions against manufacturers in China in the US, there is not enough manufacturing capacity (technology) to take up the slack in demand," she says.

The New York Times draws several parallels to three decades ago when the enemy was Japanese auto imports; ultimately those foreign companies created assembly lines and jobs here in the US, yet domestic automakers still struggle to compete against Japan. Creating division within the industry might achieve short-term sectorial success for some, but distracts everyone from the real prize: getting all of solar on a level playing field vs. other energy sources, both conventional and other renewables. -- J.M.

A sad day

Even if you never met the man personally, you most certainly have benefitted from the inventions that Steve Jobs ushered into existence. The legacy that he leaves is one that lifts up the human spirit. Whether it's beginning artists, singers, musicians, and filmmakers who are able to create art using affordable equipment, or science researchers and doctors able to expedite their work to save lives, there are few people left untouched by Steve Jobs' vision.

Our sincere condolences to his family, friends, and colleagues at Apple.
(DV)

Congratulations to Nobel Prize winner Prof. Daniel Shechtman

I couldn't let pass the notice of Prof. Daniel Shechtman (Technion) winning the Nobel Prize in Chemistry. I had the privilege of meeting Dr. Shechtman when I arranged for him to give a lecture at Watkins-Johnson Semiconductor Equipment Group (8/4/97 and 8/8/97 - I still have the flyers!!), when I was Quality Systems Director at the company. I was fascinated by the topic and through my manager at the time, CTO, Dr. Avi Katz, who knew Dr. Shechtman, the invitation was extended for our Distinguished Lecturers' series.

I was also delighted that he allowed us to use the diffraction pattern of a quasicrystal (which he provided) for the opening segment of an image video I was creating along with James Banks (videographer and gifted animator) at that time. The video was shown at SEMICON Japan in the WJ booth and that opening segment with the diffraction pattern was perfect - crystallographers, materials scientists, and physicists, chemists, and the like, who saw the video would know what it was. Everyone else just thought it was beautiful.

I know there are quite a few fellow ex-WJ'ers in our Solid State Technology audience. Perhaps some of you remember that lecture by Dr. Shechtman. Please let us know your thoughts.

(Debra Vogler)

SEMI High Tech U. event takes place 10/4-10/6/11

SEMI's SEMI Foundation in association with KLA-Tencor, Advantest, and Nikon, are conducting a special SEMI High Tech University event for high school students running 10/4-10/6/11. During the event, studends will attend classes taught by volunteer industry professionals at the campuses of KLA-Tencor and San Jose State University. (DV)

The first 450mm clubhouse

The long-discussed and controversial 450mm wafer-size transition got a significant reality check with five of the biggest global chipmakers putting their skin in the game. 450mm's Original Three (Intel, Samsung, and TSMC), now joined by IBM and GlobalFoundries creating a "Global 450 Consortium", say they will spend $4.4B over the next five years for two chipmaking development projects spanning several sites in New York State. A big chunk of that will go toward proving out 450mm manufacturing work, that ultimately "may facilitate the possibility of building a 450mm plant in New York state" (note the double-noncommittal). The rest of the money will go toward 20nm/14nnm development work for IBM and partners.

This story is still taking shape, and we're still talking with sources to fill out the entire picture, but here's what we know so far (and we'll keep updating as we learn more):

-- Who's doing what? No details were provided about how the $4.4B is being split up: 1) between the 450mm work and IBM et al.'s 20nm/14nm development, or 2) among individual 450mm participants. All of the stated destinations in NY State for the investments are facilities owned by CNSE (Albany Nanotech, Canandaigua), IBM (Yorktown Heights and East Fishkill), or SUNY (Utica). CNSE will get $400M from the state over five years, including $100M for "energy efficiency and low-cost energy allowance."

Slides from CNSE execs over the past few months show a new "Nanofab" complex (dubbed "X" or "West") on the drawing board, with proposed 450K sq. ft. footprint including 45K sq. ft for cleanrooms. That's almost twice the size of CNSE's two major sites across the street: two-year-old Nanofab East, and six-year-old Nanofab North (home to CNSE's EUV alpha tool). This could be where the 450mm work takes place; we'll be talking with CNSE tomorrow (Weds. 9/28) for more information.

That $4.4B won't answer every 450mm production question, but equipment will be installed and "everyone will get to kick the tires, work on how to improve productivity, and jointly develop what the 450mm equipment should look like," explained Gartner research VP Dean Freeman. "It might be enough for the initial C&F to be done and prove out some of the economics." Specific goals will be to "learn things about how to boost plasma densities, improve wafer thickness uniformity, and improve system throughput of the area based equipment," he noted.

-- What about existing 450mm pilot-line efforts? Earlier this year, TSMC's Morris Chang was very clear about the foundry's 450mm plans: a pilot line at Fab 12 Phase VI starting with 20nm process technology, timed around 2013/2014, and a production line following around 2015/2016, a TSMC spokesperson reiterated that timeline to SST (adding that the production line would be in Fab 15). It is still unclear whether TSMC would continue to pursue its own in-house 450mm pilot line at the same time as this new group in New York. [Update 9/29: That same TSMC spokesperson pointed out that the Albany 450mm line will be consortium-run and is not considered a TSMC line, but said "maybe the timing will coincide with each other, or be very close."] Also note that Intel says it will make this its "450mm East Coast Headquarters," a qualification that implies a future West Coast operation too. The company's D1X fab on the West Coast, which was said to be built with 450mm in mind, probably will be for final work, not initial pilot-line stuff.

That said, more than likely this 450mm pilot line will go the way all such technology partnerships go: frenemies working together precompetitively, then taking the technologies back home to tinker for their own production. "While Intel will have folks on the East Coast, you can bet when the time comes you will see D1X with some 450mm equipment," said Freeman. Expect the same for TSMC, Samsung, and apparently GlobalFoundries and even IBM.

-- Who's missing? Note the "Global 450 Consortium" is comprised of private funds, and makes no mention of actual industry "consortia." IMEC's 300mm cleanroom was upgraded to be "450mm-ready" -- if this new 450mm thrust is chipmaker-only, where does that leave IMEC's efforts? "Companies that are not invited to the consortia party, will need to find a place to do the 450mm development work; that place will likely be IMEC," noted Freeman. The EU seeing 450mm as a possible route to become competitive in the semiconductor industry again, and "there is a lot of advanced transistor work that needs to take place," he added.

