semiconductor industry

2020 still looks to be a very difficult year. How we manage the pandemic, the global economy and international relations remain major challenges but there are glimmers of light near-term and a likely much brighter future in 2021 and 2022.

The COVID-19 pandemic has inflicted major impacts on manufacturing operations worldwide including in the semiconductor industry. The virus has left millions of people confined to their homes, resulting in a massive shift to virtual work and online engagement. In Singapore, where AEM is headquartered, our management team took proactive measures to protect our workers by implementing best practices ahead of the Singapore Circuit Breakers.AEM is globally deemed an essential service, requiring us to maintain operations and minimize impact to our customers. Business continuity plans that include work-from-home and safe-distancing guidelines are in place. As of the time of this writing, we are very fortunate that all of our employees are safe and that we’ve seen only minimal impacts to our customer commitments. AEM has confined this impact by spreading operational risks across our facilities in Asia, Europe, the U.S. and divisions in Singapore, Malaysia, China, North America, Central America, Finland, France and Vietnam. All told, these facilities employ more than 550 people (Figure 1).Figure 1 – AEM Global Presence As a global leader, AEM offers application-specific intelligent system-level test and handling solutions for semiconductor and electronics companies that serve the advanced computing, 5G communications and artificial intelligence (AI) markets.Leveraging our decade of experience, the latest AMPS solutions provide asynchronous, modular, massively parallel and smart system-level testing to meet the new test challenges of complex ICs. The modularity and scalability of these systems enables customers to scale their existing engineering device validation solutions into high-volume, massively parallel production solutions that increase faults coverage, reduces time to market, and decreases cost of test and ownership (Figure 2).Figure 2 – AMPS System-Level Test Solution In meeting 5G infrastructure test needs, AEM developed a field-deployable fiber optics tester. Called WideOptix SR4, the system was initially developed in collaboration with a world leader to support the 5G fiber infrastructure deployment in China and has now been adopted for some Ethernet standards testing. With our WideOptix SR4 development, we cultivated Silicon Photonics (SiPh) testing expertise that complements our AMPS system-level test capability. As part of our business continuation and risk diversifications plan, we had also set up factories in Penang (5,200m2) and Suzhou (3,600m2). Penang’s rising influence in the Southeast Asia semiconductor industry has prompted AMM (AEM Malaysia) to expand its scope to include value-added services with a Center of SSD Excellence and Center of Photonic Excellence.ASZ (AEM Suzhou) will continue to focus on the domestic market in China for further expansion and penetration with products ranging from cost-sensitive testers to state-of-the-art test measurement instruments. In Europe, AEM is focused on wafer-level test and cost-effective ATE test solutions. Finland-based AFORE specializes in MEMS and application-specific wafer testing with the ability to add physical stimulus. The company's state-of-the-art instruments enable the testing of devices such as diced IMU’s (Inertia and Motion Units) in continuous rotation on a wafer mounting ring. Our process increased test throughput by 3X compared to the traditional pick-and-place methods (Figure 3).Figure 3 – Wafer-Level Test Throughput Advantage A specialist in application-specific wafer handling, AFORE developed its latest design to support quantum computing in collaboration with its partner BLUE FORS. The company’s probing equipment features a handling solution with temperature tolerances to 2K (-270’C) to support cryogenic testing (Figure 4).Figure 4 – Cryogenic Quantum Computing Probing Solution AFORE also gained critical insights into creating total darkness, enabling us to further explore opportunities for dark matter testing. AFORE is currently in talks with a member of the LUX Photonics Consortium funded by the National Research Foundation (Singapore) to provide a dark body testing environment and handling for its IR detectors.In Europe, our acquisition of Mu-TEST in France helps diversify our product and service offerings while spreading our business continuity risks. Mu-TEST enjoys collective test-development experience of more than 320 man-years thanks to various ATE suppliers including Schlumberger and Credence. To help combat rising costs of traditional ATE, Mu-TEST developed cost-effective solutions using FPGA-based instruments supported by a full suite of test development, debug and production test software with links to EDA and standard interfaces. This provides Mu-TEST an agile platform that can be easily re-configured for different customer needs.This Mu-Test acquisition expands AEM’s system-level testing capability to include Functional Test, allowing BIST, SCAN, JTAG to test structural failures and perform other application-level test that interface directly with the DUT using the EVM (Electronics Validation) boards to increase fault coverage within the same test environment. Mu-TEST has also enabled AEM to form the recent partnership with UTAC to develop a cost-effective CIS test solution that addresses UTAC’s test needs and complements its CIS advanced packaging solutions. Our U.S. headquarters based in Chandler, Arizona has expanded its capabilities to provide application engineering.In summary, AEM has been expanding its global footprint while managing risk and has been fortunate to be positioned to manage the recent COVID-19 excursions. While each geographical location specializes in core technologies, all sites have access to one another’s manufacturing facilities in times of need and a pool of IP available to address new opportunities. We believe this risk diversification positions us well to serve the needs and interests of our customers worldwide.Lo Wee Tick is Director, Business Development, and Stuart Pearce is Senior Director, Field Marketing, at AEM Holdings Ltd.

