Semiconductor and display fab trends gleaned from AMAT's Analyst Day

Applied Materials Inc. (AMAT) is the leading supplier of semiconductor fabrication
fab equipment to the global semiconductor industry. After Applied Materials' (AMAT) Analyst Day this week, Citi, Barclays Capital, and Credit Suisse share their bullet-point takeaways about the semiconductor and related manufacturing industries, gleaned from Applied's presentations:

There are several positive trends in semiconductors, Barclays notes: increasing
process steps in the move to 2Xnm/1Xnm nodes, the move to 3D NAND, and a sustainable wafer fab equipment (WFE) spend. AMAT believes the macro environment for WFE spending is still very strong and expects this year to be the third year of $30+B in WFE spending, Barclays reports.

On the mobility front, AMAT sees a combination of strong consumer pull, silicon functionality, and process complexity driving a sustained wafer cycle, with potential for foundry capacity additions of over 1 million wspm from 2012-2014.

In the displays fab sector, a mix shift to metal oxide and low temperature polysilicon [LTPS] capacity is intensifying capital expenditures, although the display industry as a whole is dampened by low utilization rates and dropping panel costs.

Investment into large sized a-Si LCD capacity has almost come to a standstill, Barclays reports. The industry is shifting from LCD to organic light emitting diode (OLED) displays, Citi says. But expect recovery in large-sized panel capacity spending -- AMAT estimates another ~13 new Gen 8.5 fabs will be required between now and 2015 to meet end demand -- as well as a continued ramp in high resolution small/medium sized capacity and touch panel capacity for mobile displays.

Applied Materials highlighted 3 "megatrends" for the coming years:
1. The ramp in mobility devices, which is driving increased demand for high performance and high efficiency chips, increased use of Flash memory, and growing penetration of high-resolution touch displays.
2. The growth of emerging end-markets, which is elevating the purchasing power of ~1B new consumers.
3. A continued focus on clean energy, which is fueling the cost per Watt declines in solar and growing solar installations.

Applied Global Services (AGS) sector notes a trend of declining 200mm demand and utilizations offset by stronger wafer starts.

On the packaging side, AMAT noted that copper interconnect is becoming the de-facto standard in the back-end of the line (BEOL) process, for chip-level interconnect.

On the light-emitting diode (LED) side, Applied Materials de-emphasized comments on metal-organic chemical vapor deposition (MOCVD), an important tool in LED manufacturing, Credit Suisse notes.

Applied Materials also noted that it has increased its R&D spending for new technologies such as 450mm wafer processing, Citi points out.

And Applied Materials, as well as most other semiconductor manufacturing equipment providers, is adjusting its business model as its customer base consolidates.

You can also check out the previews for AMAT's Analyst Day here, or check out the reports from last year's Analyst Day here.

-- Meredith Courtemanche, digital media editor, meredithc@pennwell.com

ElectroIQ is now Solid State Technology!

Our site has a new name, but it's one you already know: Starting today, ElectroIQ.com will re-brand under Solid State Technology. This closely matches with the design of Solid State Technology magazine, which incorporates technical features for semiconductor, MEMS, displays, and LED manufacturers and packaging providers.

Looking for photovoltaics manufacturing content? Don't worry, you can find Photovoltaics World articles and archives on our sister site, RenewableEnergyWorld.com. Photovoltaics World is part of the Renewable Energy World network, and has relocated to better fit with related content in that business. For your convenience, we have a link to Photovoltaics World's home still on the navigation bar.

On Solid State Technology's website, you'll find all of the electronics manufacturing articles and archives focused on the semiconductors, semiconductor packaging, MEMS, display, and LED industry sectors. We recently added dedicated channels for displays and LED manufacturing, and will continue to provide in-depth, technical, and timely news and articles on all aspects of solid state technologies.

--Meredith Courtemanche, digital media editor, meredithc@pennwell.com
Happy Pi Day!

Texas Instruments (TI, TXN): Trouble with wireless, analog is stable

March 9, 2012 -- Texas Instruments Incorporated (TI, NASDAQ:TXN) narrowed and lowered its expected ranges for revenue and earnings per share (EPS) in Q1 2012. The reductions are due to lower demand for wireless products, TI said in its report (PRNewswire).