[Updated 9/29: ] SEMATECH/ISMI had been ramping its own early-work 450mm program, and this year ISMI received approval for NY state funding for 450mm development at Albany CNSE. At this summer's SEMICON West it said 10 tools were either installed or on order, and that "pilot line evaluations show 'low risk.'" Some 450mm equipment already in place at Albany CNSE are tools for lot sorting, wet cleans (a SSEC 3400 tool directly in front of the NanoFab North cleanroom viewing hallway), bare wafer defect detection, wafer edge inspection, and FOUP washing. "Our program is now a part of the new initiative, which will build on and expand our efforts," a SEMATECH spokesperson said, but noted that the actual location of 450mm tools hasn't been determined.

The aforementioned production gains from 450mm also would be very attractive given the relentless cost pressures and volumes required in DRAM. Freeman expressed surprise "that Toshiba is not yet a part of this" 450mm consortium. (Also not mentioned: Hynix or Elpida/Rexchip.)

-- What's the 450mm timeline now? 450mm has been an industry hot-button topic for years, with progress slowly picking up momentum: SEMI's already done most of the standards work, and many equipment makers are finally coming out with "450mm tools" (some simple retrofits, some far more complicated), including pledges of millions of dollars for 450mm tool development much of which could be for continued feasibility studies. Originally the Intel/TSMC/Samsung triumverate wanted a 450mm pilot line by 2012, but almost certainly that won't happen now, and this new consortium's five-year pledge suggests as much, and even TSMC's proposed timeline looks a bit optimistic at this point. Gartner research VP Bob Johnson predicts prototype process tools might be installed sometime in 2012, with functional processes two years after that and an official pilot line in ~2015, then another two years for "the first real production" on 450mm wafers in 2017-2019.

The problems for 450mm remain twofold: uncertain returns and competing priorities. Chipmakers believe that 450mm wafer manufacturing is their next big stepdown cost reduction (~30%). Equipment makers bellyached about 450mm, remembering their extended and not-so-profitable 200mm-to-300mm transition (and they're hesitant to now spend lots of R&D for a technology that will basically shrink their own market by 30%), but lately they have been more publicly supportive of it. An actual 450 pilot line, with tools configured in a manufacturing environment and producing patterned 450mm wafers, will go a long way toward getting everyone on the same page about what to expect.

But the industry arguably has other important technology concerns besides the economics-based 450mm transition. Leading-edge chipmakers have managed to keep extending optical lithography with immersion, multiple patterning, etc., but the next year or two likely will see the (attempted) introduction of EUV litho into manufacturing, and possibly other next-gen litho technologies, mixed as-needed with other flavors of optical litho. And note that a 2015 450mm pilot line coincides with what is expected to be the 10nm node at leading edge, and 2017-2019 could be 7nm or even 5nm. How many more nodes will conventional silicon continue to be viable, necessitating any of a range of alternatives, from known materials to exotic ones (e.g. graphene or nanotubes)? -- J.M.

Update from Asia: Six key trends in semiconductor demand and capex

Barclays analyst CJ Muse summarizes recent visits across Asia's IT supply chain. Among his list of key themes: End-markets are still soft but stabilizing; capex is stabilizing too, with help from foundries and NAND; LCDs and LEDs are still in the doldrums; and an early Black Friday tipoff.

Semiconductor end-markets stabilizing: Semiconductor end-market trends remain still positive for emerging markets (e.g. BRIC, particularly China/Brazil/Russia), offsetting persistent weakness in the US and Europe. This trend holds for PC demand as well. "Longer-term, it is clearly difficult to get excited about the category (as corporate refresh appears to be peaking), but near-term we do see stabilization as a positive," Muse writes.

Outside of traditional computing platforms, Apple is driving strength in smartphones and tablets in all regions; competitors' buzz is "much more subdued, suggesting expectations have become more realistic and appropriate." ODMs also see potential in Intel's new category of "ultrabooks"; ODMs would prefer to stick with Intel x86 over ARM for these devices citing reliability, but the ASP difference might become a factor, he says.

Overall, Muse maintains his outlook for 4% growth in semiconductors in 2011, and 7%-8% in 2012.

Capex bottom in 4Q11: Signs are mixed for semiconductor manufacturing capital spending, Muse says. "Chipmakers are clearly hesitant to add new capacity" given the current environment. However, NAND is still comparably strong (tracking flattish), foundry will be spending to 28nm (see next point below), and overall capital intensity is increasing due to complexity of node shrinks. Citing Samsung timing and demand uncertainty, Muse sees orders remaining "muted" through 4Q11 -- but look for signs of life in early 2012 starting with foundries and NAND, offsetting a possible cut in Intel's spending. "We do have high conviction of an order recovery in the next two quarters," Muse writes, projecting $29B-$30B in wafer-fab equipment spending in 2011, followed by $27B-$29B in 2012.

Foundries stepping up at 32/28nm: Foundries have yanked back their spending in 2H11 as they still digest inventory through 3Q11 (longer than expected) and visibility is limited, but at least 4Q11 internal forecasts, which were conservative, haven't been changed so things apparently aren't seen getting any worse. But foundries should start spending again soon if only to keep up with their customers' 32nm/28nm roadmap requirements. Muse points to a 50% increased capital intensity for 28nm vs. 40nm, with cost per 1K of capacity rising from $60M at 40nm to $100M at 32/28nm. Don't mistake, spending will still decline, but "only modestly," maybe 5%-10%, Muse says.

Look for spending driven by Taiwan foundries (TSMC adding ~45k capacity/~$4.5B capex for 28nm alone, plus up to $1.5B for 40nm/maintenance), plus Samsung LSI (keeping Apple's A5 and A6 business), GlobalFoundries (ramping Malta fab), and UMC (still in the $1B club). Total projected 2012 spending for those four would be -7%, "significantly better than much more bearish views," he points out.

