Semiconductor Industry Leaders Contemplate Region's Future at ISS Europe 2013
Semiconductor industry growth drivers and European market strategies were featured topics in the first day of the SEMI Industry Strategy Symposium (ISS) Europe 2013, hosted February 24-26 at the Regina Palace Hotel outside of Milan, Italy. The conference theme, "Harnessing European Innovation for the Global Market," was reinforced in keynote presentations by executives from NXP, Infineon, STMicroelectronics as well as public policy representatives and a number of industry analysts.
While personal electronics have spurred growth of the semiconductor industry over the past decade, semiconductor enabled smart devices that have the ability to interconnect and form networks will be a primary volume driver for next growth phase according to Hans Rijns, chief technology officer at NXP Semiconductors. He predicted smart mobility and smart energy applications to be among the leading areas for machine-to-machine connectivity occurring over the next decade. With respect to intelligent transportation, Rijns believes that by 2022, about 20-25 percent of global passenger vehicles will be connected to intelligent traffic management infrastructure and/or in-vehicle networks as well as car access and remote car management systems. The robustness of security and privacy solutions will determine the speed at which the market adopts smart transportation applications.
Rijns also pointed to smart energy application trends in home
and building automation as semiconductor growth drivers. Rijns said that
the vision of smart connected systems is an opportunity for European
manufacturers, but can only be realized by collaborative innovations driven by
value chain partners including semiconductor companies, infrastructure
planners, data management enterprises and end-user application designers.
Peter Schiefer, president of Operations for Infineon, also believes that semiconductors will be key enablers for energy efficiency and that Europe will play a major role in energy innovation and productivity. The growing number of people and increase in wealth continues to drive consumption and global energy use, which is projected to increase 37 percent in the next 25 years. Schiefer commented that the world is transitioning from carbon-based energy systems to electric energy systems, which plays to European competencies. Electricity represents about one-third of the planet's energy consumption and semiconductors play a critical role in the whole electrical energy supply chain. For instance, AC/DC conversion, high-voltage DC Transmission, electrical vehicle and hybrid cars rely on power semiconductors. He noted that the number of electrical vehicles and hybrid cars are expected to triple in next 5 to 6 years.
Schiefer also said that Europe has distinct competencies in power semiconductor manufacturing, packaging and system integration. This is particularly true in automotive space, as Europe is home to the top power semiconductor manufactures as well as the leading car manufacturers.
Barnett Silver, senior vice president and principal at ATREG, sees a maturing semiconductor industry with stable but moderate growth. The semiconductor industry has hit “middle age,” with tepid growth. Projections for robust growth are “wishful thinking” he said. ASPs will continue to fall and that few firms can afford to invest in advanced nodes. Smartphone and tablets are the only high profitable high-growth segments and the OEMs will have extraordinary influence on the semiconductor value chain. Silver also sees a highly-concentrated foundry model. TSMC is the only foundry that is consistently making net profits. He stated that TSMC’s total shareholder return of 121 percent (from 2007-2012) “dwarfs” Intel as well as the five largest fabless firms. Silver reviewed a number of scenarios for future vertical integration and suggested that there are emerging alternatives to the traditional semiconductor manufacturing models (“Classic IDM” vs. “Classic Fabless”). Shared or cooperative fab scenarios are one example of the alternative approaches.
Luc Van den hove, president and CEO, imec said that Europe needs growth which requires innovation and competitiveness. Semiconductor technology also enables improvements in other sectors such as communications, automotive, energy, and sustainable healthcare. Van den hove said that challenges for Europe include “lost leadership” represented by decreasing world share of semiconductor manufacturing. However, Europe enjoys the world’s best R&D infrastructure with substantial capabilities at imec, Leti and Fraunhoufer. He said that even more synergy between these major players is required for a coordinated and coherent platform.
Van den hove said that lithography is an example of a major European strength. He said that all advanced chips in mobile devices are manufactured with European technology (AMSL) in an open innovation model. He said that, “Once you are the best, money flows to you.” He cited ASML and the customer co-investment program as an example. He also said that ASML’s impact must be appreciated as more than just one company. The ASML ecosystem encompasses about 4 billion Euros in outsourcing to small and medium sized enterprises and employs more than 50,000 people in Europe.
He cited comments by Neelie Kroes, VP of the European Commission, who called for an “Airbus for Chips” at the imec Forum in the spring of 2012. Unfortunately, the 27 member states are not well coordinated and strict European state aid rules limit subsidies in order to prevent competition among the member states. Van den hove appealed for more coordinated collaboration along with mechanisms to stimulate innovation through state funding support.
