Analyzing Intel's capex boost, PC disconnect

Two key takeaways from Intel's 1Q11 blowout financial performance and execs' comments in the follow-up conference call are resonating across the industry: why bearish analysts were so far off on PC demand, and why Intel is already hiking up its 2011 capex.

Trust our market visibility, not theirs. Despite analysts' assertions and concerns over perceived sluggishness in PC demand, Intel saw 17% Y/Y growth (12% Q/Q) in its PC client business. It may not have direct inroads into chips for mobile/tablet devices, but those devices rely greatly on connectivity, which means accessing backend/server systems, where Intel does have solid business. And as far as the PC market, Intel's Paul Otellini didn't mince words:

Like many of you, I noted that some of the third-party research firms issued reduced forecasts for PCs in 2011. I want to be clear that our views differ from some of theirs. The PC business has evolved into a global industry that is approaching 400 million units this year.

While some channels like PCs sold through consumer retail outlets and mature markets have deep visibility, other channels, especially in emerging markets, are not well reflected in the forecast of third-party firms until shipments from Intel and its competitors have been reconciled.

Over the last 5 years, we have put considerable effort into improving our visibility with systems like just-in-time inventory hubs for our major customers, as well as realtime metrics to monitor sales through all of our worldwide channels. As a result, we were able to call the inflection in our business in Q1 of '09, as well as predicting 2010 growth to within 1 point of accuracy.

Our projections for PC segment growth in 2011 remain in the low double-digit range based on early sell-through strength we are seeing as we begin 2011 and the great reception to Sandy Bridge in both Consumer and Enterprise segments. And while it's too early to call 2012 with an improving global economy, we see no reason for growth to be materially different from what we see in 2011.

Mea culpa, admitted a few analysts. FBR Research's Craig Berger upgraded INTC to "outperform" from "market perform," acknowledging that while PC checks have been weak, "investors (including us) have been overly bearish on Intel," "PCs and tablets/smartphones can co-exist and PC units can still grow," and "more time [needs to] be spent assessing the smartphone/tablet cannibalization impacts on PC growth."

Deutsche Bank's Ross Seymore noted that the disconnect between market analysts and Intel's results is largely explained by "Intel-specific drivers" including emerging markets, Sandy Bridge adoption (and overworries about chipset glitches), and pricing. "The Street (GLCH included) missed the magnitude of burn through 3Q10 and 4Q10 in the channel ahead of Sandy Bridge launch," which led to undershipments for 2010 PC demand, added Gleacher's Doug Freedman. Also a contributing factor: an extra week (14th) of revenue in the quarter.

Better performance needs better silicon. Three months after mapping out a $9B (±$300M) capex plan for 2011, Intel has now raised that ceiling to $10.2B (±$400M), citing a need to support 22nm and 14nm (both production and R&D). Intel says it spent $2.72B of that in 1Q11 alone (up 46% Q/Q). "We think that Intel has placed orders for equipment deliveries through mid-3Q, and we think there should be continued Intel orders in 2Q/3Q to ensure the company spends its capex," writes Credit Suisse's Satya Kumar.

Explained Intel CFO Stacy Smith during the conference call Q&A:

Probably the biggest single chunk that's happening inside of this increase in CapEx is the fact that we've made the decision that for the development fab for 14 nanometer, we're going to make that fab bigger. That gives us the ability to actually, at the early stage of the ramp, move more products to 14 nanometer, take advantage of that process technology leadership, ramp it faster. So we're going to spend some construction dollars today to have that capability in place of 14 nanometer. But over the 14-nanometer life, it should save us money by going faster on that first factory.

What Intel is seeing earlier than anyone is the effect of rising capital intensity, argues Kumar. "The rest of logic is only spending on 28/46nm," he notes, and should start feeling the higher capital intensity pressure next year. Recent pushouts by Samsung and TSMC are not an industrywide weakness trend, he says. Barclays' CJ Muse echoes what Intel execs said in the call: that the needs of emerging mobile devices (notebooks, tablets, phones) require more platform features integrated into the processor, meaning more leading-edge silicon capability for power management and performance in smaller formfactors.

Of course rising capital intensity is good for equipment suppliers, and those with best visibility to new business from Intel (particularly R&D) include ASML and KLAC, Kumar says (adding that LRCX has no Intel exposure). Others, like UBS' Stephen Chin, see others taking advantage, including NVLS and VSEA. Muse adds CYMI, ASMI, and TEL to the list as well.

Intel's capex boost also means overall 2011 industry capex should grow 20% (vs. 15%), notes Muse, with "aggressive spend still on bricks and mortar," and WFE spending loaded into 2H11. Intel's WFE spending also should stay strong in 2012, he notes.

One area Intel isn't really concerned about is foundry. Intel reportedly fabbed a 22nm chip for FPGA maker Achronix, and "we are interested in talking to some very specialized companies in terms of doing foundry things," Smith said, but "we are not building a broad-based foundry business and it's not driving our CapEx number."

CA's 33% renewables target: Promise or paper tiger?

California Gov. Jerry Brown has signed a new bill that hikes up the state's commitment to 33% renewable energy of overall use, up from 20%.

Bill "SBX1 2" revises some terms within the state's Renewable Energy Resources Program, signed as an executive order in 2009 by then-Gov. Arnold Schwarzenegger. But the bottom line: The new target for renewable energy usage by 2020 is fully one-third, up from 20%.

In a statement, the Governor said the increased threshold would stimulate investment in green technologies, create "tens of thousands of new jobs," and promote energy independence. But making 33% of the state's energy overall portfolio come from renewable sources -- the highest in the nation -- "is really just a starting point, a floor, not a ceiling," he said, suggesting that as prices drop and more RE sources come online, 40% "at reasonable cost is well within our grasp in the near future."

The measure, announced at a SunPower-Flextronics plant dedication, is supported within the renewables sector and by major power producer SoCal Edison, which is already close to the current 20% benchmark. But it's not without controversy; some suggest that residents' utility bills will spike greatly.

What do you think? Is this a significant stake-in-the-ground for renewable energy adoption, a catalyst for industry and jobs that paves the way for others to follow? Or is it a partisan paper tiger that will cause more financial problems than the ones it aims to solve: power generation/availability, environmental concerns, and eventually cost/W?

AMD's carrot for GloFo, patience for CEO

AMD has revised its wafer supply agreement with Globalfoundries, apparently to help light a fire under the foundry to keep its leading-edge process technology up to snuff -- but perhaps there's another reason.

The two firms' original WFA signed in 2009 involved a "cost-plus" payment plan (fixed regardless of utilization or yields). The amended one changes those terms for 2011 to fixed prices for 45nm wafers, but based on "good die" for 32nm wafers. AMD anticipates payments to GF will total $1.1B-$1.5B in 2011 (vs. $1.2B in 2010). The "cost-plus" terms will revert again in 2012, bumping up AMD's annual payments to $1.5B-$1.9B, with bonuses if GF meets goals for 32nm capacity.

In a post-PR presentation, AMD execs acknowledged that the changing terms are in response to what were "challenges relating to 32nm yield ramp at GF" (which caused a chip-launch shuffle) but that those yields are now "in-line with our expectations." (Now those the terms just offer a bit more of a carrot for GF to keep its 32nm yields up.) Other reasons for the change were to tighten pricing options and provide better cost visibility for its 32nm ramp.

In addition to yield insurance, AMD also pledges to give GF a little extra in 2012 if 32nm capacity benchmarks are met -- so this rearrangement of pricing terms is not just about making up for past slipups, but rewarding future availability.

Ultimately there could be a higher goal here -- all this talk about 32nm yield and incentives is really just a way to smooth out the company's margins over the next year or two, concludes Charlie Demerjian at SemiAccurate. John Pitzer with Credit Suisse notes that AMD's gross margins are basically unchanged at 4%-48%, but sees long-term targets rising to 50% due to decreasing cost/die and favorable mix.

Meanwhile, AMD's search for a new CEO "seems stalled," says MarketWatch's Therese Poletti. Why? It's a unique exec and personality who'd be willing to square up to longtime dominant rival Intel, plus emerging fabless heavyweights Nvidia and Qualcomm as well as ARM, notes Raymond James analyst Hans Mosesmann. Both AMD and Intel are still weighted heavily to PCs (currently a slumping sector), and largely criticized for (so far) missing the boat to mobile devices, smartphones, and tablets and new Apple and Google devices utilize ARM's architecture, a battle front for both chip companies. Look for clarity (or at least investor inquiries) at AMD's quarterly earnings call in a couple of weeks. Mosesmann speculates that the matchmaking efforts have "been tougher than [...] they thought," but that it's still too soon to judge. "You don't want them to rush," he notes.

Calling all photographers/moviemakers: Nikon Small World Photomicrography competition

I know there are a lot of photographers and movie makers in our ElectroIQ audience. Nikon's 37th annual Nkon Small World Photomicrography Competition is accepting movies (new this year) or digital time-lapse photography taken through the microscope. The new moviemaking category will be judged separately. The call for entries deadline for both images and movies is April 30, 2011. Rules and entry forms are at http://www.nikonsmallworld.com. Good luck and have fun! (Debra Vogler)

Demands on the Cloud, data center; Wally Rhines' 3D IC roadmap

Sharon Holt, SVP/GM, Semiconductor Business Group at Rambus, cited some interesting information during her presentation at the GSA Memory Conference (3/31/11, San Jose, CA). For example: the cost of a 22nm logic IC design is >$140M – for each new design. And from Cisco’s Global Mobile Data Traffic Forecast update – Holt presented the following data for consideration on the demands on the Cloud: 1) In 2010, global mobile data traffic was up 159%; 2) smart phones are 13% of the global installed base, yet drive 78% of the total traffic; 3) so far, video represents >50% of all mobile traffic in 2011; 4) and the average tablet traffic is 5X that of smart phones, which are 24X that of feature phones. Watch for my upcoming podcast interview with Holt on the search for a unified memory solution (i.e., one that works for PCs/servers, and for smart phones/tablets).