Memory firms cutting out: DRAM prices have been plunging for a long time now, but seem to have bottomed out in recent weeks. Meanwhile, DRAM makers have been busy, taking as much as ~12% of their capacity offline, Muse notes. That encompasses production cuts in Taiwan and Japan (Muse calculates 50K /WSPM at Powerchip, 30K WSPM at Rexchip, 50K at Nanya/Inotera, and 30K-40K at Elpida) plus conversion to specialty DRAM by Korean memory firms. However, as PC end-market data points show stabilization, and supplies respond to the production cuts (should take a month or so), "we are near-term bullish on the DRAM cycle," Muse writes.

NAND suppliers, meanwhile, are better than their DRAM brethren, enjoying demand driven by smartphones/tablets and (building, eventually) demand for solid-state drives. Apple is on pace to soak up around 30% of the entire NAND flash market in 2011, he notes. Meanwhile, firms are rapidly approaching more complex sub-2Xnm node manufacturing. Overall look for slowing bit growth (Hynix sees 80% in 2011 and 2012, Samsung sees mid-70% and 70% in 2012).

Weak LCDs, and a Black Friday tip: LCD demand is weak too, with utilization rates hovering around 80%, and panel prices are seen down in August and September; shipments are tracking in the low-single digit growth, not enough to stave off inventory buildups. Assuming 4Q11 is below seasonal norms, utilization rates probably won't improve. On the supply side, capex cutbacks and capacity pushouts (e.g. China) suggests a wait-and-see approach heading into early 2012.

How desperate are LCD suppliers to stimulate demand? As a "Black Friday" preview nugget, Muse says he heard about 32" LCD TVs being priced as low as $99 -- well below the $120 panel price.

No help for LED drought: LED firms are feeling very uneasy, too -- sentiment from "a handful of LED players" was "decidedly negative," Muse reports. Component pricing is tracking down in the high single digits for both 3Q11 and 4Q11, and factory utilization has sunk to 50% and even lower. Many suppliers indicate no new MOCVD capacity in 2012; one vendor told Muse that Chinese vendors are selling excess equipment into the used market. "We just don't see a recovery here anytime soon, and [...] 2012 demand could prove to be extremely low," he writes. -- J.M.

What the IMF's new GDP forecasts mean for semis

Today the International Monetary Fund decided the entire planet's economic recovery is slower than thought, particularly in developed regions, so it's trimmed (and in some cases slashed) its GDP outlooks for both 2011 and 2012.

"The global economy is in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing," said the IMF said in its just-updated 2011 World Economic Outlook (WEO).

Overall global GDP is still seen at 4.0% in both years, but there's a gulf between the "Advanced" and "Emerging" economies. The IMF sees just 1.6% growth this year for the former, vs. 6.4% for the latter. In 2012 it's not much different, 1.9% vs. 6.1%. And within those anemic numbers are dark clouds for the US economic picture. Back in June the IMF saw 2.5% growth in 2011 and rising to 2.7% in 2012 -- now it's slashed those outlooks to just 1.6% and 1.9%. Other nations in this category (e.g. Euro, UK, Canada) have their two-year GDP outlooks lowered by up to half a point.

The new GDP projections also depend on a number of optimistic assumptions: that the EU debt crisis can be contained, that US fiscal turmoil can be quelled, and global financial market volatility smooths out. Government stimulus programs have to give way to private demand, and regions with heavy imports or exports need to balance themselves out. "If the assumptions are not met, global growth will be much lower," the IMF warns.

(Source IMF)

For the semiconductor industry, the revised IMF GDP forecasts are another dash of cold water on hopes of even a mild a bounceback in 2012. Last week Gartner kicked off the downgrade party by sinking its 2011 semiconductor forecast into the red, with a worst-case scenario of consecutive 2011-2012 declines (-2.2% and -4.9%) if global economies sputter.

Just days ago at his annual fall forecast presentation, IC Insights' Bill McClean cited a number of global GDP assumptions underpinning his forecasts for 2011 and 2012 (and beyond). Responding to the new IMF numbers, he agrees that if Europe's credit upheaval can be resolved "in a good way, our forecasts could still hold," though he admits there's "more downside than upside potential." If Europe's problems persist or widen, "a flat or negative semi market could be in store for this year and next."

McClean's GDP numbers are based on the World Bank, which he says calculates GDP in local currency divided by the previous year; the IMF uses a "purchasing power parity" method to adjust for seasonality differences and currency valuations. (The World Bank told SST it has nothing new to compare to the IMF's new GDP numbers.) As a result, he says the IMF numbers are about 10% higher -- so the IMF's new ~4.0% global GDP for 2011 would be more like 3.6% (McClean has 3.8% in his most recent global GDP assumption). But even so, the IMF update casts a pall over what might happen in 2012: that same discount would convert the IMF's new 1.9% US GDP for 2012 to 1.7% for McClean, vs. his current 2.8% assumption, and total developed from 1.9% (IMF) to 1.7% (vs. his 2.2%). -- J.M.

Key takeaways from IDF: Ultrabooks and phones

The big theme of this year's Intel Developer Forum (IDF) was about mobile technology, now and coming in the near future. Barclays' CJ Muse wraps up his key takeaways.

Ultrabooks. Intel wants to have a ~$1000 ultrabook on shelves in time for the 2011 holiday season, but desired features such as "all-day battery life, instant on, and touch capability" won't be incorporated until arrival of new architectures Ivy Bridge (2012) and Haswell (2013). Neither specifics nor benchmarks were disclosed at this year's IDF, Muse notes, but the company did show some ultrabook variations based on Sandy Bridge chips, and even some Haswell prototypes. Anything on shelves this season would be based on the 32nm Sandy Bridge chips.

Intel sees its Atom SoC "in line with mainstream products" by the 14nm node in 2014. Many discount Intel in the mobile space as playing major catch-up with ARM-based technology, but Muse notes that by the 14nm node Intel will have a two-year design cycle advantage vs. other foundries. Intel has a roadmap for a low-power SoC with the Haswell architecture, which is said to offer 20× reduced standby power and be more than 50% more power efficient than today's laptops (~15W vs. 35W).

What's different now vs. Intel's previous attempt to push its with "consumer ultralow-voltage" (CULV) processors? Muse says this time the message is not just ultrathin formfactor and low cost, but also offering at least or better performance than laptops. New features would include fast-start (5sec out of hibernation), a "smart connect" ability to quickly un-sleep to check for updates, and antitheft from McAfee.