Revenue: $2.99-3.11 billion
EPS: $0.15-0.19

Analysts' take:
This is TI's fourth mid-quarter update cut in a row, noted FBR Capital Markets. The company's entire $100 million revenue cut was attributed to wireless shipments, mainly OMAP sales as well as connectivity. Contributing factors include Q1 2012 sales seasonally falling after an exciting Q4 2011 with new OMAP design wins and initial orders, and chip/device inventory reduction activities also pressuring TI, FBR reports. Short lead times imply soft demand and weaker OMAP, warned Sterne Agee analysts, who also see near-term gross margin challenges for TI due to an under utilized (currently at about 50% capacity) fab base.

OMAP suffered from a lack of high profile design wins at the International CES and the Mobile World Congress (MWC). Some designs may have been sidelined in anticipation of OMAP 5, TXN's dual core A15 OMAP refresh expected in 2H12, FBR asserts, but notes that "OMAP has lost some of its differentiated value proposition" in the face of competitive products. TXN is not expecting an OMAP rebound, says Sterne Agee.

The analysts expect a Q2 2012 reacceleration, noting that "TI has done a good job of focusing on its analog core, building competitive barriers, and growing scale." OMAP and Connectivity "are not the most critical parts" of Texas Instruments, agree the analysts at Barclays Capital. Despite the guidance cut, analog is tracking in line, led by automotive/communications infrastructure/industrial applications, they point out. With "order growth, backlog, and visibility improving," TI should see Q2 begin an upward climb.

Texas Instruments decided to close 2 semiconductor fabs, one in Texas and one in Japan, earlier in 2012.

--Meredith Courtemanche, digital media editor, meredithc@pennwell.com

Is semiconductor capex spending beating expectations? AMAT's Q1 results, Q2 guidance

February 20, 2012 -- Applied Materials Inc. (Nasdaq:AMAT) is one of the largest and broadest makers of semiconductor manufacturing and packaging equipment, as well as tools for display and solar photovoltaics fab. The company's strong Q1 results, and positive guidance for Q2, have many analysts questioning whether 2012 is going to be as grim a semiconductor capital expenditures year as previously thought.

This one sentence from AMAT chairman and CEO Mike Splinter is echoing around the industry: "In semiconductor, 2012 is shaping up to be the year of the foundry."

Display tool orders were $40 million, reflecting ongoing weakness in LCD TV equipment demand. Energy and Environmental Solutions (EES) orders were $33 million, down 62% from the prior quarter, reflecting solar industry overcapacity. But the Silicon Systems Group of AMAT saw a 53% jump in orders from Q4 2011, to $1.42 billion, reflecting strength in global semiconductor foundries and positive effects from AMAT's buy of Varian.

"Global demand for mobile devices is driving a third consecutive year of strong capital investment by semiconductor customers," said Splinter. Chipmakers such as Intel Corp (INTC.O), AMD (AMD.N) and contract foundries such as TSMC (2330.TW) are seeing more demand amid rising sales of smartphones and tablets, added Reuters news service.

AMAT's order backlog decreased by $230 million from Q4 2011 to $2.2 billion.

For the second quarter of fiscal 2012, Applied expects net sales to be up 5-15% sequentially. Look for the Silicon Systems Group to do better, 15-25%, AMAT forecasts. "We see solid order momentum and an improved outlook overall for our second quarter," Splinter said.

Applied generated orders of $2.01 billion and net sales of $2.19 billion in Q1. Get AMAT's full Q1 report here.

-- Meredith Courtemanche, digital media editor

Intel's (INTC) 2011 earnings, Q1 outlook, and executive reshuffle

January 22, 2012 - BUSINESS WIRE -- Intel Corporation (NASDAQ:INTC) reported full-year revenue of $54 billion, operating income of $17.5 billion, net income of $12.9 billion and EPS of $2.39 -- all records for the semiconductor company. The company generated approximately $21 billion in cash from operations, paid dividends of $4.1 billion and used $14.1 billion to repurchase 642 million shares of stock.

Intel had initially downgraded its Q4 2011 expectations in light of the supply chain disruptions caused by Thailand's floods, as well as general economic conditions. For the fourth quarter, Intel posted revenue of $13.9 billion, operating income of $4.6 billion, net income of $3.4 billion and EPS of 64 cents. The company generated approximately $6.6 billion in cash from operations, paid dividends of $1.1 billion and used $4.1 billion to repurchase 174 million shares of stock.