And in his presentation at the GSA Memory Conference, Jim Elliot, VP, Memory Marketing & Product Planning at Samsung Semiconductor, tackled the power consumption challenges of the data center. He said a Web 3.0 impact on traffic load study indicates that by 2015, 1266PB of memory will be required by data centers. 1PB = 13.3 years of HD video. And data center power consumption is growing. Elliot noted that data centers account for 23% of global ICT power consumption (about 1% of total worldwide power) and growing. SSDs can help address the challenge because of course, they have no moving parts, thus, use less power. “One SSD can replace up to 20 15k HDDs,” said Elliot. “An SSD outperforms an HDD by 47X in IOPS.” (Debra Vogler)


The 3D IC roadmap according to Mentor Graphics
Wally Rhines, chairman & CEO of Mentor Graphics, outlined what he considers to be a realistic 3D IC roadmap at the GSA Memory Conference (3/31/11, San Jose, CA). Today, there are sensors on logic, limited volume stacked memories, and PoP and flip-chip memories on processors. In the next 2-3 years, the technology will move to what Rhines calls 2.5D+. It comprises a rapidly increasing use of interposers, the integration of logic and memory with flip-chip and interposers, and mixed analog, RF, logic and memory in multi-die stacks, and TSVs outside the active circuitry. In 5 or more years from now, Rhines sees the industry at full 3D with embedded TSVs in leading edge logic chips. (Debra Vogler)

Synopsys: head in the Cloud, feet firmly planted

Synopsys’ (Nasdaq: SNPS) chairman & CEO, Aart de Geus, told attendees of the company’s annual SNUG (Synopsys Users Group) event (3/28/11, Santa Clara, CA) that using cloud computing to provide surge capacity for modeling/simulation activities by its customers is an opportunity to evolve the EDA business model. To that end, the company has an agreement with Amazon to provide the service – essentially, the ability for a user to request compute power by the hour when such a “surge” is needed to meet time-to-market goals. It was further noted that the security of such a service must be extraordinary, i.e., military-grade. SPICE modeling will also be targeted for surge capacity on the cloud. De Geus also took the opportunity to reiterate his view of semi-economics: where “smart everything” results not only in systemic value creation, but also systemic complexity. To keep up with such complexity, De Geus said accelerating software development with prototypes will be the actionable/executable specification of the future. Prototyping can be either virtual or FPGA-based. The reality of managing systemic complexity includes R&D expenses, collaborations, and acquisitions. Synopsys fully participates in all three. For example, the company currently spends over 30% of its revenue on R&D, and recent acquisitions (e.g., Optical Research Associates, Virage Logic, CoWare, Synfora, VaST Systems Technology) will continue to be an important part of the company’s strategy as software/IP/simulation/modeling are key to moving forward. Perhaps no truer to a practical, pragmatic business philosophy is de Geus’ comment that when dealing with Wall Street, “don’t over promise – over execute.” (Debra Vogler)

"Refresher" on abstract and article submissions

To all interested authors for Solid State Technology, Advanced Packaging, Photovoltaics World, and Small Times magazines: we are always looking for solid technical feature-length articles as well as column-length pieces for both print and online publication.

If you have an article idea, please submit an abstract (1-2 paragraphs should suffice) to debrav@pennwell.com. I will get back to you with the best article placement plan (print or online) as well as the length constraints. Thank you. (DV)

WaferNEWS Watch: Test tango changes tempo, VRGY chooses ATE over LTXC

The apparent lack of movement in the battle for Verigy's (VRGY) hand in marriage appears to have a victor: the company has "unanimously determined" that Advantest's (ATE) bid of $15/share in cash -- roughly a $900M valuation, note the Wall Street Journal and Nikkei daily -- is "a superior offer" than that of original suitor LTC Credence (LTXC). VRGY is still playing it coy, though, leaving the door ajar until March 25 in case LTXC counters with a sweetened offer "that would cause the Advantest proposal to cease to constitute a 'Superior Offer.'" (At this writing, 3/22/2011 at 10:45am: VRGY stock is up about 11% to $14.14; ATE is up a 6.5% to $17.68; LTXC is down about 4.3% to $8.09.)

But don't hold your breath for a LTXC rebuttal, thinks Satya Kumar from Credit Suisse. Among its options, the company most likely will choose to terminate the deal (and pocket a $15M breakup fee) and let VRGY+ATE sort out any DoJ antitrust problems, while it refocuses on its own business, he writes. The other options are less attractive: come back with a better offer, or take its case straight to VRGY shareholders, who probably won't be too receptive since the original terms (a 0.96:1 stock swap) are now dilutive at current share prices, and VRGY's board is publicly backing the ATE offer. In a terse PR, LTXC said it would explore its options, but with "the express purpose of preserving shareholder value."

So what's next for a VRGY+ATE combination? ATE already sent a note to the DoJ in January, with a second notice received by both companies in mid-February, from which point they had 60 days to respond, explains Kumar. If LTXC does back out, VRGY and ATE can go ahead and respond to the DoJ (until/if not, VRGY is on its own without ATE's help), after which the DoJ has 30 days to approve, request amendments, or enter litigation. "VRGY and Advantest have very little overlap in the markets that they operate in, leading us to believe deal has a high chance of receiving DoJ clearance eventually," he writes.

Ultimately, he notes, the winner in all of this is: Teradyne, the overall market leader. "We continue to view a possible consolidation of the test equipment space as a significant longer term positive for TER," he writes. In an earlier analysis, CJ Muse from Barclays pointed out that the test market has condensed within a decade from a dozen jostling competitors to now just three players with ≥95% market share (two with ≥80%), which makes everyone behave more rationally, which translates to better ASPs and margins.

News from Japan on the Impact of Disasters

All thoughts are of Japan and the country’s well-being after a triple disaster on March 11th, with a 9.0 earthquake and tsunami, followed by major nuclear reactor malfunctions. My heart goes out to all my friends and colleagues and their families in Japan, and their collective loss.

I have been in contact with Takeshi Hattori, president of Hattori Consulting International and an advisory board member for The ConFab, with more than three decades of experience at Sony. He worked around blackouts to file his report at 10:19 pm Tokyo time: “Letter from Japan: Update on infrastructure, fab status after earthquake”.

I also contacted a longtime friend and colleague, Kenji Tsuda, who was with Nikkei for 25+ years, launched Nikkei Microdevices, acted as Editor-in-Chief of Semiconductor Internatinoal Japan, and is now Editor-in-Chief of Semiconportal. He (like Hattori-san) is fine although expressed concerns about continued earthquakes (quakes are still felt every day, even in Tokyo), radiation and the status of survivors in the north of Japan. He reported that “Most disaster areas are snowing, where climate is similar to Illinois or Minnesota, colder than in Tokyo. So, they require blankets, oil, gas, and foods. Why they do not have sufficient goods required for life? This is because traffic roads are also damaged with the quakes and huge tsunami. Logistics are not available enough, but now getting better,” he writes.

Tsuda said the first priority of the logistics is for disaster people, secondly for industry and thirdly for national people. “Tokyo Electric Power Company (TEPCO) estimated this Monday consumption of the power might be 41GW (giga watt) covering the big Tokyo area called Kanto district. Due to power down at Fukushima nuclear power plant, however, the actual power capability was 31GW (almost 10 GW by nuclear energy)."

TEPCO announced a “rolling blackout” would start from this week. “Many commuter trains stopped and business people are confused, but JR railroad, a major railroad company in Japan has own power generators, and provides almost perfect operation. However, people living in suburbs of Tokyo were obliged to keep in their home, not to work at their office,” Tsuda said. “Yesterday, I came to my office in Tokyo, but people in Tokyo are not so many, (very quiet) and all lighting of buildings is dark to save power as well as subway station and facilities.”

He said there was plenty of misunderstanding related to nuclear effects. "Today (March 17th) the maximum radiation dose is in the nearest city, Soma City in Fukushima Prefecture, was instantly 200 micro Sv (Sievert), comparable to a flight traveler radiated with space radiation from NY to Tokyo. Usually average natural dose is 0.05 micro Sv, and places 100km far from the nuclear power plants have a few micro Sv, a 100 times larger than daily average, but not enough to damage to our health. This is lower level than radiation level in usual flight travelers." Radiation levels at the damaged nuclear plant are still unknown.

Tsuda added that, from an industry side, people worry about how long the rolling blackouts will continue. “Power is essential to ramp up their factory operation. Factory damage is being recovered within a month, people say, including Fujitsu, Toshiba and Renesas.”

Continued good wishes to Japan during this tragic time.

Pete Singer

WaferNEWS Watch: SPIE viewpoints

A pair of Wall Street analysts and a litho exec describe their key takeaways from this year's SPIE Advanced Lithography symposium: How far from HVM are the latest EUV results, how are the competitive source vendors faring, and why some work in improving EUV is falling short.

Several thrusts can help keep the industry on the Moore's Law path (transistor shrinks via HKMG, FinFETs, and 3D; new materials e.g. Ge-doping and III-V, eventually optical interconnects, and system-level approaches like TSVs). But there's general agreement that EUV provides "the single biggest knob" to tweak for the best cost-reduction roadmap, writes Credit Suisse's Satya Kumar. (While EUV will help chipmakers keep on Moore's Law, the big volume chipmakers see the larger 450mm wafer size as their next opportunity for a big step-down in manufacturing costs. The timing isn't likely to happen until 2016 at the soonest, though.)

When will EUV be "ready"? Almost certainly not at the 20nm logic node. (Intel's Sam Sivakumar said at SPIE that EUV is also already late for 10nm design rule definition, which is supposed to be frozen by early 2013.) So for now the industry will rely on double-patterning/multipatterning schemes, with the hope that EUV can quickly ramp up its throughputs and be ready for HVM by, say, ~2014-15).

For EUV there are hurdles to be sure (most notably in source power) but it's no longer a science question of if it will work -- it's "now more of an engineering/technology development project," notes Barclays' CJ Muse. Current specs show improvements: 25nm hp resolution at a customer (18nm at ASML), <0.2% dose stability, 3% CE), but sources are still ~11W usable/filtered, with goals to be ~22W by midyear (~80W lab).