One big roadblock in the road to Ultrabooks is cost -- specifically, getting supply-chain partners on board to keep their own costs low, while also designing in the features people want (e.g. sensors, touch) and what the product would require (solid nonplastic chassis, different battery, thinner speakers, low-profile keyboard, SSD drive). Intel is mapping a 40% penetration rate by end of 2012, but Muse "perhaps 20% is more realistic."

Android phone chips. A deal with Google to develop chips for Android-based phones is seen as "a step in the right direction," after a failed partnership with Nokia to develop the MeeGo platform (now relegated to niche use in markets e.g. auto). "Android is the leading OS in terms of units and we see endorsement of Intel's roadmap as key to winning sockets," Muse writes. Intel plans to release a phone sometime in 1H12.

22nm and capex. Intel's IDF is typically more about the chip architecture technology, but Muse offered some thoughts about recent reports that Intel might be tweaking its 22nm ramp-up. "Our checks do confirm that Fab 24 [in Leixlip, Ireland] has been removed from the 22nm roadmap and that Intel has also begun to incrementally cut tool orders here in 2H11," he writes. If the current market softness persists, Intel will pull back on 32nm utilization and switch to 22nm -- not a surprise, Muse says, since by far most of Intel's capacity (80%-90%) is still earmarked for PCs. Muse sees Intel's 2011 capex at about $9B, and lowering to $7B or $8B in 2012. -- J.M.

Gartner's revised industry forecast not for the faint of heart!

Another perfect storm is hitting the semiconductor industry in 2011 and its impact will be felt well into 2012. Jim Walker, VP, Research of Semiconductor Manufacturing and Emerging Technologies, at Gartner, gave a sobering forecast at the MEPTEC lunch forum (9/14/11, Santa Clara, CA). Inventory correction, foundry and DRAM overcapacity, and macroeconomic trends are hitting the industry. All the bad news has resulted in a significant slow down in the supply chain.

Gartner's revised forecast indicates that most likely, the semiconductor revenue growth for 2011 will be -0.1%; in 2012, the growth is projected to be 4.6%. The risk in the 2011/2012 forecast is if the economy takes a turn for the worse. The worst case forecast is -2.2% for 2011 and -4.9% for 2012. It is projected that 2013 will see a rebound as ASPs recover.

As an example of inventory correction, Walker noted that the industry saw no growth as a result of the "back to school" selling cycle and there is a reduced holiday build. Therefore, semiconductor companies' guidance for 3Q11 is well below the seasonal norm. Consumer confidence is at a 30-year low and Global Insights has said that the odds of a double-dip recession have risen from 25% to 40% in one month, said Walker. The DRAM sector has also been hit hard by reduced PC demand.

It would not be hyperbole to say that Walker's observations that ~85% of 2012 semiconductor growth will come from just three applications (tablets, smart phones, and SSDs) caused audible gasps from the audience. As Walker notes in a podcast interview (watch www.electroiq.com or my author page, http://www.electroiq.com/authors/vogler.html) for the podcast, to be posted soon) with SST, consolidation is a very real possibility in this situation.

Another of Walker's comments at the event elicited gasps. He believes that Apple's iPad/operating system is so entrenched in the market (75-77% of total market), that if competitors hope to make a dent in Apple's market share, they will have to price their tablets well below the iPad. He suggests a price in the range of $200-250-275 will be necessary to buy market share.

An interesting observation by Walker was that the industry was not particularly impacted by the Japanese quake. As result, the inventory correction has been continuing while "economic head winds mount," he said.

Walker also suggested that with respect to the transition from gold to copper wire bonding, it could be that in some applications, instead of converting to copper, it may be a better idea for some companies to go directly from gold wire bonding to a low-cost FC-type process (e.g., Cu pillar), which the industry will have to eventually do anyway as he questions the viability of wire bonding at around 32nm, 28nm, and below.

There were a few positives in the Gartner forecast. For the next couple of years the major growth markets will be in smart phones, the tablet PCs, and SSDs. These areas will start to grow a little bit in 2011. In 2012, however, the growth market for tablet PCs will be 250%. But, he cautions, if you're not in any one of these markets, there's not much happening for the rest of 2011 and the first half of 2012. "In the second half of 2012, we think the economy will start turning around and we'll start seeing growth in PCs, LCD display drivers and LCD TVs, etc.," said Walker.

-- By Debra Vogler, senior technical editor

Insights from Citi's Tech conference: Capex slump, Samsung bump, 28nm & EUV ramps

Citi brought a dozen semiconductor suppliers to its Technology Conference; what came out were common themes about an extended slowdown in demand and capex, good news from Samsung, and the status of 28nm ramp-up, 450mm wafer-size transition, and EUV lithography. The info below came out of notes from Citi analysts Tim Arcuri and Wenge Yang.

Downturn extends into 2012, for most. Once upon a time 2Q11 was seen as the worst of the current downturn; then orders pessimism pushed that flip date out to 3Q11. Now it looks increasingly like the sector won't see any relief at all this year.

After an expected -20% sales dip in 3Q11, Teradyne is being "cautious" on 4Q11 guidance, seeing "seasonal weakness starting in October" and "broad-based weakness" in tester orders (except wireless, thanks to Apple exposure). Citi's Wenge Yang notes that "all major players" in OSAT are cutting their capex in 2H11, which partly explains the soft SoC tester buy-in rate in 2H11.

Applied Materials, too, is "more cautious" about its fiscal 1Q12 (Jan.2012) orders being up, partly attributed to Intel's reported freeze of Fab 24/22nm (Ireland) orders. To the positive, though, most SSG orders in the October quarter (fiscal 4Q11) are technology buys since wafer capacity expansion is "essentially nil."

Not everyone's so pessimistic, though. Amkor feels "pretty good" about overall demand, thanks in part to its exposure to communication (smartphones) and gaming (seasonally strong). Utilization rates actually inched up above 80% in 3Q11, with "no notable inventory issues from most of its customers." KLA-Tencor wouldn't offer specific estimates about 4Q11 orders, but it did add some color to previous comments that implied "meaningful" growth, saying that it's a "reasonable scenario" since 4Q usually encompasses "positive seasonality." ATMI saw softer-than-expected foundry wafer starts in 3Q11 (-3% to -5% Q/Q instead of flat), but sees stabilizing forecasts from key customers into 4Q11, though they have yet to show anything "incrementally" better. Veeco's 4Q11 should be ok, but expiring Chinese subsidies could snap back orders in 1Q12.