Intel grew revenue by more than $10 billion, noted Paul Otellini, Intel president and CEO, fresh off a keynote appearance at International CES 2012. "We're excited about the global growth opportunities presented by Ultrabook systems, the data center, security and the introduction of Intel-powered smartphones and tablets" in 2012. Also read: Intel Press Briefing and Keynote at CES 2012 by Dick James

Full-year 2012 (GAAP, unless otherwise stated), Intel had a 64% gross margin (65% Non-GAAP), excluding amortization of acquisition-related intangibles. The chip maker spent $18.3 billion (plus/minus $200 million) on R&D ($10.1 billion) and MG&A. Full-year capital spending hit $12.5 billion, plus/minus $400 million. In 2012, amortization of acquisition-related intangibles was approximately $300 million. Depreciation: $6.5 billion, plus or minus $100 million. INTC's tax rate was about 29%.

Table 1. INTC's non-GAAP financial performance.
Annual 2011 2010 vs. 2010
Revenue $54.2 billion $43.6 billion up 24%
Gross Margin 63.6% 65.5% down 1.9 pts.
Operating Income $18.4 billion $15.7 billion up 18%
Net Income $13.7 billion $11.5 billion up 19%
Earnings Per Share $2.53 $2.02 up 25%
Non-GAAP results exclude certain acquisition accounting impacts and expenses related to acquisitions and the related income tax effects of these charges. Also, McAfee Inc. and Intel Mobile Communications contributed revenue of approximately $3.6 billion in 2011 and were not included in the results for 2010.

Table 2. INTC GAAP financial Comparison.
Annual 2011 2010 2011 vs. 2010
Revenue $54.0 billion $43.6 billion up 24%
Gross Margin 62.5% 65.3% down 2.8 pts.
Operating Income $17.5 billion $15.6 billion up 12%
Net Income $12.9 billion $11.5 billion up 13%
Earnings Per Share $2.39 $2.01 up 19%

Intel's Q1 2012 outlook (GAAP, unless otherwise stated) includes $12.8 billion, plus or minus $500 million in revenue, 63% gross margin and 64% Non-GAAP (excluding amortization of acquisition-related intangibles). R&D and MG&A spending will total approximately $4.4 billion. Amortization of acquisition-related intangibles will be approximately $75 million. Depreciation: approximately $1.5 billion. Intel plans to report its earnings for Q1 2012 on April 17.

"The strength of this revenue guidance is somewhat puzzling as we do not believe 4Q11 CPU shipments were far below consumption, given trends toward ocean freight in mid 2011 and the cannibalistic impacts from smartphones and tablets. Indeed, visibility into 4Q12 revenues is low for everyone, and we wonder why Intel's guidance is so aggressive here given macro overhangs, ramping sales of smartphones and tablets, and continuing investor doubts about PC unit growth rates. Stepping back, we do think Intel has sustainable competitive advantages in manufacturing, and its execution is top notch with a robust product roadmap, process leadership, technology leadership (high-K, 3D transistors), and scale advantages. This is somewhat tempered by ongoing growth of tablets and smartphones, with some Windows on ARM (WoA) risks, too," announced FBR Capital Markets.

"We continue to model only modest PC growth which drives our outlook for only 4% revenue growth in 2012. We applaud Intel for its execution and strong cash flows but need greater confidence on the company's growth drivers to believe shares will outperform other semi names at this point in the cycle," input Barclays Capital. "Note that while Intel suggested that [wafer fab equipment] WFE as a percent of capex would decline in 2012, this still points to WFE spend of at least $7B, suggesting their WFE spend should head higher year over year," the Barclays analysts added.

Following its record 2011 results, Intel announced several top-level changes at the company, with a new COO, chief product officer, and group heads, among other changes:

Andy Bryant will move from vice chairman of the board to full-time executive chairman at the company’s Annual Stockholders’ Meeting in May. Intel promoted Brian Krzanich to chief operating officer, reporting to Paul Otellini. Krzanich had previously been a senior vice president in charge of Intel’s worldwide manufacturing. In his new role, Krzanich will continue to oversee manufacturing and also take on responsibility for internal IT and human resources, functions that previously reported into Bryant.

Dadi Perlmutter is being promoted to chief product officer. Perlmutter will continue to lead the Intel Architecture Group and continue reporting to Otellini.

Stacy Smith, senior vice president and chief financial officer, will now report directly to Otellini.