Data recently collected by SEMI points to only a moderate slowdown in the industry’s pursuit of talent, illustrating the growing and significant need for attracting workers at all levels of the organization. With COVID-19’s devastating impact on many sectors of the economy, the time is ripe to sharpen the industry’s focus on attracting and training a new wave of workers to meet the growing talent needs across our industry.To help illuminate the state of microelectronics industry hiring during the pandemic, following are three takeaways from recent workforce development data. Key Takeaway 1 – Emsi Hiring Data and Analytics ReviewIn a May 5 SEMI webinar on the Future of Work, presenter Andrew Crapuchettes, CEO at Emsi, a labor data analytics firm based in Moscow, Idaho, revealed that the U.S. semiconductor equipment and device manufacturing sectors posted 199,326 total jobs (32,022 unique positions) from March through June 2020 with an advertised median annual salary of $68,500 – the highest posting intensity for all other occupations and companies in the U.S. Crapuchettes noted that “although the job postings number was actually down from the previous quarter, some of the large companies have shown flat or growing postings during this period. At Emsi, we are evangelists for more accurately establishing the requirements for the job to more closely match the skills actually being sought.”He pointed to a gap between the skills employers list in job postings and those employees itemize in their resumes. Today’s use of algorithmic resume analysis, however, may reveal false gaps in hiring. Emsi is working with several Fortune 500 companies in the electronics sector to help them analyze their job postings. The goal: to better understand if they have identified the right skills for their business and the recipe for attracting top talent. Emsi supports programs such as the SEMI Works workforce development initiative that are out to more closely align job seekers and curriculum development with the skills needed for microelectronics design, development and manufacturing.During COVID-19, Crapuchettes sees companies across all industries doubling down on employee training. For many organizations, a business slowdown is an opportunity to identify and work to fill employee skill gaps and prepare companies to emerge stronger once the pandemic has passed. Key Takeaway 2 – SEMI COVID Impact SurveyIn March, April and June, SEMI surveyed members to evaluate the impact of COVID-19 and help inform SEMI’s response. Among the questions in the June survey was “How has COVID-19 impacted your hiring plans?” Of the more than 300 respondents, just 13% reported a hiring freeze and 55% said their hiring plans remain unchanged.Figure 2: Data from SEMI COVID-19 Impact Survey All SEMI regions show a similar pattern. Japan, Korea and China reported little to no slowdown in hiring as shown in Figure 2. Differences across regions were notable with more cautious approaches to hiring adopted by North America, Europe and Taiwan, with some companies slowing hiring for certain positions.Key Takeaway 3 – SEMI Survey of Workforce Development Advisory CouncilSEMI relies on members for industry insights we use to build, evolve and prioritize our programs. A June survey of SEMI America’s Workforce Development and Diversity Inclusion Advisory Council showed that, while some member companies have delayed hiring until the pandemic’s impact of the industry is clearer, most respondents see this period as an opportunity to attract talent to the electronics industry and maintain hiring programs to meet the growing demand for talent the digital revolution is fueling. The survey data, as shown in Figure 3, is consistent with Emsi’s results and a larger SEMI member survey. Our June survey also illustrated the strong desire by the Council for SEMI to support diverse communities and lead efforts to connect talent from these groups with career opportunities in electronics. All survey respondents urged SEMI to place the highest priority on promoting Diversity Inclusion in the workforce, with 57% ranking university outreach as a high priority. Visit the Workforce Development Pavilion at Virtual SEMICON West 2020 for More InformationThe microelectronics industry is making a huge impact in the COVID-19 era – from developing the tools to run algorithms for companies working on a vaccine, to keeping the internet humming for home workers and online ordering for homebound seniors. But these services will only continue to evolve at a rapid clip with the right talent. SEMI programs remain laser-focused on pursuing and developing that talent.Thank you to all members who responded to the surveys and Emsi for contributing to understanding of the workforce need in the current climate. We invite all members to connect with SEMI Workforce Development activities. We need your help to align skills to curriculum (SEMI Certs), presenting at our workforce development events and donating to the SEMI Foundation, which provides financial support for much of our work.Learn more about how you can help the industry grow its talent pipeline at the SMART WorkForce Pavilion at the virtual SEMICON West – July 21-23! Checking out the pavilion is free, but there’s a modest fee for the content. Register now for a discounted all-in pass to enjoy blister- and COVID-free access to the first virtual SEMICON West ever. Shari Liss is Executive Director of the SEMI Foundation. She oversees the development and success of all programs from K-12 through re-skilling for veterans.