And there's some growing hope on the horizon. Lam Research and Novellus confirmed Citi's report that Samsung is pulling in some tool shipments, "technology-related orders on the foundry side," to end-of-2011, which will help beef up some suppliers' 4Q numbers. ASML also supported the idea that orders have to rise in 4Q, or else customers will put at risk their stated 1H12 spending and technology objectives.

Citi's Tim Arcuri continues to point to data indicating WFE capex run-rate bottomed out in 3Q11 at ~$20B, essentially the "maintenance level" which is impossibly low to sustain. For 2012 he expects "flattish" capex vs. 2011, with a -10% decline as the "worst-case scenario." That worst-case view would put WFE spending at around $26B-$27B, far above the current WFE order run-rate.

28nm: A 1H12 story. Foundries (e.g. TSMC, GlobalFoundries) are taping out 28nm now but realistically the ramp is 1Q12-2Q12 until they can improve yields. ATMI looks to be designed into both TSMC's 28nm process chemistry and likely others (GF), and should grow revenues/wafer once 28nm ramps. NVLS also cited 28nm yield issues as a reason for recent foundry order pullbacks, but once they are resolved orders should flow again. LRCX said it has yet to ship any volume 28nm tools to major foundries.

450mm: Hurry up and wait. The major backers of 450mm (Intel, TSMC, Samsung) are getting together over the next few weeks to formalize "a unified plan/consortium," Citi's Arcuri writes. Nonetheless, with rising capital intensity driven by ever more complex steps (and new ones, e.g. EUV), tool suppliers are fine with holding off on their 450mm development, he says. NVLS is "more cautious" on 450mm wafer-size transition, citing a "deflationary outcome" seen in the shift to 300mm. LRCX, on the other hand, sees a big window of opportunity to gain share at 450mm.

EUV timeline compressed. Specifically talking about EUV, ASML expressed more confidence about the technology's ultimate viability, but time is running out to get to 60WPH targets by mid-2012, with sources still the key challenge, Arcuri noted. DRAM customers could get away with 50-60WPH for two layers, but other sectors (e.g. logic) are still uncertain. Eighteen tools are in the supply chain: 10 ordered and two more likely to order a tool each, but the other 6 are question marks in terms of timing. In the meantime, ASML plans a ~250WPH immersion tool for next year to fend off encroachment by Nikon which has gained qualifications at Samsung, TSMC, and INTC.

From "Solar" to "Technologies:" What prompted GT Solar and OPEL Solar to change their names

Both OPEL Solar International (OPL) and GT Solar recently dropped the "Solar" moniker, becoming OPEL Technologies Inc. and GT Advanced Technologies Inc. (GTAT), respectively.

GTAT calls this a "rebranding and new corporate identity," since it has been marketing more crystal growth equipment to the LEDs manufacturing market, and aims for a broader customer base than the solar industry alone. Tom Gutierrez, president and CEO, says GTAT will "continue to look for strategic expansion opportunities into other adjacent markets."

GT Solar acquired Crystal Systems Inc. in July 2010, beginning the expansion beyond solar equipment. Silicon growth for solar cells and sapphire growth for LEDs are complementary technologies, but require different capabilities and serve different customers. Learn more at www.gtat.com.

OPEL Solar International became OPEL Technologies Inc. to avoid "confusion" about the company's two segments: high concentration photovoltaic (HCPV) solar panels and solar tracker systems, and III-V semiconductor device development.

For OPEL Technologies Inc., a new website was launched at www.opeltechinc.com. For OPEL Solar Inc. (solar) the website remains www.opelsolarinc.com. ODIS Inc. (semiconductors) has a new website, www.ODISinc.com.

The name change and website development allows each segment of the company recognition in the marketplace and unrestricted growth, said Leon M. Pierhal, OPEL CEO. CPV and III-V semiconductors are related technologies, as III-V semiconductor materials enable photovoltaic modules to capture a wider range of the solar spectrum. However, customers and applications can vary widely.

--Meredith Courtemanche

Notes from SEMI's Silicon Valley Lunch Forum: don't take off the economy's training wheels too quickly!

Speakers at SEMI's Silicon Valley Lunch Forum (8/24/11, Santa Clara, CA) spoke of the "uncertain economy" and asked the rhetorical question, "is it time to panic?"

Brian Matas, VP at IC Insights, noted that the temporary "solutions" to economic woes being implemented in the U.S. are impacting overall IC growth. Likening economic stimulus to a set of training wheels on a bicycle, Matas said that taking the wheels off must be done carefully, seeming to imply that politically, the U.S. may have gone from stimulus to austerity too quickly. Responding to a question about quantitative easing 3 (i.e., QE3), Matas said that it would be a good thing for the economy if the Fed were to implement it.

Dean Freeman, Research VP at Gartner, warned that rising semiconductor inventory levels are causing a drop in ASPs. Furthermore, the financial meltdown is impacting consumer spending - something to keep in mind when approximately 60% of all ICs sold worldwide are due to consumers. Of particular note: Japanese consumers are reining in spending as a reaction to that country's disastrous earthquake earlier this year and U.S. consumers are also spending less. As a result, Gartner expects slow growth for the next two years until the supply/demand outlook improves. Capex spending is forecast to increase by about 11% in 2011 driven by Intel, foundry and NAND spending, said Freeman. Semiconductor capex should see strength from 2Q11 through 2013 before retrenching. The research firm will be issuing its complete forecast update in September.

Dan Tracy, Sr. Director, Industry Research and Statistics at SEMI, told forum attendees that materials suppliers are seeing a significant slow down in the third and fourth quarters as a result of an over-reaction to the disaster in Japan earlier this year. Additionally, higher prices for gold and other metals and raw materials, as well as higher prices for oil are impacting the cost of materials manufacturing.

-- Debra Vogler

Apple begins post-Jobs era

Steve Jobs has left Apple Inc. for stints before due to serious health problems. Today, Apple's CEO and figurehead announced that he would resign from the company, leaving it in the hands of Tim Cook.

With Apple hugely influential to the semiconductor and MEMS markets, with rumors of a solar foray in the works, Job's departure could have ripple effects throughout the electronics supply chain.