Bill Holt, senior vice president and head of Technology Development, will also now report directly to Otellini. He, too, had reported to Bryant. Holt and Krzanich will continue to co-manage the Technology and Manufacturing Group, allowing Intel to maintain the critical, close collaboration between semiconductor process technology development and manufacturing.

Kirk Skaugen, Intel vice president and head of Intel’s data center business, will become the new head of the PC Client Group (PCCG), succeeding Intel Vice President Mooly Eden, and reporting to Perlmutter. After 9 years in the United States, Eden is moving back to Israel at his request and will assume the position of president and general manager, Intel Israel, reporting to Perlmutter. While in the United States, Eden led Intel’s mobile PC business before being promoted to run PCCG, Intel’s largest product group, in 2009.

Diane Bryant, Intel vice president and CIO, will lead the data center business and succeed Skaugen as general manager of that group. She will report to Perlmutter. Kim Stevenson, vice president of IT Global Operations and Services, will succeed Diane Bryant as CIO and report to Krzanich.

Q4 and 2011 Key Financial Information (GAAP)


Q4 Business unit revenue:
PC Client Group revenue of $9 billion, up 17% year-over-year.
Data Center Group revenue of $2.7 billion, up 8% year-over-year.
Other Intel architecture group revenue of $1.1 billion, up 35% year-over-year.
Intel Atom microprocessor and chipset revenue of $167 million, down 57% year-over-year.
McAfee Inc. and Intel Mobile Communications contributed revenue of approximately $1 billion.

Full Year Business unit revenue:
PC Client Group had revenue of $35.4 billion, up 17% from 2010.
Data Center Group had revenue of $10.1 billion, up 17% from 2010.
Other Intel architecture group had revenue of $5.0 billion, up 64% from 2010.
Intel Atom microprocessor and chipset revenue of $1.2 billion, down 25% from 2010.
McAfee Inc. and Intel Mobile Communications contributed revenue of $3.6 billion.

All INTC's Q4 and 2011 numbers can be found at on our Financial Content page. A detailed discussion of these and other factors that could affect Intel’s results is included in Intel’s SEC filings, including the report on Form 10-Q for the quarter ended Oct. 1, 2011.

Intel (NASDAQ: INTC) is a world leader in computing innovation. Website: http://www.intc.com/.

Samsung plans record investments in 2012

January 17, 2012 -- Samsung Group, which includes Samsung Electronics Co, is raising its 2012 investment to a record $41.4 billion (47.8 trillion won), the company said in a statement (in Korean). Miyoung Kim, Reuters, says that this record amount underscores "the widening gulf between the dominant South Korean conglomerate and its faltering competitors." The money will be divided up for facilities, R&D, strategic acquisitions, and staffing.

Samsung Group did not provide a breakdown of the 47.8 trillion won investment for Reuters. Kim expects that Samsung is spending on its logic chips and organic light emitting diode (OLED) displays, hoping to see success like that of its flash chips, computer memory chips and LCD flat-screens. Turner Investments recently noted that Samsung's position as one of the top 3 media tablet makers will put it in a strong position, next to Apple and Amazon.com, in this emerging growth market. Also read: 7 semiconductor and display suppliers to benefit from tablet wars

Samsung's capital spending will rise 11% year-over-year to 31 trillion won. 80% of the capex will come from Samsung Electronics and its display unit. Reuters' Kim expects a 7.5 trillion won investment in system chips (mobile processors and sensors) to exceed spending on memory chips for the first time, and by about 1 trillion won. OLED investment could hit 7 trillion won. Lesser amounts will go to LCDs, rechargeable batteries and LEDs, Reuters reports. Worldwide, Korea is the only region expected to show growth in semiconductor fab equipment spending in 2012, mainly due to expected spending by Samsung, says SEMI. Also read: Semiconductor fab capex forecast for 2012

Samsung also said that it will add a record 26,000 employees this year, despite "worldwide economic difficulties and uncertainties." Samsung now employs around 350,000 workers. Samsung's Q4 2011 earnings are estimated (prelim.) at about 47 trillion won, with a record 5.2 trillion won profit.

The Wall Street Journal and other outlets quoted Samsung Electronics as planning a $1billion bond sale from its US unit, the first bond sale in many years.

Samsung Group comprises around 80 companies. Its business portfolios expand from financial, construction and shipbuilding to medical services and consumer electronics and total revenues account for some 20% of South Korea's 1,200 trillion won GDP.
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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.