Emerging applications powered by 5G and artificial intelligence (AI) are expected to be a boon to the semiconductor industry, but only once chipmakers overcome a key challenge: Architecting chips that meet the exacting performance, power consumption, size and cost requirements of devices for mid- to high-end applications. One technology – heterogeneous integration – promises to meet these demands and help drive future leaps in semiconductor innovation in the post-Moore era. To help the industry better grasp the technology challenges and business opportunities associated with deploying highly integrated chip and packaging technologies, SEMI and AI on Chip Taiwan Alliance recently gathered industry leaders from organizations including ASE, Unimicron, Dialog Semiconductor, Cadence and AITA to discuss technology trends and the vital importance of building a cross-industry exchange platform to advance next-generation manufacturing processes critical to heterogeneous integration. Following are key takeaways from the forum, Heterogeneous Integration Enables 5G and AI. Overcoming Heterogeneous Integration Technology Challenges Key to Advances in Taiwan High-End Semiconductor Manufacturing The introduction of the Heterogeneous Integration Roadmap (HIR) by the International Technology Roadmap for Semiconductors team in 2016 was an important first step, Dr. C.P. Hung, Vice President of ASE Group, noted in his opening remarks. The HIR is designed to stimulate pre-competitive collaboration to advance heterogeneous integration technology development and accelerate electronics innovation. The roadmap provides a long-term vision for the electronics industry, identifying future technology requirements and potential solutions. Today, the HIR working group focuses on high-performance computing (HPC), 5G and other leading-edge technologies.Dr. Hung predicted that heterogenous integration will reshape traditional collaborations between the semiconductor ecosystem and supply chain in order to clear I/O bottlenecks that hamstring high-performance applications. The retooled industry connections will also need to enable high I/O pin counts, ultra-thin devices, and high-frequency signal shields. In an important step forward, the chip industry today is developing a platform that enhances wafer-level advanced packaging services and deepens cooperation with Oversea Assembly and Testing (OSAT) and substrate supply chain partners. Overcoming the current limits of IC substrates – the connection between IC chips the PCB – is one key for heterogeneous integration technology to flourish, said Dr. Yu-Hua Chen, Vice President, Carrier SBU, RD Division of Unimicron. He noted that the industry must tackle limits to PCB thickness, substrate density, fine pitch and automation to meet the needs of high-end packaging customers. Another barrier the industry must be surmounted is to make the currently inscrutable confidentiality requirements for patents of foreign materials – key to improving chip yields – easier to access and understand for substrate engineers. Chen said partnerships across the entire industry will be necessary to break through this and other technology breakthroughs. Supply Chain and Cross-Border Ecosystem to Strengthen Partnerships for Further DevelopmentTaiwan has long invested heavily in advancing semiconductor manufacturing and application engineering technologies to become a top global chipmaking hub and, in the process, has been behind significant leaps in optimizing chip functionality, said Leroy Liu, General Manager, Asia Headquarters, of Dialog Semiconductor (Germany). With its semiconductor manufacturing prowess, Taiwan can also play a central role in maturing advanced heterogeneous integration packaging technology while managing development costs by partnering with its international supply chain community to overcome technical challenges more effectively, Liu said. The region can also help forge partnerships, even among competitors, to build the ecosystem essential for heterogeneous integration technology to shine.EDA tools will be