Source update

ASML has been the EUV litho flag-bearer, so pushing EUV also means helping ASML succeed, at least initially, which gives the supplier a big headstart on others -- but the race seems to be tightening. Here are the three contenders for sources, with technology pros/cons for each of their approaches:

Cymer. Cymer's goals for HVM-I: In-band CE 3.0%, 50% collector reflectivity, "clean" power of >100W (200W @ IF). Its current test stats (100hr stress test): >70% source availability, 15W exposure power, 40% duty cycle, >0.3% full wafer dose stability (error stability 4%), 52.1% average area-weighted reflectivity. Two upgrades are coming, starting with a >80W raw power/40W exposure in 1Q11. The next step is HVM-II, which will improve CE from 3.0% to 3.5% (via pulse shaping and prepulse optimization), CE from 5.0sr to 5.5sr (better mirror collection angle), and improving subsystem efficiency (dose control and purity filter).

Muse's take on CYMI's map? "Overall, it would seem that the program is about 6 months to a year behind, not at all to be unexpected in an undertaking of this magnitude," he writes. "HVM-I success criteria are in no danger of being breached."

Ushio. Early EUV tools used a Cymer source, but now imec's new preproduction tool has an Ushio DPP source that it says has "considerably higher source power" and a factor-of-20 throughput increase vs. the alpha demo tool. (Kumar points out that German firm Xtreme, whose related technology Ushio acquired, worked with imec and Fraunhofer in early EUV work so their inclusion in the imec tool is not surprising.) The company claims its laser-assisted DPP technology has much better duty cycle (up to 100%) vs. LPP and with much purer spectrum that requires no light filters. The company also says its roadmap matches CYMI for power (100W by mid-2011). In addition to the imec tool, Ushio apparently is also used in Nikon's first EUV tool (vs. CYMI which has shipped four EUV sources already, one reportedly already installed at Samsung).

Besides imec and Samsung, the other four preproduction EUV litho tools are expected to go to Intel, TSMC, Toshiba, and Hynix, possibly with one of them also using an Ushio/Xtreme source. Gigaphoton plans to have its first source ready for ASML's production-ready 3300 tools, which are planned for initial build later this year and start shipping in 2012, for 2013 debugging at customers and probably volume production sometime in 2014.

Gigaphoton. Gigaphoton is still on track to ship its first EUV source to ASML in 3Q11, notes Muse. The company updated its LPP source: >100W radiation at IF from a 13kW CO₂ driver, though needing basic improvement in duty cycle, CE, debris mitigation, and laser load revealed. CE as high as 3.3% (vs. Cymer's 3.0%) was described in experiments with Sn droplet size (20μm) and droplet preheating with a Nd:YAG laser pulse. Next stage goals by year's end: 5% CE, 75% duty cycle, and 250W @ IF.


Who's supporting the EUV supporters?

Among his own summary of the SPIE symposium's EUV updates, Vivek Bakshi, president of EUV Litho, expresses doubt that 100W will be bet before 2012 (after doubling to 40W in 2011), but that's ok since those 100W sources would hit the field around the same time as the 3300 HVM tools.

Bakshi also lamented the lack of support (i.e. funding) for EUV. For one, there's little research into improving source components beyond the HVM-baseline 100W (e.g. 150W-250W). "With very few exceptions, source research, the very lifeline of EUVL, has essentially been stopped," he writes, noting for example work from Purdue's Ahmed Hassanein in increasing conversion efficiency and reducing debris which has gone largely unfunded, and apparently will soon cease. (On the other hand, research from Gigaphoton's Hakaru Mizoguchi went back to the university drawing board with a 10Hz source to improve CE and eliminate most debris, Bakshi notes.) Little if anything has been shown in scaling DPP beyond 100W -- there is work at the ISAN Institute to scale DPP, but he questions the direction provided by industry beyond that.

Regarding mask metrology tools (AIMS), Energetiq's source is 8W/mm²sr (scalable to required 25W/mm²sr), but the work needs external investment -- the overall source trio aren't really in this game, and while others have shown progress in principle (NanoUV/special design DPP, Adylyte/Sn LPP, Bruker-AIXUV/Sn LPP), it's unclear how or whether these could be developed in time to support mask metrology infrastructure. "EMI funding is not going toward efforts to make sure that the most critical element of the technology is ready in time," Bakshi writes. "This critical technology has to be driven by a consortium, or we’re not going to end up where we want to be."


Two EUV alternatives

A poll conducted during one SPIE session showed unanimous choice of EUV as the industry's biggest challenge, and also the most likely risk of failure to be adopted (more than 3D memory, through-silicon vias, or FinFETs), Kumar notes. Though EUV also is clearly the choice over other litho approaches, there remain difficult challenges needing to be resolved.

Of the non-EUV litho paths, maskless e-beam seems to be favored over nanoimprint across all devices (NIL has favor possibly in DRAM), and among the approaches, work by Mapper and KLAC's "reflective" e-beam (dubbed REBL) appear more promising. Throughput is still an issue, though (<0.1 wafers/hr on a Mapper alpha tool, projected 10WPH on a HVM tool). The logic is whether a cluster of ~10 Mapper tools could hit the 100WPH benchmark for HVM at roughly the same price of an EUV system. Throughput depends on the number of beams and current; with initial systems having 110 beams and only 0.3μA current (HVM needs 13,000 beams and 13μA), Mapper's technology has to make "tremendous progress to be successful," he notes.

KLA-Tencor, meanwhile, says its REBL system uses microlensing and lenset arrays for a more compact design; benefit is high packing density, but maybe more blur due to columbic interaction between the beams (which cross in the REBL approach, vs. separate in a Mapper system). The company has mentioned planning 1M beamlets for 5WPH throughput, which Kumar calls "intriguing" but doesn't expect any impact for a couple of years.

All the best to our friends and colleagues in Japan

The news coming out of Japan after an unprecedented earthquake and resulting tsunami is indeed devastating. Our friends, colleagues, business associates, and their families located in harm's way, are in our thoughts and prayers.

“Electric” keynote address by Kurt Yeager on transforming the grid for the 21st century

Speaking at the REW/PVW Conference & Expo (Tampa, FL, 3/8-3/10/11), Kurt Yeager, executive director of the Galvin Electricity Institute, called for a transformation of the nation’s electrical grid. “The obsolescence of our electricity system costs the country $1T/year,” said Yeager. “The average consumer in the U.S. is out of power 4hrs/year.” By comparison, Singapore’s figure is measured in seconds/year.

To enable the future, Yeager calls for integrating the grids, and diverse generation and storage resources, into a smart self-healing grid. The solution, he noted, calls for intelligent technology, intelligent policy, and empowered consumers. Key to empowered consumers is the smart meter – but it really has to be “smart.” Such meters have to provide data to the consumers, not just the utility company. Yeager referred to a user-centric view that requires the emergence of a synchronous “enernet” – something akin to the internet.

Yeager defines a smart grid as a transformative network, seamlessly connecting producers and consumers. It also needs price-responsive end-use devices that enable autonomous consumer control (i.e., empowered consumers). Yeager further calls for the nation to look beyond the regulated monopoly business model. “Remove the barriers to competitive retail services,” he said.

Another component to Yeager’s energy view is converting buildings from "power pigs to power plants." There are so many losses in the conventional industrial building, for example, just due to conversions back and forth between AC and DC he observed. (Debra Vogler)

What ventures don't get funded?

In a pre-conference workshop (at the REW/PVW Conference & Expo, Tampa, FL) on renewable energy venture development, instructors Sumesh Arora and Tony Jeff - both of the Mississippi Technology Alliance - told attendees what projects do NOT get funded: ideas, products, hobbies (i.e., if you haven't quit your day job to work on the venture full time, it's a "hobby"), patents, and lifestyle companies or family businesses. The workshop covers risk readiness, growth risks, market risks, established business risks, among other topics. Watch for my podcast interview with Arora and Jeff in the Daily Pulse and/or PV Times later this week. (Debra Vogler)

Four reasons why LRCX will rebound

Barclays' CJ Muse understands why Lam Research "has been a relative underperformer" of late, due to its lack of exposure at Intel and unfavorable growth vs. opex. But he's optimistic for a turnaround in the stock, for four reasons:

• Customer mix improving. Spending by foundries and Intel are likely to be frontend loaded in 2011, so look for memory mix of capex to get better as the year progresses. LRCX has its best customer mix in NAND (65%), so look for better business for Lam vs. more logic/foundry-leveraged rivals KLAC and NVLS.
  


• Improving margins for clean. Margins for the company's clean technology were in the low 30% in early 2010, improved to ~39% by year's end, and should top ~45% (maybe up to 47%) by the end of 2011, Muse predicts. Why? The fast market upswing actually made it tough for the company to sell its reengineered spin clean products, but this should change as the market winds die down. Also, the company's nine design wins in 2010 should translate into 3%-5% share gains, and there are higher volumes for clean.
  


• Market share gains coming. The company's increased opex outlook (~$100M) in the January quarter soured investors, but there's a longer-term ROI reasoning behind it -- Muse says it'll be for building infrastructure to help support imminent growth in etch and clean. Nearly two-thirds of the increased spend is for etch R&D to drive innovation for top customers, he notes, which is a longer-term "good investment;" ~20% is for new work for clean, particularly the re-engineered chamber configuration (medium-term investment); and ~15% is for 450mm, mainly to woo Intel (longer-term) even if it ultimately dents capital intensity. "Add it all up, and we see these investments as an effort to drive the next 5-10 points of share gains in both etch and clean over the next cycle or two," he writes.
  


• Multipatterning litho schemes driving etch. After prolonged tinkering with multiple patterning (double and more) litho schemes, the industry should finally start truly adopting this technology in 2H11 and 2012. To this end, look for etch to increase as a percentage of wafer fab equipment spending, Muse notes.

Taking all into consideration, LRCX is trading at a discount "to all of its front-end equipment peers," Muse suggests. He expects a likely March earnings trough followed by consistently ratcheting estimates, and currently pegs a $66 stock price target (11× CY11 EPS estimates), meaning he projects roughly 13% upside.