Tim Cook, Apple's COO, will take over as CEO. Cook took the reins during Jobs' most recent medical leave in January, and Apple's Board of Directors seemed pleased with his abilities. He takes the job with Jobs' recommendation. As COO, Cook was previously responsible for all of the company's worldwide sales and operations, including end-to-end management of Apple's supply chain, sales activities, and service and support in all markets and countries. He also headed Apple's Macintosh division and played a key role in the continued development of strategic reseller and supplier relationships, ensuring flexibility in response to an increasingly demanding marketplace.

Steve Jobs' legacy at Apple can hardly be overstated. In a letter to shareholders and consumers, Jobs stated that "Apple's brightest and most innovative days are ahead of it," adding that he would continue to contribute to the company in a new role.

Apple shares fell on Jobs' announcement, but Wall Street analysts remained uniformly behind Apple's succession plan and business prospects, says Rex Crum, MarketWatch. Apple shares remain up about 14% since the first of the year. The sell-off will be short-lived, analysts agree, as new buyers leap at the lower stock price for the successful company, and influential market watchers come out in support of Cook's leadership.

What to look for in AMAT's 3Q11 results

What to expect from AMAT's forthcoming (Aug. 24) fiscal 3Q11 results? Few surprises, limited visibility, and simultaneous weakness in both chips and solar, warn Wall Street watchers.

Stifel Nicolaus' Patrick Ho, Citi's Tim Arcuri, and Barclays' CJ Muse generally agree that an industrywide order trough is imminent. The problem for AMAT, Ho notes, is that it's a convergence of troughs in not only semis but also solar, as well as FPD, so there's no safe harbor from known semi industry cyclicality. Ho's newly revised 2001 estimates: $10.7B sales and $1.45 EPS, down from $11.1B and $1.55. [Update 8/22: Caris & Co.'s Ben Pang wades into the discussion, noting that the back-to-school season isn't much of a boost this year, either; he thinks AMAT will meet Street expectations for 3Q but probably not 4Q.]

Citi's Tim Arcuri is more bearish, anticipating "very poor guidance" with EPS maybe half what the Street is projecting ($0.17 vs. $0.33), but interestingly, he says overall "not bad enough to have negative preannounced." (He is lowering his AMAT outlook for EPS to $1.21 in 2011 [vs. $1.35] and $1.01 in 2012 [vs. $1.21].) Muse's outlook for AMAT is also bearish: $10.19B in 2011 sales and $1.25 EPS (vs. his "industry consensus" of $10.86B and $1.36), falling to $9.42B and $1.20 in 2012.

AMAT likely won't offer much sector visibility in its call, which Muse expects will be largely "uneventful." Besides clarity in softness in all its key markets, AMAT likely will face some investor blowback about its acquisition of Varian Semi. Equip. Assoc. (VSEA) -- which was all cash and, as it turned out, at the market's midcycle peak. AMAT also has to deal with solar slowness as customers "finally start to curb cell capacity expansion on cell inventory + demand uncertainties," Arcuri reports, specifically citing a "multihundred-million-dollar cancellation" from Chinese customers.

Everyone generally expects an imminent trough -- Muse sees a -20% decline in current-quarter orders (-20% silicon, -40% solar), and another -10% in the next quarter, while Arcuri sees a -15% orders decline (-50% in solar) before any pickup in early 2012 when Samsung should offer more capex. Following a 2H11 trough, "2012 is shaping up to be at/above normalized level," he writes, with WFE orders "rebound[ing] to $30B run-rate again," Arcuri says.

Japan manufacturers' newest hurdle: A strong yen

A soaring yen over the past year is adding an extra burden to Japanese manufacturers who are already pushing hard to rebound from the March 11 disaster.

The yen has gained about 11% in value over the past 12 months, from roughly ~¥86/US$1 to now ~¥77/$1. (Two years ago it was north of ¥100.) For many companies that's a double-edged sword: a higher yen means higher prices, sales, and profits, though it's somewhat hollow as it's not really tied to end-demand. But it's a big problem for companies whose costs depend upon domestic purchases and procurements, or who have higher exposure to exports vs. imports. Every ¥1 rise in the 2010 dollar/yen rate erased ¥2B from Sony's operating profit, for example; Honda loses ¥15B for every ¥1/USD appreciation.

"The yen trading below 80 yen to the dollar is an extraordinary level," noted Shuichi Aoto, managing director at Mitsubishi Motors, quoted by the Asahi Shimbun. (According to the paper, the ¥76.29/USD on Aug. 1 was fractionally shy of a post-WWII record.) "We will be in an extremely difficult situation even if we consider steps to cope."

The strong yen "has ushered in a period of Japanese manufacturer exodus," according to Toyota senior managing officer Takahiko Ijichi, quoted by the Nikkei. Sony's outsourced production now accounts for 50% of TV production, vs. 20% a year ago. Hitachi is considering widening its overseas materials/components procurement from current 36% to 50% or more. Mitsubishi Heavy Industries is ramping up its first nondomestic gas turbine plant (in the US), hoping that a local supply operation will reduce exposure to foreign exchange rates. Carmakers Toyota and Honda are building new plants and revising their corporate structure to improve proportions of local procurement in North America.

In our industry, even Toshiba is ready to rethink its flagship NAND flash operations, after the strong yen has cut operating margins in half (20% to 10%) in just six months. "If the yen stays this strong, we will have to examine each business to see if it can really continue operating in Japan," said exec officer Makoto Kubo, quoted by the Nikkei. Ramping output of more 2Xnm chips this year will help reduce costs, but "if the yen's appreciation reaches very high levels, the impact will be too big to offset through improvements in production technologies."

(Tokyo Electron, meanwhile, reports export sales for its equipment (semiconductor, FPD, PV) as yen; some settlements are in dollars, but forward exchange contracts are made at the time of booking, so "the effect of exchange rates on profits is negligible," the company said reporting its most recent fiscal numbers.)