critical in understanding and resolving heterogeneous integration technical issues since IC substrate, packaging and chip design all pose interdisciplinary engineering challenges, said Julian Sun, Product Marketing Director at Cadence. To help the industry navigate these challenges, Cadence has launched intelligent system design products – solutions that address a wide range of design problems with semiconductor nanometers, micrometers on packaging and testing, and PCB level micro/millimeters to Pin/Pitch, I/O models, and thermals and electricity. By supporting various technical designs, Cadence helps customers shorten the design cycle to strengthen design quality and reduce costs.Sun also pointed to the vital importance of overcoming the significant challenge of designing silicon interposers for heterogeneous integration. Today’s EDA tools are capable of optimizing the design of complex structures including 5GAiP and HBM and are instrumental in aiding Taiwan’s semiconductor ecosystem players to quickly adapt to shifts in the evolving heterogeneous integration market.Heterogeneous Integration Enables 5G and AI speakers (L-R): Julian Sun, Product Marketing Director at Cadence, Dr. Yu-Hua Chen, Vice President, Carrier SBU, RD Division of Unimicron, Dr. C.P. Hung, Vice President of ASE Group, Leroy Liu, General Manager, Asia Headquarters, of Dialog Semiconductor (Germany), Dr. Shih-Chieh Chang, AITA Executive Secretary Designing AI chips is particularly difficult as semiconductor makers struggle with high costs and low yields, said Dr. Shih-Chieh Chang, AITA’s Executive Secretary. That’s why the chip industry now uses FPGAs for small-volume production of AI chips, which makes it easier to improve manufacturing yield through redundant design. For its part, AITA has formed a special interest group (SIG) to help form connections among the chip industry, academia and research institutes. The association’s goal is to build a platform for mass production of AI chips.To get involved in SEMI Taiwan Heterogeneous Integration related events, please contact Ula Huang, outreach senior specialist, at [email protected] Fang is a coordinator and Ashley Huang is a specialist in marketing and public relations at SEMI Taiwan.

Many companies are applying Fourth Industrial Revolution initiatives in manufacturing, though only a few have managed to successfully integrate the smart manufacturing technologies at a scale that allows them to realise significant economic and financial benefits.Known as lighthouse companies, these organisations have taken their smart manufacturing journeys from pilot to integration at scale, serving as beacons to others in overcoming challenges in their production systems through the adoption of leading-edge technologies such as artificial intelligence, additive manufacturing and advanced analytics.At the recent SEMI Southeast Asia webinar Journey to Recovery of the E E Industry, Dato' Azman Mahmud, Chief Executive Officer of Malaysian Investment Development Authority (MIDA), spoke about building Malaysia’s very own Lighthouse Project comprising multinational corporations that will act as anchors to help guide local players into this new venture.During the webinar, Dato' Azman elaborated about Malaysia’s competitive edge – its diversified economic structure and government support. He said the key to sustaining this competitive edge, however, is that the Malaysian economy must be digitally empowered. The Lighthouse Project is one programme that will help achieve this objective. We are inspired and encouraged by this initiative. As firm believers in connecting and collaborating, SEMI Southeast Asia supports programmes that advance the entire microelectronics ecosystem. We look forward to seeing MIDA drive this project, and we encourage Malaysian E E companies to tap MIDA’s expertise in this field. Ultimately, we are confident that through this initiative and the adoption of Industry 4.0 technologies, Malaysia will be repositioned as a top global manufacturing nation. Bee Bee Ng is president of SEMI Southeast Asia.