SPIE Advanced Lithography Conference podcast round-up

We have already begun posting podcast interviews that took place at the SPIE Advanced Lithography Conference. Watch for them to appear on our podcast page...you'll hear interviews with technical experts at Applied Materials/Magma Design Automation, Brewer Science, Cymer, D2S/e-Beam Initiative, Gigaphoton, IMEC, KLA-Tencor, Multibeam, Synopsys, and Toppan Photomasks. (DV)

On deck: REW/PVW Conference & Expo

Editors from Photovoltaics World will join their colleagues from Renewable Energy World and renewableenergyworld.com next week in Tampa, FL for the REW/PVW Conference & Expo. I'll (DV) be doing video interviews and podcast interviews at the event - if you're attending and want to comment on an interesting panel discussion or "hot" topic at the show, contact me via email (debrav@pennwell.com) and hopefully, we can schedule a time at the event, or else via phone after the event. (DV)

SPIE Advanced Litho Conference podcast "watch"

Watch for podcast coverage of the following companies reporting from the SPIE Advanced Lithography Conference: Cymer, Applied Materials, Gigaphoton, Toppan Photomasks, Imec, D2S, Synopsys, Multibeam, and a special interview with Dr. Terry Brewer - who is celebrating Brewer Science's 30th anniversary. The best way to catch our podcasts is to subscribe to the Daily Pulse e-newsletter and/or WaferNEWS. (DV)

WaferNEWS Watch: FORM shaping up; an AMAT mea culpa

One market analyst says probe card vendor FormFactor is "back on track" to retake market share in DRAM test. And another analyst wants a do-over for his previous bearish stance on AMAT.

FORM shaping up

FormFactor (FORM) has had its fits and starts in recent quarters, and some have even called for it to get busy trimming, and/or get busy selling. (One of our readers, meanwhile, believing this a far too simplistic synopsis, points out that not only did the company recognize the need to trim manufacturing, but its fab ops issues are more complex, concerning improper utilization and burn rates.)

But where there's a trough, there's a coming upswing, and chance to rebalance the playing field. Citing FORM's talk at his outfit's recent tech conference, Patrick Ho of Stifel Nicolaus feels the company is "back on track" with its operating model, as long as it can win back share in DRAM, and longer-term could push into NAND flash and system-on-chip designs. Initial quarters under new CEO (and former AMAT exec) Thomas St. Dennis have had "some hiccups," he notes, but 1H11 could spell the bottom for the company.

AMAT mulligan?

On the heels of strong Applied Materials' (AMAT) fiscal 1Q11 numbers, particularly in solar, we've got a Mea Culpa sighting: Piper Jaffray's Gus Richard says he shouldn't have downgraded AMAT back in July when it was deep-sixing its thin-film solar biz. In fact, estimates for 2011 and 2012 are too low, he now says, with backlogs well in excess of $3B and even approaching $4B by year's end.

Key to overall performance, though, is the company's bread-and-butter biz of tools for advanced semiconductor manufacturing, and here the shift to 28nm manufacturing will be the proving ground. "We believe yields at 28nm are going to be challenging as older gate stacks do not offer sufficient process latitude, high-k/metal gate processes are not mature at 28nm, and foundries move to double patterning is likely to be challenging as well," he writes. A rocky 28nm node transition will mean adding more wafer capacity, which actually is good news for suppliers -- and AMAT in particular, as the 800lb gorilla.

Dr. Burn Lin of TSMC compares EUV and MEB

Dr. Burn Lin, VP of TSMC, was the keynote speaker at KLA-Tencor's annual Litho Users' Group forum. Among the topics he covered was a comparison between multi-ebeam and EUV lithography for future nodes. Lin first noted that economics will drive the decision at the 16nm node - whether to use EUVL or MEB ML2. However, at 8nm, EUVL has better resolution, MEEF, DOF, and overlay margin, while MEB has the potential for better CDU and OL accuracy.


EUV needs more source power to compensate for throughput loss per node, which breaks down as follows: a 2x loss due to shot noise, and a 2x loss due to the need for more mirrors at higher NA lithography. MEB needs either more parallelism or source brightness to compensate for its throughput losses per advancing node; MEB's throughput losses per node break down like this: MEB's problems are due to a 2x loss because of the huge volume of data generated by the process (e.g., the data rate is >7.5Gbps/beam - in the MAPPER tool, for example, a single electron source is split into 13,000 Gaussian beams), and there is a 2x loss due to shot noise.


The last two points are probably obvious: EUVL has a high cost and MEB is less developed as a technology. (DV)

Editorial coverage at SPIE Advanced Lithography

I'll (Debra Vogler) be doing podcast interviews at the SPIE Advanced Lithography conference next week. You'll see them all in the Daily Pulse!

Podcast coverage at Strategies in Light

Coverage at the Strategies in Light conference includes podcast interviews I (Debra Vogler, senior technical editor) did with Chris Moore/Semilab AMS, Jeff Desroches/ATMI, Mike Plisinski/Rudolph, Ravi Kanjolia/SAFC Hitech, and Thomas Uhrmann/EVG. Some have already been posted - you can hear Jeff Desroches' interview at http://tinyurl.com/5w9cg2o. Additional podcasts are at http://www.electroiq.com/index/Semiconductors/sst-podcasts.html

WaferNEWS Watch: 450mm is coming, but after EUV and TSVs

Barclays analyst CJ Muse updates his views on a 450mm wafer-size transition, following TSMC's stated switchover plans. His take: 450mm will happen by or before 2018, but other key chip manufacturing transitions will have to come first -- namely through-silicon vias (TSV) and EUV lithography.

After an initial push by the self-appointed 450mm Big 3 (Intel, Samsung, TSMC) asking for a 2012 pilot line, things quieted down (at least publicly) due in part to vociferous reception from suppliers, and then the global and industry downturns. Now, with recent news of Intel's forthcoming 450mm-capable D1X facility in Oregon and its planned new AZ fab (also 450mm capable), and TSMC's stated 450mm schedule (pilot line in 2015-2016, ramping production in 2015-2016), industry chatter about 450mm has "begun to percolate" again, he notes. Equipment makers, long resistant to the idea of 450mm, have started commenting publicly to the eventuality of a transition. (The 300mm wafer-size upgrade increased processing surface area by 2.25x, but they only could get roughly 40% more for 300mm tools, Muse points out.)

But capital intensity for leading-edge semiconductor manufacturing is on the rise, and there are more pressing transitions that will need to be addressed first, he says. First, expand use of through-silicon vias (TSV). Then, incorporate EUV lithography for finer features where immersion (and its associated tweaks) can no longer go, presumably sometime soon after 20nm. And being third-fiddle to TSV and EUV will actually help 450mm's cause, because 450mm will help chipmakers reduce their rising manufacturing costs, and rising capital intensity translates into more business for tool suppliers so they'll have a better economic foothold for the R&D.

"We will likely see a chicken and egg game, but we do expect chipmakers to help support the tool development efforts with equipment companies, at the same time, sharing some of the higher dollars received in the current golden era of capital intensity," Muse writes. His back-of-the-envelope calculations (a $40B equipment market, 15% R&D spend on it, and a seven-year transition period) suggest tool makers will spend roughly $6B on 450mm, which they "can rather easily come up with," he says, as long as chipmakers add their own funding "in the order of billions" to help the transition.

Muse also lays odds on who will benefit most, and least, from the 450mm future. Adding more wafer surface area means that beam-tool process steps (i.e. litho, implant, and metrology) will need to be improved to maintain their throughput, so suppliers in these fields should see a boost in capital spending. Areas that won't see much help from 450mm would be in vacuum-based process equipment.

"The ROI argument still exists for 450mm, as has existed for EUV," Muse sums up. "But if [chipmakers] all want it in no uncertain terms, and are willing put money to make it happen, it will happen."

LED manufacturing workshop at Strategies in Light

At a pre-conference workshop (Strategies in Light; 2/22-24/11; Santa Clara, CA), industry experts discussed manufacturing issues and strategies for LEDs. In the coming days, watch for my podcast interviews with workshop presenters Chris Moore/Semilab AMS, Mike Plisinski/Rudolph Technologies, Thomas Uhrmann/EV Group, and Ravi Kanjolia/SAFC Hitech. They'll be posted to www.electroiq.com and featured in the Daily Pulse and WaferNEWS.

Strategies in Light conference coverage this week

Just a reminder that Electroiq (i.e., Solid State Technology, Photovoltaics World, Small Times, and Advanced Packaging) editors will be covering the Strategies in Light conference this week (Santa Clara Convention Center).

Next week - we'll be covering the SPIE Advanced Lithography Conference.

(DV)

WaferNEWS Watch: War of the ASPs at Mobile World Congress

Eyeing the Mobile World Congress through a semiconductor industry lens, Deutsche Bank analyst Ross Seymore sees the battleground of tablets and operating systems shifting from basebands to application processors, and ultimately boiling down to integration and prices.

Nokia: MeeGo to Windows. Android's growing popularity in smartphones and tablets was in the spotlight at the recent Mobile World Congress, but what created buzz among semiconductor vendors was Nokia's announced shift to Windows from the Intel-backed Linux-based MeeGo platform. "Most chip vendors at MWC were trying to put on a positive spin on this change, but we found a pervasive sense of uncertainty as to the chip procurement implications," writes Seymore in a research note. Perceived winners in this shift: Qualcomm (incumbent in the Windows ecosystem) and possibly Texas Instruments (incumbent at Nokia in basebands). Intel and Broadcom would be potential losers amid the uncertainty surrounding the OS shift, ramp timing, and opex requirements, he speculates.

War of the app processors. The emergence and user embrace of smart phones and tablets (netbooks, we hardly knew ye!) is shifting the battle of silicon from basebands to application processors, and there's a "core war" brewing among numerous (at least 10) vendors trying to differentiate on how many ARM cores (single, dual, quad-core) and frequencies (1GHz-2.5GHz) they can offer.

It's all about price and integration. Ultimately, end-users generally don't care about the guts and components of their smartphone or tablet unless it impacts usability. So, inevitably, the key advantage for mobile chip components will be about price, and favor those who can leverage cost-cutting benefits of integration (baseband, connectivity, etc.)