Ourania Georgoutsakou, director of Public Policy for SEMI Europe, said that 2014 represents a year of significant political change in Europe, which makes this the right time to educate policy makers and influence European industrial policy. SEMI public policy priorities are confirmed by its regional membership and are currently focused on implementation of an EU strategy for Key Enabling Technologies, advocating for competition and trade reforms, and working with EU regulators on appropriate Environment Health and Safety rules. Georgoutsakou stated that these goals will be further discussed with EU representatives at the upcoming SEMI Brussels Forum, which occurs on May 24.
Emphasizing that semiconductors are pervasive in every facet of daily life in Europe, Jean-Marc Chery, executive vice president and chief Manufacturing and Technology officer at STMicroelectronics, pointed out that each person in Europe utilizes about 250 chips per day or about 1 billion transistors per person, per day. He stated that the innovation pipeline requires leveraging the ecosystem that includes fundamental research, advanced research, technology development, manufacturing and sales.
Khalil Rouhana, directorate-general for Communications Networks at the European Commission, said that European Commissioner Neelie Kroes will present a strategy for the electronics industry in Europe to the European commission by mid-April. He claimed that it will be “an aggressive strategy that is beyond business as usual.” It is aimed at reversing the trend of declining market share in Europe. He implied that the agenda will include support for “More Moore” (scaling) as well as “More than Moore” technologies in 200, 300 and 450mm. One new Joint Technology Initiatives (JTI) is expected on electronic components and systems including investment in large scale demonstrations and pilot lines.
Rouhana stated that 2.8 billion Euros over a six year period was originally budgeted by the European Commission for the both the “More-than-More” and “More Moore” micro- nanoelecronics and photonics segments, but that the overall budget cuts proposed in February will reduce overall ITC investment amounts by about 10-12 percent. This figure excludes the additional member state and industry funding that will augment this amount.
In an rebuke of the region's semiconductor industry leadership, Malcolm Penn, chairman and CEO of Future Horizons, said that the decline of the major European chip makers has been a result of a defeatist attitude, not necessarily fundamental structural issues. He said that focusing on “More-than-Moore” without “More Moore” is a long-term strategic error. Penn said that the economic impact of lost chip market share amounted to over $100 billion cumulative sales from 2003 to 2012 and that, "some would argue that they have blood on their hands."
Penn asserted that the 450mm transition should be seen as a unique European opportunity and represents a chance to regain a position in advanced CMOS manufacturing. He noted the regions strength in equipment technology (particularly lithography), world-class chip R&D infrastructure, and leading advanced semiconductor materials research, but noted a “disappointing complacency in a seemingly leaderless region.” Like other speakers, Penn appealed for the region's semiconductor industry to come together around a single industry vision. His suggestion is for European chip makers to build a 450mm fab jointly and operate it as a foundry, not just a joint venture. His prescription for favorable yields and a competitive cost structure calls for starting with non-immersion lithography nodes and products; then, to learn 450mm on proven processes and state-of-the-art equipment.
Penn forecasts 2013 semiconductor industry growth of 2 percent over 2012, which was 12 percent above the prior year. He says that there is no slack in the global semiconductor ecosystem and believes that a sharp market recovery will occur when economic confidence returns. Likening the industry to a coiled spring waiting to unravel, he believes that when the rebound occurs, it will take 2-3 years to unwind.
IC Insights CEO Bill McClean sees six percent semiconductor market growth and flat to two percent capital spending growth in 2013. Two companies, Intel and Samsung, will make up about 40 percent of the year’s capital spending. He agrees that there is significant “pent up” demand and believes that double-digit — or better — semiconductor growth could occur 2014 and 2015 due to this demand. He sees the potential for a significant upside for European industry players when the economy recovers. Furthermore, McClean disagrees with prior speakers and sees ASP increasing since the second quarter of 2009. He speculates that a major “shock to the system” may occur as the industry faces greater difficulty in maintaining the historic cost per chip function reduction. Though it may apply to a smaller number of companies in a consolidating industry, He’s optimistic about overall market growth ahead being better than over the prior 15 years.
Robert Bosch GmbH chief economist Thomas Hueck concluded the day stating that the overall global business climate remains below the long-term trend but at 2.7 percent growth, is slowly restoring growth. He said that the European Monetary Union states are slowly regaining competitiveness.
The ISS Europe 2013 conference continues tomorrow with other presentations, equally relevant to semiconductor industry professionals, dedicated to technologies and technology management strategies including manufacturing infrastructure, new materials for ICs, yield management and the impact of LED lighting to the electronics industry.
February 25, 2013