Semiconductor companies that begin revising their long-term strategies now may emerge stronger in the next normal.In the months after the coronavirus began to spread, semiconductor companies moved decisively to protect employees, secure supply chains, and address other pressing concerns. Although the situation is still serious and many governments are still imposing physical-distancing requirements, semiconductor leaders are now looking ahead to the time when the pandemic abates and the next normal begins. To prepare for that moment, they are thinking about strategies for reimagining and reforming their business models—two activities that McKinsey described in a framework for responding to the coronavirus.Every aspect of the business model could be subject to change, including the composition of product portfolios, capital expenditures (capex), R D strategy, demand forecasts, supply-chain footprints, production decisions, and options for mergers and acquisitions (M A). But with so much uncertainty ahead, semiconductor companies may have difficulty making strategic decisions. To move forward, they should first establish a solid baseline for their company (see sidebar, “Determining the starting point,” for more information on this topic). With this foundation, semiconductor companies can chart a path to the next normal by focusing on the following questions: What recovery scenarios are most likely, considering evolving demand, economic developments, and other global changes? What is the impact of the COVID-19 crisis on long-term trends and demand? How can we emerge even stronger from the crisis? In past downturns, companies that thought about strategic questions early in the crisis were most likely to recover quickly and become market leaders. Although the COVID-19 pandemic is unprecedented in modern times, the need for long-term planning still holds true.Developing recovery scenariosCOVID-19 has significantly altered the fundamentals of the sector, including customer behavior, business revenues, and numerous aspects of corporate operations. Many companies have unclear future prospects, and some may not survive the crisis. Multiple recovery scenarios are possible, depending on potential government interventions and other variables that are now difficult to predict.Earlier, we published an article about the short- to medium-term outlook for semiconductor demand. Our analysis was partly based on assumptions in two of the nine scenarios that McKinsey developed for the COVID-19 recovery, both of which assume that the spread of the coronavirus is eventually controlled and catastrophic economic damage is avoided. In the first scenario, termed A3, global gross domestic product (GDP) recovers in the fourth quarter of 2020; in the second, termed A1, recovery is delayed until late 2022. Since the original analysis, we have updated the estimates to include 2021 demand.Both recovery scenarios suggest most semiconductor segments will experience negative year-on-year revenue growth in 2020.Both recovery scenarios suggest that most semiconductor segments will experience negative year-on-year revenue growth in 2020. Looking ahead to 2021, however, we expect that the situation will improve as most end markets recover, mostly because the starting point for 2020 will be much lower than it was in previous years. In the more optimistic A3 scenario, only a few segments meet the growth expectations that were forecast before COVID-19 emerged by 2021 (Exhibit 1). In the more pessimistic A1 scenario, the number of segments that recover is even lower (Exhibit 2). Within the individual segments, a few trends stand out: PCs. This segment will see the sharpest drop in demand and the performance gap will become more serious over time. Most people will buy all the home-office electronics that they need for remote work in 2020, lowering demand for next year. Meanwhile, enterprises may continue to delay investments in PCs to control expenditures, even if the recovery is proceeding. Automotive. In the more optimistic recovery scenario, A3, the automotive segment sees year-on-year growth of 28 to 36 percent in 2021. This estimate is based on the assumption that governments will offer incentives to car buyers. In A1, the scenario with the delayed recovery, government incentives are not as strong and growth remains in the 1 to 5 percent range. Wired communication. Growth in this segment could exceed pre-COVID-19 forecasts in both 2020 and 2021. This is one of the few areas where a delayed recovery would actually contribute to higher growth than the more optimistic scenario, since continued remote work and homeschooling will stimulate demand for wired communication. Evaluating the impact of the COVID-19 crisis on long-term demandBeyond 2021, semiconductor companies may have more difficulty predicting demand because even greater uncertainty abounds about healthcare and business developments. As companies create long-term plans and evaluate potential scenarios, trends in two areas deserve particular attention.Market pullOver the past few months, people around the world have experimented with new ways of working, studying, and communicating through videoconferencing and other technologies. Such trends could have a lasting impact on semiconductor demand and open new possibilities for existing products and services. For example, demand could increase for semiconductors that enable servers, connectivity, and cloud usage as online collaboration grows. Semiconductors may also be in high demand for the following products and services: contactless solutions, including touch screens and elevator buttons ambient assisted-living devices, including sensors, that help elderly and chronically ill patients remain in their homes, rather than moving to facilities automated-delivery solutions for the last mile, such as robots and drones digital work processes and the Internet of Things, especially in lagging sectors, such as healthcare, government, and defense Of course, COVID-19 could also decrease semiconductor demand in several important areas. Some automotive makers have already begun to postpone investment in autonomous driving because their lower revenues meant that less funding is available for R D. In other areas, demand trends are difficult to predict. Looking again at mobility, it is clear that public transportation is now less popular because people fear viral transmission. If subway and bus ridership remains low, or if more people begin to purchase private cars, semiconductor demand could shift in response.Monitoring industry shifts and geopolitical responsesOn the supply side, the pandemic has exposed risks that were previously unrecognized, leading