Room enough for everyone? Bottom line, the markets for smartphones and tablets are probably big enough that there's significant growth potential for chip vendors, but competition will be fierce and even intensify, from basebands to application processors to connectivity. Once handset vendors whittle down their OS choices, look for technical differentiation to give way to pricing pressures, and the winning OEMS will be those who can offer various wireless silicon solutions that can be integrated to lower silicon costs. (Seymore's looking at you, QCOM, BRCM, and MXIM.)

Strategies in Light conference coverage

Those of you interested in LED manufacturing issues and strategies will want to attend the Strategies in Light conference next week (2/22-2/24/11, Santa Clara Convention Center; www.strategiesinlight.com). I'll be covering the event and our editor-in-chief, Pete Singer, will be moderating a workshop on Tuesday, 2/22, 8:00AM-noon. I have limited time available in my schedule, but if anyone is interested in doing a podcast (audio-only) interview, please contact me at debrav@pennwell.com to see if arrangements can be made. (Debra Vogler, Sr. Techical Editor)

WaferNEWS Watch: Advice for MENT and EDA: Fight and pray

Late last summer Carl Icahn raised his ownership stake in Mentor Graphics achingly close to the 15% threshold trigger of the company's newly enacted "poison pill" amendment, set down just two months earlier in what was viewed as a preemptory response to just such a shareholder maneuver.

And now we see why: Icahn now says MENT should put itself up for sale, and he's gathering forces for a potential proxy battle, ostensibly at least in part due to the company's sudden acceleration of its shareholders meeting date. "At the very least [Mentor Graphics] should be put up for sale and see what the shareholders want to do with it," he told CNBC. "The company is substantially undervalued versus its peers," added Donald Drapkin of Casablanca Capital, a 5.48% stakeholder that also is suggesting a new slate of board members. "Management's done nothing to promote shareholder value, they've just been just sitting on their hands [...] It's just a sleepy company run like a country club."

We asked EDA market watcher Gary Smith of Gary Smith EDA what he thought of the situation. Antitrust risks would probably keep EDA rivals Synopsys and Cadence out of the running for M&A, as the fragmented MENT assets would be "far less valuable than the whole," he told SST. A more logical fit would be with a mechanical vendor (e.g. Dassault or PTI), but a true inflection point of system design automation is still years away -- it "probably won't happen until the next decade so the acquisition wouldn't reap benefits for quite a while." From an engineer/user's perspective, acquisition by any other type of firm would mean a breakup of MENT, loss of leadership, perhaps "a slowdown in DFM R&D," and even a sectorwide EDA breakup "as we are seeing in the embedded software design market," Smith thinks.

His recommendations: "I think Mentor should remain independent so they can carry out their present market strategy without interference." And his advice for all the EDA companies: for MENT, "fight;" for SNPS, "pray"; and CDNS, "pray harder."

NanoArt 2011 - open to all artists and scientists (18 yrs or older)

The NanoArt 2011 international online competition was announced today. It's open to all artists and scientists 18 years of age and older. Basically, contestants are given 3 hi-res monochromatic electron scans of nanosculptures. Participants have to alter the provided image(s) in any artistic way to finish the artistic-scientific process and create NanoArt works. Artists and scientists may also use their own images as long as these visualize micro or nanostructures. Go to http://nanoart21.org/html/nanoart_2011.html for more details. (DV)

WaferNEWS Watch: Popping the MOCVD bubble for LEDs

Market analysts at our sister organization Strategies Unlimited recently took a look at the rapidly rising sales of MOCVD reactors for LED production, whether it's a true market bubble, and what it means to both sides of the supply chain -- who wins and who loses. Turns out it's a bit more complicated than at first glance.

"There have never been so many orders in the history of MOCVD," asserts Tom Hausken, director of components practice. For an idea of just how wild & wooly this sector has become, consider:

• A rumor from last month, that Golden Concord Holdings (Hong Kong) sought to purchase 500 reactors as part of a new $2.5 billion investment in LEDs;
  

• Several companies have orders for >100 reactors;

• There are two primary supplier beneficiaries -- Aixtron and Veeco -- who are "working like crazy" to deliver tools, he says.

Seems easy to conclude that there's way too many tools in the pipeline. Hausken and S-U peers drew up the following chart to calculate what they believe the world needs to meet near-term LED production (not counting normal excess or competition), vs. what the devicemakers seem to be asking for. (Note that this doesn't include assumptions about what might actually get delivered, accepted, and put into production...)

Estimated LED MOCVD reactor shipments. (Source: Strategies Unlimited)

Clearly there is a big mismatch, but the question is -- who stands to win, and who will lose? Hausken reveals all in an article for SST's sister magazine LEDs Magazine, but suffice to say that there are a lot of winners, from LED end-users (excess capacity means lower prices) to MOCVD reactor vendors (cash windfall). And even China, which is pushing this entire envelope with subsidies, generally comes out ahead due to technology and investment infusions, much like what happened with the nation's solar PV push.

On the other hand, in the event of an LED glut lower-tier LED suppliers probably will suffer, Hausken notes. And investors "may get stuck with some expensive paperweights."

WaferNEWS Watch: ATE-VRGY quietly busy?

It's been a month or so since the drama unfolded around Verigy, LTXC (the fiancée) and Advantest (the 11th-hour suitor). In Nov. 2010 LTXC and Verigy announced a planned merger. In late December Advantest swooped in with its own unsolicited offer whichVRGY at first coyly rejected it, but with language that implied a sweetened offer might be better received. Barclays analyst CJ Muse has suggested VRGY-LTXC is a better strategic fit.

Today things are unusually quiet, though doubtless there's activity behind the scenes. "We think that Advantest and VRGY are still in merger discussions," writes Satya Kumar from Credit Suisse in a report. Regulatory concerns shouldn't be a problem (the combo would trail TER in marketshare by ~50% to 33%), and tech synergies are there (e.g. cross-selling probe cards and handlers, streamlining product roadmaps). Indeed, Kumar thinks the protracted silence is due to hammering out details in breakup fees and other terms in case the deal can't be closed.

A S1/A filing could happen in early Feb, with proxy mailings around the same time; Kumar thinks shareholders will lean toward ATE instead of LTXC (though VRGY might continue to press ahead with LTXC if only to get ATE to accept terms and sweeten the deal). The two sides, he believes, are close enough, and the opportunity attractive enough, that ATE is unlikely to make this a hostile bid and appeal directly to shareholders. "We still think there is enough incentive for Advantest to do what it takes to make this deal happen," he writes. "If there is a will, there can be a way."

WaferNEWS Watch: Semicap 1Q11 preview: Rising tides

Wall Street analysts handicap this week's field of semicap earnings announcements, and the impact of some big chipmakers recently lifting their 2011 capex ceilings.

Generally speaking, both CJ Muse (Barclays Capital) and Peter Kim (Deutsche Bank) expect a slightly better-than-thought 4Q10 from several key suppliers reporting their financials this week, as foundries and NAND flash suppliers get an early jump on what likely will be a very busy 2011 for both sectors. Kim sees things at the upper end of guidance ranges, with around -4% sales declines.

Both analysts also expect 1Q11 to be flattish (or slightly lower than 4Q10), though Kim thinks it'll be better than originally thought as recently hiked 2011 capex budgets would seem to erase a projected midyear capex gap. "Concerns of tool delivery schedules could motivate chipmakers to place longer lead time orders for tools to secure delivery slots)," which could pull in orders into 1Q11, Kim writes. Muse adds that ASML, which has the highest lead times in the SPE sectors, just reported near-term record orders. Look for bookings to climb again in 2Q10 as fabs firm up their ramp-up plans, Kim notes. Indeed, the next week will bear this out as Samsung, Hynix, TSMC, and UMC all report their quarterly results and 2011 capex plans; Kim sees Samsung and Hynix coming in flat or slightly lower in 2011 vs. 2010, while TSMC likely will raise its budgets (UMC is keeping its 2011 capex flat at $1.8B...Kim had been projecting $2.0B). Toshiba might also provide some clarity on its Fab 5 spending plans ahead of its fiscal year-end in March.

A rundown of their company-by-company expectations:

Lam Research: Intel's $9B capex surge in 2011 helps competitors and hurts LCRX which has little business there outside of bevel clean -- but this might indirectly help, too, if other chipmakers (e.g. foundries) feel compelled to open their wallets a little more to keep up, points out Kim. Other key accounts with anticipated big 2011 capex investments (Samsung, GlobalFoundries, TSMC) should pick up the slack, too. Muse sees inline C4Q10 revenue/shipments and a flattish C1Q11, with SEZ clean business picking up any slack in etch demand. Much of LRCX's business will be backend-loaded in 2011. "We think that $800+ revenues is definitely sustainable in the 1H of 2011, if not for the whole year," Muse writes. Keep an ear out, though, for any comments (however unlikely) made by LRCX CEO Steve Newberry during the results call regarding overspending or peak spending.

KLA-Tencor: KLAC has the largest exposure to logic and foundries who are leading the capex charge in 2011, and they generally buy high-end wafer and mask inspection tools, Kim and Muse agree. ASML's record orders also comes into play here, since those masks have to be inspected, Kim points out -- though he thinks some of that reticle inspection business could be split with AMAT, whose Aera 2 is believed to have a foothold at Intel. Muse sees KLAC coming in at C1Q11 guidance of flat/-10% orders, though like others this should quickly pick up in subsequent quarters. Kim also points bullishly at KLAC's new LED production tools, a market that "is quickly becoming large enough to be meaningful" to the company.

Varian Semi. Equip. Assoc.: This is a clear darling of both analysts; Muse gushes that it's "one of our favorite secular growth stories" (in both semi and solar), and Kim acknowledges that VSEA is the leader in both HC and MC implant, and the sole supplier of PLAD tools (all DRAM for now, but maybe NAND later). That means there's a lot of wind blowing to fill its sails, from 2011 capex projections from Intel, Samsung, and GlobalFoundries to increased penetration of its Solion tool (projected $25M sales in 2011 with possible upside, $100M in 2012, according to Kim). "With capacity expansion spending in full swing [and] our estimates incorporating only ~$50M in new market revenues, we see upside potential to our above-consensus CY11 and CY12 estimates," Muse writes.