Panasonic, too, is dented by foreign currency swings -- every ¥1 rise vs. the dollar and euro trims operating profits by ¥3.8B and ¥1.7B, respectively, notes managing director Makoto Uenoyama, in an interview with the Nikkei. "Given Japan's higher tax rates and power-supply restrictions, maintaining domestic production is becoming increasingly difficult." To help mitigate its currency exposure, the company is increasing its emphasis on "forward exchange contracts" beyond the current 50/50 proportion, and will push more procurement and production out of the country. Plans include moving procurement functions from its Osaka HQ to Singapore, procuring more parts and materials from China and other Asian countries, and raising overseas procurement ratio from 53% to 60% in fiscal 2012. A new Li-ion battery plant in Suzhou will take parts from local manufacturers, supplying batteries to Chinese PC makers, and Panasonic will increase some white-good production in India and Brazil for those local consumers.

Another problem: Korean companies have fought against their nation's similarly weak won by cutting prices of products, something that further handcuffs their Japanese rivals. "To compete against our South Korean rivals on an equal footing, we have no choice but to shift production overseas," Uenoyama said. And that might mean a dramatic shift in strategy. "I don't think we can survive if we continue to focus on selling consumer products. We should shift our attention to environment/energy-related operations and offer a package of energy-saving products to businesses and consumers," he said.

Beyond individual corporate efforts to minimize exposure by outsourcing or rebalancing import/export levels, there's not a lot that can be done to check the yen's ascent. A sluggish US economy and recent credit rating drop, and the Fed's subsequent pledge to freeze interest rates at basically zero for the next two years, won't help. (Nor that the yen is one of the currencies investors generally view as a "safer" investment in times of economic turmoil.) Eventually the Bank of Japan might step in and expand asset purchases or lower interest rates itself, though such moves won't be popular internationally, especially since the US has more freedom with its interest-rate levers, notes the Nikkei. But don't be surprised if the yen keeps getting stronger, maybe even to ¥74/$1, warns Osamu Takashima, chief foreign exchange strategist at Citibank Japan Ltd., quoted by the Nikkei.

SMIC's new CEO: Best fit, but work ahead

SMIC has officially named a new CEO to replace David Wang who resigned last month after what amounted to a no-confidence vote. Tzu-Yin Chiu, who also becomes an executive director of the company, comes with nearly three decades of experience in the semiconductor industry, most recently:

• Hua Hong NEC Electronics (president/CEO)
  
• Shanghai Huali Microelectronics (president/CEO)
• Silterra Malaysia (president/COO)
• Hua Hong International Management (SVP/COO).

He was at SMIC from 2001-2005 as SVP of Shanghai operations, and before that was TSMC's senior director of fab operations. At the start of his career he was department head of AT&T Bell Labs' high-speed electronics research department.

SMIC chairman Zhang Wenyi touted Chiu's "extensive technical and management experience in the semiconductor field, as well as his in-depth knowledge of SMIC and the Chinese semiconductor industry." Chiu himself says his mission "is to further improve SMIC's operations, customer support, technology offerings, and market competitiveness, while continuing to develop long-team strategic relationships with key customers." He also pledges that SMIC will play a more important role in the global semiconductor foundry sector.

Chiu "is a very good choice and probably the best solution for SMIC," says Samuel Tuan Wang, analyst at Gartner -- and former SMIC exec himself, having led SMIC America operation for eight years. He has "great leadership skill," and "is well liked by employees and customers." His prior experience at SMIC and close work with the Shanghai government while at HHNEC also help his cause.

When David Wang stepped down, there was some concern that there might be a power struggle between Taiwanese and Chinese management, with the move perhaps indicating a strategic swing in favor of more domestic leadership. Chiu actually comes from Taiwan, Gartner's Wang noted, which suggests both Datang and CIC think he's the best candidate on either side of the Strait. He also noted that Wang's predecessor at SMIC, Richard Chang, recruited a lot of Taiwanese managers, but also promoted many Chinese as well. Ultimately any recent turmoil in SMIC's business can be more directly attributed to a loss of wafer business from TI once Nokia dropped the Symbian platform -- pushing SMIC's fab utilization rate below 80% -- and less to internal strife, he suggested.

SMIC needs to move away from its reliance on customers who develop internal IP (customer-owned tooling, or COT) and focus on its more leading-edge technology (which hasn't had enough R&D funding) and winning more customers there, he suggested.

But Chiu's appointment may not simply calm the waters around SMIC. He may be the best candidate, but he'll need to form his own team, Gartner's Wang noted. "I think that some key managers will leave. Lack of experienced managers will be the issue now." With a still-unsettled and possibly political atmosphere, "many experienced managers (from Taiwan or from the US) will hesitate to join SMIC," he suggests. "Chiu will have a very challenging job ahead."

Renesas: Rebuilt and revitalized

An update on Renesas' rebuilding efforts following the March 11 disaster offer an example in courage, teamwork, dedication, and learning from adversity -- sometimes with unexpected benefits.

The March 11 earthquake/tsunami disaster caused great destruction and disruption across every imaginable plane (most significantly on the human side). Thanks to frequent and valuable reporting from Takeshi Hattori, readers of SST had immediate and first-hand information and insights about damage assessments, availability of resources, and recovery efforts. From a macro perspective, Japan's response to the March 11 disaster has been nothing short of inspiring; the spirit of Kizuna, of bonding together, has many examples.

A semiconductor industry example of both corporate and human inspiration is Renesas Electronics. Only five of Renesas' domestic sites across Japan (10 wafer fab plants and 11 assembly/test facilities) were impacted; the worst was at its Naka factory in Ibaraki Prefrecture, home to 200mm and 300mm facilities (wafer fabrication and test/packaging). Initial messages from Naka suggested there was concern whether the site would be salvageable at all (structure, infrastructure, equipment). But after intense efforts, recovery is about 30% ahead of schedule for restoring operations at Naka to pre-earthquake levels, with both 200mm and 300mm lines now up and running, with projected return to 100% capacity in September. See below/after damage photos below.

Ali Sebt, COO of Renesas Electronics America, related the Japanese company's rebuilding efforts to SST, citing the quick recovery to effective planning, teamwork, help from partners and customers, and overall a monumental effort of dedication, sacrifice (e.g. carpooling, or even buying bicycles for a 4+hr commute) and communication. Eighty thousand people contributed to the company's recovery on a global basis, including 2500 external employees -- all of whom, from the beginning, "shared a sense of urgency, and also optimism," he emphasized.