Teradyne: Barclays' Muse expects -21% Q/Q decline in C4Q10 orders to $275M, but hopes to find in TER's results some "confirmation that the March Q is indeed the trough for tester demand." Leading the way back up the slope will be a pickup in NAND test demand, he says.

Novellus: NVLS is actually lagging in cycle-to-cycle revenue growth, Kim says, but PVD sales are trending higher thanks to marketshare gains in memory. Also, share buy-backs and "disciplined cost control" give it better earnings leverage growth, he adds.

Applied Materials: Though AMAT reports later than other SCE firms, it's still by far the industry 800-lb gorilla, and it'll get a windfall from Intel's capex splurge (CMP, RTP, epi, PVD, and mask inspection as stated above). But overall, AMAT could see a lag from EES (orders down in F1Q11, with added risk of a growing solar PV market oversupply situation) and FPD businesses (down "moderately" in F1Q11 and flat through F2Q11), Kim says.

Common Platform alliance to use gate last at 20nm

At today's Common Platform Tech Forum event (Santa Clara, CA), Dr. Gary Patton, VP, IBM Semiconductor R&D Center, told attendees that the alliance will switch from a gate first approach to gate last at 20nm. He noted that 20nm technology demands different requirements than 28nm. He said both approaches have been evaluated in parallel since 2001 and stated that he is less concerned with the replacement gate process than he is about the other innovations that will be needed at 20nm (e.g., self-aligned contacts, local interconnects, and BEOL pitches).

The time frame for introduction of 20nm is 1Q2013 for early production. It is anticipated that third generation ArF immersion with double-patterning and source/mask optimization (SMO) will be used at 20nm.

WaferNEWS Watch: Takeaways from CES

Scanning products and trends at this year's CES show to get a sense of where the industry's going, Barclays' CJ Muse thinks the emergence of tablets and smartphones not only helps NAND demand overcome DRAM softness, it could signal "a paradigm shift" in the relationship of semiconductor sales and worldwide GDP. And there's a Beta vs. VHS battle brewing in LCDs.

Moore's Law is alive and well. More people are using and embracing tablets, smartphones, and smart TVs, which change consumers' relationship and interaction with the PC. On the devicemaker side this means greater functionality, smaller formfactors, and reduced power consumption -- all of which mean more high-end silicon. As such devices continue to penetrate into emerging markets, "we could be seeing a paradigm shift in terms of semiconductors contribution to worldwide GDP," he writes. (His supplier picks, with most exposure to node-shrinks and new wafer capacity: ASML, LRCX, VSEA, AMAT.)

Memory split, but overall strong. Tablets continue to cannibalize netbooks and lower-end notebooks, but surging NAND consumption (likely doubling to 128GB in the next-gen iPad) is only partially offset by decreasing DRAM consumption, so look for higher demand for more memory wafer starts, Muse writes. And this doesn't even factor in the potential for solid-state devices. (His picks: Memory makers, and suppliers with most exposure to them: LRCX, VSEA, TER.)

Displays: A Beta-vs-VHS battle brewing? No big new splashes in displays at this year's CES, it's all "evolutionary" vs. "revolutionary," Muse says. 3D-TV continues to gain steam, but with weaker forecasts than before (3.5M units in 2010 vs. 5M+, by his count), and "slightly less than 20M units" in 2011.

And there's a "Beta vs. VHS battle" brewing in this space. LG Display wants to move from active shutter glasses to a passive technology aided by its fill-type patterned retarder (FPR) display, which lowers passive costs by up to 30% and enables use of lower-cost glasses ($1-$2 vs. $100+). Sony and Samsung are sticking (for now) with the active technology. And Toshiba is working on a third option (autostereoscopic) that is glasses-free. With more larger-size displays incorporating 3D technology, this is a battle to watch, Muse points out.

Muse also was surprised at a lack of OLED TVs at CES; LG had a 31" model (ready in the US later this year) and Sony had a 24.5" one, while Samsung pulled its offering from the floor. It's clear, Muse writes, that OLED's high production cost is limiting its penetration into larger panel sizes, and mass production is (for now) only viable for small-size displays (Gen 4 and 5.5). Samsung hopes to gain first-mover advantage this year with a massive AMOLED capex ramp, he notes.

For Internet-connected TVs, it's still unclear where the functionality will reside (the TV or set-top box), and also how TV panel/set makers will differentiate themselves.

Steve Jobs goes on medical leave from Apple

In an email subsequently released to the media, Steve Jobs informed the Apple team that he will take a medical leave of absence to focus on his health. Jobs will continue as Apple's CEO and be involved in major strategic decisions for the company.

Tim Cook, chief operating officer, will be responsible for all of Apple’s day to day operations.

Apple recently made a stir in the photovoltaics sector when it won a patent for a mobile device that derives power from a solar panel in a "plug-and-play" configuration. The patent shows that the solar panel would be removable and could be used to charge the device or batteries/accessories.

The company also influenced the MEMS microphone sector in 2010 with incorporation of MEMS microphones into the iPhone 4.

The PV and MEMS sectors will watch carefully to see how Apple's technology and design decisions are affected with Jobs on this medical leave. The Associated Press reports that Cook spent significant time at IBM before joining Apple, where he has taken the reins twice due to Jobs' medical leaves (2004 and 2009).

WaferNEWS Watch: Best of 2010

In a banner year for semiconductor makers and the suppliers who sell chipmaking tools, industry stocks generally did pretty well, up ~22% on average for our WaferNEWS Fab 50 list. Congrats to AXT, which climbed more than 200% for the year; kudos also to Axcelis, which more than doubled its stock in the past year. Heading the other direction were Tegal (languishing most of the year in the $0.50 range) and FormFactor (whose problems and possible solutions have been the subject of speculation).

Note that as in every year there were changes and casualties: EGLS, ASYT, AVZA, BESI, and ICOS are no longer on our list. Also, LTX and Credence merged, while Semitool was bought by AMAT.

Silicon Valley Engineering Council banquet

If you're in the Silicon Valley area, you might want to check out the Silicon Valley Engineering Council (SVEC) banquet. Register at http://svecbanquet2011.eventbrite.com/

Dr. Robert Doering featured in January 2011 SST

Please be sure to check out the cover feature by Dr. Robert Doering of TI in the January issue of Solid State Technology. And thanks to NRI Southwest Academy of Nanoelectronics at the University of Texas at Dallas for the beautiful SEM that graces the issue's cover. (Any comments - please send to debrav@pennwell.com)

CES will be a staging ground for the new TV remote, brought to you by MEMS

We'll challenge the inner TV infomercial announcer here.

Does your arm ache from pointing the remote at the TV? Are you sick of scrolling with endless button clicks just to get to the channel you want? Don't you wish there was a better way?

At the upcoming Consumer Electronics Show (CES), January 6-9 in Las Vegas, several TV manufacturers are teaming up with micro electromechanical system (MEMS) makers for the new, modern TV remote. LG is using InvenSense's MEMS in its TV remote at CES, as is Universal Electronics. Hillcrest is partnering with Broadcom at CES to showcase the powers of Bluetooth SoC and MEMS integration, all in the name of better TV remotes.

MEMS in the remote control allow TV viewers to scroll through channels and showtimes more easily. They don't require direct line-of-sight to the box either. This kind of user-synched control is what you experience when playing Nintendo's Wii, which also uses motion control MEMS.

This might be a good time to brush up on what MEMS are, their uses, and why they fit right in at a cutting-edge electronics show like CES. The acronym is generally pronounced "mems" rather than saying each letter. Get started by reading STMicro's article, Introduction to MEMS gyroscopes, then explore further on the ElectroIQ MEMS center at http://www.electroiq.com/index/mems.html

This is the point in the infomercial where I'd repeat the phone number to call about 5 times. But hey, if you had a MEMS-enabled remote, you would be able to change the channel pretty quickly!

WaferNEWS Watch: China hitting the dimmer on LEDs?

Veeco's stock was nudging $50/share less than two weeks ago, but in the last five days has lost 19% of its value. Aixtron's lost about 9% during the same period. What's going on? Despite their recent assurances to the contrary, Citi's Tim Arcuri is increasingly pessimistic about a possible change in China's MOCVD subsidies that could send tool orders plummeting in 2011. Officials are becoming "very concerned" about misuse of the funds offered in the program, he said, citing no "smoking gun" but instead "a mosaic of discussions with China LED makers, policy makers, and other sources" within China. TheStreet cites a Chinese newspaper quoting a Yangzhou official that the subsidies will be cut off July 1, and that some companies have applied for the subsidy "that didn't even know the first thing about LED production."

Still, other analysts cited by TheStreet weight that much of this chatter is at the local level and may be part of metropolitan competition. Avian Securities' Andy Abrams points out that to reach its stated goal of 33% share of LED production by 2012, China will need another 500+ tools, on top of the 370 expected installations by early 2011. Chinese LED companies serious about being real players won't cancel orders, he surmises, they'll just find other ways to fund them. The real question, he says, is not whether China will dump its subsidy program -- but whether and how fast the market improves for LED backlighting.


Still bullish on semi capital intensity

Credit Suisse's Satya Kumar raised his semiconductor capex estimates for 2010, and all the way through 2012, believing that NAND, foundry, and Intel spending will more than offset a decline in DRAM capex. He sees 2011 capex now at nearly 9%, vs. flattish, and 2012 capex at $35B, vs. $30B-$32B previously. Shipments should plateau at ~10% levels through 2Q11, which is better than his prior view of this "mid-cycle pause."

Why more bullish? He reiterates his argument that semiconductor capital intensity is only increasing -- from ~5.2% in 2009 to ~10.5% in 2011-2012 (prior peaks: 12.6% in 2007, 15.8% in 2000) -- due to a pushout of 450mm wafer-size transition, accelerating product cycles and penetration, increasing cost/wafer starts per month for new logic and foundry capacity, and a transition in memory spending from shrink to capacity adds.

And industry companies seem to be rallying to the bullish flag. ASML's big bookings hike, a company with long product lead times, "impl[ies] others will see upside eventually," Kumar writes. At its midquarter update NVLS raised its 4Q10 bookings guidance, and VSEA, LRCX, and CYMI "have sounded incrementally more confident," he adds.

WaferNEWS Watch: Recap of Barclays' conf: Semicap outlook brightening for 2011

On the heels of Credit Suisse's gathering of semicap presenters, Barclays had its own Capital Tech Conference, where many of the same themes were reiterated. Key takeaways, as reported by CJ Muse:

• Orders for 4Q are looking flat to up 5%, with no pushouts ("some have reversed themselves," he writes).
  
  
• 2011 capex now looks "closer to flat" with 2009, vs. expectations of around -10%. "Most equipment vendors" are now on this bandwagon, Muse says. Lithography is more bullish than that (see the next point), while SoC test should see a trough in demand in 1Q11 (see the point after). Other areas to look at for 2011: foundry and NAND should spend strongly (main beneficiaries: LRCX and VSEA, also KLAC).
  
  
• There's a gold rush in litho systems, Muse notes, as Tier 1 firms (e.g. Samsung, TSMC) race to add capacity by 1H11 and Tier 2 suppliers scramble to get their hands on immersion tools so they're not left in the dust. "Reluctance by nearly all semi players to push out immersion tools provides strong visibility to above-industry growth in 2011, and early adoption of premium-priced EUV systems contributes to 2012 strength," Muse writes. Overall immersion shipments could exceed 120 units in 2011, he says, with ASML likely further widening the gap between it and Nikon. And Cymer's looking at Y/Y unit growth in 2011 for both immersion and KrF light sources.
  
  
• More specific frontend semicap insights: VSEA sees 1H11 tracking similar to 2H10 and NAND boosting 2H11 prospects, while its solar unit is on pace to exceed sales targets for both 2011 ($25M-$35M) and 2012 (>$100M); AMAT is tracking 17 fab projects in 2011; KLAC sees foundry spending and NAND spending in 2011; MKSI is leaning toward a flattish environment (likely driven by "bulky solar order[s]," Muse notes);
  
  
• The market for SoC test tools, currently going through a 1-2 quarter digestion period, should hit a trough in 1Q11 "with a gradual recovery thereafter," Muse writes. (Huse also updates his take on the Verigy-LTX/Credence-Advantest M&A soap opera currently playing out -- suggesting that Advantest's offer really is the better one now, citing fair valuation ($11-$15/share, possibly increased to $15-$18), ballpark comps (closer to 2.0× EV/LTM sales), a stronger Yen for leverage, and ATE's desperation to add VRGY's high-end digital SOC capabilities. Even so, he still sees TER as the top dog in test, if only as a beneficiary of all the sector consolidation & uncertainty.)
  
  
• Elsewhere in the backend, Amkor sees 4Q about at guidance (-5% to -10% q/q) and 1Q11 with typical seasonality (also -5% to -10%), but then growth resuming. Management emphasized growing copper capabilities. And Formfactor now has "some elements of a turnaround in place" -- including trimming its board of directors -- but uncertainties remain," Muse cautions.
  
  
• In subsystems, AEIS and BRKS are helped by diversification: AEIS into PV inverters, and BRKS in other non-semi sources (to the tune of "at least $40M in revenue").
  
  
• Key MOCVD equipment suppliers Aixtron and Veeco see no signs of slowing in either subsidies or tool orders form China; instead they emphasized "solid visibility to revenue momentum in 1H11," with new tools and an environment where lots of smaller players are driving spending with single-digit orders (translation: market gains at individual customers are hard to track).
  
  

IEDM 2010: too academic? or just right?

While attending IEDM 2010 earlier this week, I heard a number of industry experts comment that this year's conference was too academic. Translation: most of the technologies presented would never see the light of day in a fab. Indeed, during the opening day plenary session, it was noted that this year's conference had seen a drop in submissions from industry, while submissions from universities was up.

It seems reasonable that with so much R&D work being done under the auspices of consortia (and surely it will increase as the funding levels needed to get beyond 22nm increase), more papers will be presented by the consortia, and perhaps less presented by sole companies, or small groups. That leaves academia to round out the roster. But with so many different paths to get below 22nm - architecture and materials - maybe this is a perfectly logical development. A bewildering number of pathways might need a large number of research paths to sort everything out. So perhaps it's a good thing.

Please tell us what you think. Was this year's IEDM "too academic," and if so, is this a good trend or troubling? Or maybe this year was just a blip. Or perhaps you think the program is just right. Thanks for taking the time to comment.

Debra Vogler, Sr. Technical Editor
debrav@pennwell.com

WaferNEWS Watch: NVLS, ASML spreading holiday cheer

ASML: €2B with a bullet

In its 3Q10 results (Oct. 13), ASML forecasted 4Q10 bookings of about €1.3B. Eight weeks later it now sees as much as €2B coming in. (No details about 1Q11 numbers.) What happened? DRAM is weaker than expected, but NAND flash and especially foundry/logic new-fab commitments (55% of orders vs. 48% in 3Q) have far more than made up for it, the company says. Credit Suisse's Satya Kumar named names for likely culprits behind the increased demand: Samsung, TSMC, and GlobalFoundries for logic foundry, and IM Flash, Hynix, and Samsung in NAND flash.

None of those bookings include the company's EUV systems, of which six beta versions (NXE:3100s) are now on their way to customers. (Nine of the high-volume production version, NXE:3300, are slated to ship in 2012.) Those, he calculates, could translate into another €1B in incremental revenue, starting in late 2011 and throughout 2012.

While noting that order levels in 4Q are hard to sustain, Kumar sees several truths underpinning ASML's increased order demand, which is on track to end 2010 with a €3.4B backlog:

• Semiconductor product cycles and market penetrations are only expanding

• Capital intensity is only going up (memory as well as logic)

• Lithography capital intensity is *really* going up, with ASPs racing ahead of tool productivity

• ASML is gaining share vs. competitors (notably Nikon) in the next product cycle

• EUV is no contest at the moment: ASML is "3+ years ahead" of competing tool suppliers.
  

Look for order levels to trend back down to ~€1.5B in 2012, which will include EUV, but with lumpiness like we're seeing in 4Q, Kumar says.



Novellus brightens mid-4Q update

In its Dec. 7 midquarter update, Novellus nudged up its guidance for 4Q10 bookings (-5% to +10%, vs. -14% to -10%), shipments (13% Q/Q vs. 9%), and EPS ($0.88-$1.00 vs. $0.85-$1.00) noting that business has picked up since October, with a couple of big orders (for new capacity) potentially making that upswing. 4Q sales ($367M-$385M) and gross margins (49%-51%) remain unchanged (the divergence between improved shipments and flat sales being attributed to new products for new customers). Fab utilizations are above seasonal averages and overall memory is solid (stable NAND offsetting weak DRAM), while foundry activity remains strong. NVLS execs see no pushouts, but the midpoint of the 4Q bookings growth is slower than the previous estimate.

Bottom line, agree several industry watchers (Credit Suisse's Satya Kumar, Deutsche Bank's Peter Kim, Barclays' CJ Muse, Tradition Equities' Peter Wright): NVLS' generally positive outlook sounds an awful lot like other semiconductor capital equipment suppliers. Nothing surprising.

IEDM coverage to come!

If you didn't get to attend IEDM or missed some sessions, you can catch up on the discussion topics by listening to my podcast interviews from the conference. Watch for them to appear in the Daily Pulse and WaferNEWS - or just check out the podcast section online at www.electroiq.com. There will be interviews with IMEC, SEMATECH, Leti, and more. (Comments - send email to debrav@pennwell.com)

Have you submitted abstracts yet?

If you haven't checked out our media planners for 2011 - check them out at www.electroiq.com/index/advertise.html. Each media planner (Solid State Technology, Small Times, Advanced Packaging, and Photovoltaics World) contains editorial calendars. We also have editorial calendars for our e-newsletters: WaferNEWS, Small Times (both MEMS and Nanotechnology - the e-NLs alternate topics), PV Times, and AP Semi-monthly. When you find a topic of interest to you, send an abstract to me at debrav@pennwell.com. Thanks!

WaferNEWS Watch: Inside the CS Tech Conference

General sentiment reported by Credit Suisse analysts from the firm's annual Technology Conference (11/29-12/2) pointed to a solid opening weekend for holiday purchases and positive vibes about early 2011. Company presentations of interest shed light on strategies at TSMC, Micron, and several equipment suppliers.

Comments from participating companies continued to point to a 1-2 quarter industry pause -- not a cyclical downturn -- wtih lean inventories and visibility into 1Q11 that shows returning to seasonality. Potential upside is in areas relevant to touch-screen, industrials/auto, smartphones & tablets, comm and RF, and lighting. Themes with a longer playout include growth of semi content in devices and higher R&D intensity at smaller nodes. A survey of 200+ investor participants was "cautiously optimistic" on tech with 64% "overweight" on the sector and just 12% underweight; 76% of investors expect tech to outperform in 2011 (14% see underperform), with semiconductors behind only software and tied with Internet for subsector picks.

Another widely supported theme was upbeat attitudes about a successful holiday shopping kickoff, with a handful of happy vendors represented. Visa showed double-digit Y/Y growth in several payment trends. And Microsoft's Xbox had its biggest Black Friday and week in history.

Cautious optimism among chipmakers, suppliers

Updates from several key industry companies indicated slightly better visibility through 1H11, and a number of

-- TSMC noted its 4Q10 is on track and 1Q11 forecasts are better than seasonal (flat to -5%). The foundry still sees much better growth in IDM outsourcing (15%, up from 10% in 2010) than semiconductors (5%), IDM logic (6%), or fabless ("high single-digit"), citing demand for PCs, handsets, and consumer apps. The foundry will grow capex in 2011 with "full loading every quarter" though "not as tight as 2010" -- the tool move-in schedule was Fab 12 phase 5 in 3Q10, then Fab 14/phase 4 in 1Q11, and then phase 1 at its new gigafab Fab 15 in 2Q11. Leading-edge node is clearly a high complexity but high-reward business -- capex per 1k wafers will be doubled at 28nm than 65nm, there are half as many customers two years into the 40nm ramp than at 130nm, and 20% fewer devices, but wafer volumes are 4× higher than 130nm. TSMC is an EUV litho tool user, but hasn't finalized the timing of a ramp due to well-known throughput issues. It's been a big e-beam proponent but that technology requires a ballet of multiple tools used in parallel; TSMC is betting on extending double-patterning to the 20nm node, then requiring EUV at 14nm in 2015. TSMC also has a phased plan for its LED business (lower costs/tech development, develop a 20% ROE biz model, and then ramp volumes) and solar fab (completed by mid-2011 and then initial volumes).