From a conversation with Sebt, several themes emerged:

Great challenges offer great opportunities. The March 11 disaster offered lessons in ways to change the way things are done, and generated a "renewed and reenergized" focus across multiple planes: customer interaction, manufacturing redundancy, reemphasis on quality and reliability, Sebt explained. "We're a different company now." Renesas was already in the process of flipping its customer landscape from a 60%/40% domestic vs. overseas dependence (about 50/50 in micros) to a 40%/60% globalized ratio, Sebt noted.

It also gave customers a new concern too. Now they're talking about continuity of supply commitments, dual-sourcing, and responding to new RFQs with new stipulations about risk mitigation plans. This, Sebt said, is "healthy for the industry and overall economy."

JIT revisited. Some have argued that, while recovery efforts have been commendable, the real savior was "luck" in the form of an unrelated inventory overhang built up for several quarters, which softened the blow to the supply chain. "We were fortunate" in this regard, Sebt agreed. "Had we come into this quake from an allocation period, it would have been disastrous." That inventory overhang only kept until the May-ish timeframe, he noted, so credit must also go to resiliency and determination of the company's staff and partners.

The March 11 disaster has put a critical spotlight on the just-in-time (JIT) delivery method. In JIT, inventories are kept to a minimum, and the redundancy of building a given device in more than one location can mean additional cost, the antithesis of a lean environment. "Absolutely there is a broader rethinking" of JIT, Sebt acknowledged. Major customers who categorize components into strategic buckets (e.g. sole-source, proprietary architecture) vs. commodities are taking a closer look at how to manage their inventory. And for smaller and midsize customers who have completely outsourced their manufacturing and components, this has been "an awakening for them" that they have very little visibility to security and continuity of supply.

"JIT delivery was the pride of the whole ecosystem," Sebt said. Now, having inventory is "not such an evil thing;" now they see it as a good thing. "All feel it's too risky to be in an inventory-less situation all the time," he said.

Globalization of manufacturing. Part of a bigger companywide strategic examination (a "100-day plan") was to take account of how Renesas tapped a worldwide network of fabs and its supply chain. Now, there's a new emphasis on why that balance of internal/external fab network is crucial. Including the company's external fab network (which has been a 5%-10% boost in capacity), Renesas will "continue to do beyond 100% capacity," Sebt noted. GlobalFoundries' site in Singapore was originally a Hitachi fab, and Renesas has maintained some production there; TSMC, meanwhile, has been a partner since and through the 65nm node. "Once we're back online 100%, we don't intend to stop using external fab networks," Sebt explained; "we will continue those relationships as a business continuity measure." And that increase in outsourcing means Renesas can continue to grow without additional capital investment, he pointed out.

Before and after

These before/after photos were taken on April 11, nineteen calendar days after the March 11 disaster -- that's less than three weeks. And this doesn't show the "third dimension" of rebuilding beyond the visible equipment and room itself: e.g., gases, connection to servers, water/electricity, etc. Initial damage assessments had to be done via flashlights; damage "was very heavy," Sebt said.

Notice even the building's air ducts -- not terribly strong structurally -- many of them stayed intact.



The involvement of partners in rebuilding was particularly visible in rebuilding the cleanroom operations. The president of one equipment supplier personally visited Naka, bringing lunch for his employees, Sebt noted. In other cases, suppliers' other customers deferred equipment (e.g. gas indicators) to help. Renesas also borrowed spare parts from US and other operations that had them in stock.


There's also been an unexpected benefit to rebuilding the Naka cleanrooms and facilities. Putting in new or reconditioned/cleaned equipment has, in some cases, raised yields, Sebt noted.

Making sense of INTC's 2Q11: PCs down, capex up

Intel handily beat expectations for its 2Q11; PR here, analysis is all over the Web. Besides the general number-crunching, here are two key themes relevant to our semiconductor manufacturing audience:

- PC growth lower. Sales in INTC's PC group rose 11%, despite general malaise reflected by other industry watchers -- and indeed INTC now is cutting its PC growth expectations to ~8%-10%, though sales will still be higher thanks to "a very rich mix" of enterprise PCs, noted CEO Paul Otellini in the financials conference call. INTC also continues to see above-average growth in emerging markets, e.g. India, Russia, China, and Latin America (Brazil will likely be the third-largest PC market in 2012) all showed PC shipment growth in the mid-teens during the quarter.

Otellini also reiterated his view that PCs aren't really threatened by tablets, but the new devices are actually "additive to computing" as "a companion device" and won't replace PCs, though netbooks are showing signs of being affected. (Also note that INTC's PC forecast, while lowered, is still higher than the single-digit growth -- if any at all -- professed by other industry watchers.)

- Capex budget higher. Most relevant to our semiconductor industry were the comments about INTC's hiked capex budget for 2011, and how most of that is going into factory-building, noted CFO Stacy Smith. "It's been a long time since we've had to build incremental shelves, but the growth in our business now requires it," he said. "So we're putting in place some clean room space that we haven't had to do over the last couple of generations."

Often when a company raises numbers in the short-term, it's just pulling them in from future plans -- and some of this increased 2011 capex is just that, Smith acknowledged on the call. "We're going a little faster on the 40nm factories," where the company "saw some opportunities to do some things in the infrastructure" to be able to incorporate post-40nm work, even down to 10nm and 7nm, he said. "It gets kind of high ROI to do that now versus having to retrofit those factories later."

Smith also hinted that 2012 capex will increase again, reiterating that INTC's capacity spend tends to be "a couple years cycle". "Expect elevated capex next year relative to the historical trend line," he said, but without specifically committing to a figure. (Later in the call, Smith noted that the capacity going in can be throttled back "if things end up being softer" than anticipated unit growth, much like the company did in 2009.) (Deutsche Bank's Ross Seymore pegs INTC's 2012 capex at $8B, down -20% from 2011 and ~14% of sales.)

Some other points to ponder about capex, courtesy of Credit Suisse's Satya Kumar:

• In 1H11 INTC spent just a hair under 50% of its total 2011 capex budget, implying neither frontend- nor backend-loaded spending. Given negativity swirling about 2Q-3Q semicap equipment orders, that linearity probably a good thing, especially for companies with INTC exposure.
• From a macro perspective, note that it's the foundries who have been generally understood to have overextended and now cutting back their spending, and that sector (as well as Samsung) has yet to be heard.
• INTC's capex is being raised, even as its PC unit shipment growth is lowered.