-- Micron sees 1Q11 demand slightly above seasonal, with DRAM inventory rebuilds starting up, including for the Chinese New Year. Intel's new Sandy Bridge architecture should help with demand as gfx/processor compete for memory resources. Bits/box should rise from 3.3GB to 4.5GB by year's end. While inventory might be lean for semiconductors in general, MIcron sees inventory still at 3-4 weeks and needs to get to 102 weeks in 1Q11 to stabilize and boost prices. The top 3 DRAM makers are widening the gap with Tier 2 suppliers; Micron sees a 25%-50% gap in cash costs alone. Look for 45%-50% supply growth for DRAM and 70%-90% NAND in 2011; NAND flash bookings have picked up very recently (though ASPs are still down in double-digits), and MU is "optimistic about non-Apple builds and smartphones" through 1H11. And solid-state drives continue to gain momentum; MU thinks notebook vendors want up to 25% of notebooks to have SSDs targeting ~256GB or more (though OEMs need to drop prices another -10% to $1/GB), a level of demand that will require four more NAND fabs to satisfy.

-- ASML sees 10% growth in the litho market (vs. SEMI's new estimate of 7% in overall wafer processing), driven by technology shrinks, with "no weakness in any segment." Six EUV beta tools are now out (CS's Satya Kumar says to Intel, Samsung, Hynix, Toshiba, TSMC, and IMEC), with production tools to ship in 2012. Despite some analysts' worries to the contrary, ASML claims to be seeing "no pushouts" and sees strong demand; Kumar thinks is because NAND capex is frontloaded for Samsung in 2011, and backloaded for others.

-- Could 2011 capex be flat? That's what AMAT thinks could happen. DRAM spending probably won't dip below -30% decline, since any lower than that wouldn't support 50% bit supplies for 2011. Foundry capex should be firm through 1H11 and "could surprise in 2H11." And 2011 could be the year that NAND capex usurps DRAM (though DRAM has surprised us in the past). Regarding the solar sector, AMAT estimates 35-40GW of solar cell capacity by the end of 2010 and 55-60GW by end of 2011 -- way more than CS' demand estimates of ~14-15GW. That's not to say that we're already oversupplied, though, notes Kumar -- low-cost Chinese cell suppliers are already at full utilizations and Taiwan/Chinese companies are adding incremental capacity, "which means the bar is significantly higher for solar now."

-- LCRX is comfortable with its 4Q10 shipment guidance, as NAND pullins are helping offset DRAM price declines. 1H11 shipments are tracking slightly better at flat to -5% (vs. prior outlook of -10% lowend).

-- CYMI has shipped a fourth EUV unit (out of six total), with the fifth likely shipping in early 2011. EUV ASPs are likely to be 10% of overall value; gross margins will be below CYMI's 50% average. Interestingly, CYMI thinks it could recognize EUV and TCZ revenue in 2011 (ASML will postpone EUV revenue until 2012). Onpulse, the company's long-term service program that charges by pulses, accounted for 70% of installed base quarterly revenue and 60% of total company revenue. Gross pulses increased 3% in 3Q10, a counter-cyclical trend apparently the result of companies' habits of tightening utilization first in an upturn, and tune it down last on the downswing.

-- Like others, KLAC is comfortable with high shipment expectations through 1Q11, with a $1.1B shipment backlog ($1.4B total) likely translating to >$800M in shipments during that period. Like AMAT, KLAC sees 2011 total capex possibly flat, with NAND capex on the cusp of surpassing DRAM capex. An average fab at the 4X node requires 40% higher capital intensity than a 6X fab, the company calculates.

-- VECO forsees a dramatic plunge in LED device ASPs over the next two years, which will drive a 31% CAGR, and push the company to 50% market share. LED equipment customers in China (a region that's 30% of VECO's sales) range from well-established firms to startups to JVs with Korean or Taiwanese partners. One worrisome point: uncertainty over expiration of "generous" Chinese subsidies, which expire anywhere from 6-18 months; these average $1M/tool and have fueled record MOCVD sales for both VECO and Aixtron. AMAT and some Korean startups hope to crack the LED tool sector in the near future.

-- A dinner meeting with MEMC investors and execs shed light on smaller-diameter wafers; the company is seeing an uptick in 200mm ASPs (for semiconductors), and that 2011 ASPs should continue to rise (WFR is more exposed to 200mm than Japanese rivals, notes CS' Satya Kumar). With this projected increase, WFR wants to focus on 200mm and "avoid new 300mm capacity in the near term." In the company's solar business, it plans 600MW capacity expansion in Malaysia, with $300M capex incurred; half of total capex will be incurred in 1H11. The new technology will be multicrystalline with larger crystals and efficiency "near mono," but Kumar notes scalability has yet toi be demonstrated. WFR execs emphasized they will add capacity only if they have matching in-house poly capacity, to shield against poly cost volatility; the company wants to avoid cell or module capacity investments, since oversupply could slash GMs by 50%.

WFR company execs also offered more insights into the non-GAAP accounting treatment of the SunEdison business, which is something of a sore point -- "the company had been frustrated by the lack of comparability between the SunEdison previous real estate-based accounting treatment and competitors’ IFRS," Kumar notes. Changing the accounting method means all revenue will be recognized at the project sale, while cost recognition will happen as incurred -- that's a change from GAAP real estate-based accounting, where revenues cannot be recognized until guarantees are fulfilled 100%. This means, for example, the company's Rovigo sale will push up 4Q10 non-GAAP revenue, but most costs will be incurred in early 2011 since most of the MW has yet to be built out.

Calling for articles on nanotechnology, especially biotechnology

If you have an interesting abstract on the topic of bionanotechnology, please submit it to debrav@pennwell.com for Small Times.

Call for feature articles for the July/Aug issue of PVW

If you are a solar cell/module manufacturer, or a supplier of solar PV equipment/materials, please submit abstracts to debrav@pennwell.com on the following topics: update on c-Si technology, silicon production, and/or wafering and sawing. Thanks!

WaferNEWS Watch: Sizing up the shrinking SoC market

The system-on-chip market was a cattle-call barely a decade ago but has thinned to just three major providers now, and that's best for everyone -- but especially Teradyne, says Barclays analyst CJ Muse. He also addresses whether there's any hidden upside to the Samsung-AMAT settlement.


Handicapping the SoC market: Three's not a crowd

Now that the market for system-on-chip (SOC) test is down to three main suppliers (Teradyne, proposed LTX-Verigy merger, and Advantest), Barclays' CJ Muse handicaps the field. Advantest's key customers are Intel and AMD (plus some Toshiba business), but though its T2000 has expanded it's still lagging TER and VRGY in performance and roadmap, he says. A merged LTXC/VRGY means no more single-platform strategy: look for the Diamond to overshadow the V101, and the 93K to win out over the Sapphire, he says. Teradyne, meanwhile, has emerged as the company with the most complete SoC test portfolio; and as with any merger, some affected LTXC/VRGY customers (especially those using to-be-discontinued products) could be up for grabs.

Semiconductor test product matrix. (Source: Barclays Capital)

TER has pulled away from the pack over the past five years to grab ~50% share in 2010, thanks in part to mix (less CPU/GPU spending hurts VRGY and Advantest) but also by gobbling up other's business. TER is holding its own at digital powerhouses Qualcomm and Broadcom, is making inroads into LTX "strongholds" TXN and ST, and Muse says its Eagle Test division has "incremental gains" for core analog at Monolithic Power, On Semi, and Linear. TER also has a strategic focus on next-gen products centering on mobility (getting more out of chip design or test functionality) and power efficiency (exploring areas such as LED or different storage techniques) that should maintain its ~50% share, he believes.

SOC test market share, in % (bars) and US $M (table). *Estimated (Source: Barclays Capital)

A market that just a decade ago had a dozen jostling competitors now has three players with ≥95% market share (two with ≥80%), and that makes the market more rational, Muse writes. Socket wins and competition will still persist, but more rational behavior from management should keep up the ASP pressure and better support margins for everyone.

UPDATE 12/6: Advantest has submitted an unsolicited $12.15/share (~$700M) bid for VRGY, which said it would initially reject in favor of going forward with LTXC -- however, it coyly noted that "the Advantest proposal might lead to a superior transaction" (read: pay us more) and so will "engage in discussions." Muse's take: Advantest lags "severely" behind all three SoC test players (TER, VRGY, LTXC) and probably sees this is as its "last shot at obtaining core digital and/or analog technology" from either VRGY or LTXC. He sides with the VRGY-LTXC as the better strategic combination ("LTXC's low-end digital and analog is precisely what VRGY is missing"), but adding Advantest to the mix clearly puts that deal at risk. (Investors seem happy just to have a second suitor; VRGY stock is currently up 40% after ATE's offer, wiping out what was a 30% premium to VRGY's Friday stock price; LTXC is down 12%.)



AMAT-Samsung: Back to just friends?

Speculation that AMAT's settlement with Samsung over an IP-leak dispute featuring reduced tool pricing could float its market share at its key customer might not be quite accurate, says CJ Muse from Barclays. While the supplier marches on with new chip tool introductions, its "gradual progress in organic growth" puts it at roughly 19% market share through 2009 for wafer fab equipment -- that's below the 22% it held in 2004.

As for AMAT's newest etch products, Muse notes they "are intended to be useful in SADP/ LELE etch (for now) and in TSV silicon etch (in 2012)," and the Centris "may have helped performance at Toshiba, Samsung, and Micron" (AMAT said five customers have or will soon take shipment). Still, he sees these new tools as "more evolutionary than revolutionary, and aimed at recapturing share lost in silicon etch when deep trench architecture converted to stack in DRAM." And taking share won't be easy in an etch market that includes not just familiar foes Lam Research and TEL but also Hitachi, China's AMEC, and Mattson (for noncritical etch), he points out.