to potential shortages of critical parts and components. In response, many semiconductor companies are already reconfiguring their supply chains to improve resiliency, and the changes may continue into the next normal. As they plan ahead, semiconductor companies might want to create scenarios that show the potential impact of localizing production, increasing stock and inventory levels, or making other changes.Within plants, the COVID-19 crisis could accelerate automation and the adoption of Industry 4.0 technologies. Remote manufacturing, diagnostics, and maintenance could all become permanent features. If that occurs, semiconductor companies might become smart workspaces, with technologies that facilitate remote work for most employees. They might also encourage a hybrid model in which a certain number of employees are remote and the rest remain on site. The efficiencies gained through such changes, as well as their start-up costs, could influence future semiconductor revenues.Long-term scenario planning must also consider the geopolitical response to the COVID-19 crisis. To stimulate the local economy, several governments have already announced subsidies and incentives, but these often vary by region. China for example has announced extended state subsidies and tax breaks for consumers purchasing new electric vehicles, while the United States has reduced fuel-efficiency standards for automakers. Semiconductor companies should closely track such regional variations, since they may affect demand patterns, and note whether local government responses appear to be evolving.Emerging stronger from the crisisSemiconductor companies have developed effective crisis-management strategies during other difficult periods, including the dot-com bubble in 2000 and the Great Recession of 2008. But the COVID-19 crisis presents entirely new challenges that make it different from any previous downturn. It hit unexpectedly and has exacted an immense humanitarian toll in addition to causing economic hardship. Although no playbook exists for such a crisis, some lessons from past downturns may apply if semiconductor players want to emerge stronger in the next normal.Modestly reducing capital expendituresIntel’s cofounder, Gordon Moore, once observed, “You can’t save your way out of a recession.” Large capex reductions are unavoidable if companies need greater liquidity to survive a crisis. But for companies in a better financial position, experience suggests that enormous cuts may not be the best strategy. During the Great Recession, many of today’s leading companies reduced capex less than their competitors and thus were better positioned to prepare for growth once the economy began to recover. With the current crisis, companies that proceed with plans to create next-generation products, purchase equipment, or make similar investments will be prepared if demand surges as the economy recovers. Those that hold back may have difficulty catching up, since some improvements can take years.Focusing R D budgets on next-generation productsFor maintaining a strong R D strategy during a crisis, three actions can be critical: Limiting cuts to R D budgets. As with capex, research shows that top companies tend to make moderate R D cuts during a downturn, allowing them to sustain a rich and evolving product portfolio. Unless liquidity issues require more significant cuts, companies should strive to fund innovation, rather than setting the bare minimum budget needed to keep R D running. Those companies that retain their focus on R D innovation now could gain long-term advantage over competitors, given the often lengthy timelines for developing new products. In some cases, the lagging competitors may never close the innovation gap. Focusing on next-generation products. Although semiconductor customers might be limiting their spending now, demand for new and innovative products could surge once the economy begins to recover. Rather than simply improving products using current state-of-the art technology, companies should also invest in next-generation products using new technologies. They may not generate revenue from these products over the next 12 to 24 months, but they will be well positioned once customer demand surges. Keeping a close eye on trends. Forward-thinking semiconductor companies will try to determine what products will generate the highest demand post-COVID-19 and prioritize their R D investments accordingly. Their analysis should encompass all areas, from new manufacturing techniques that allow for smaller process sizes to more innovative sensors. To make the right decisions, semiconductor companies must closely monitor new trends and customer behavior. If unexpected market shifts occur, they may need to take a new course. Taking a strategic approach to mergers and acquisitionsSemiconductor companies may also emerge stronger from the COVID-19 crisis if they take a strategic, systematic approach to investment and divestment. A retrospective, cross-industry analysis of 1,000 businesses shows that today’s top 100 companies were 10 percent more likely to undertake programmatic M A—the regular pursuit of modestly sized deals—both during and after the Great Recession (Exhibit 3). For divestment, the top 100 companies also unloaded 1.5 times more assets than their peers during the downturn. Another striking finding: the top companies also were more likely to pursue smaller deals. Overall, their average deal value was about 9 percent lower than that of competitors.A programmatic approach to M A is well-suited to the current era, since governments may implement stricter controls on large deals to limit foreign investment. It is possible that some protections may even extend to smaller deals to protect local businesses from hostile takeovers by international companies, so semiconductor players must examine regional regulations closely before proceeding with any M A activity.The world will be a different place after the COVID-19 crisis, and we do not yet know the extent of the changes within business, healthcare, and society as a whole. With so much uncertainty ahead, semiconductor companies will benefit by creating multiple future scenarios, each showing different macroeconomic and virus-related outcomes, as they set their strategy for coming years. They should embrace the uncertainty as part of their operating model, since agility and the ability to adapt quickly will be far more important than sticking to a plan. As in previous downturns, those semiconductor companies that act quickly could emerge stronger. Modest capex cuts, a focus on R D innovation, and a programmatic approach to M A could help them capture growth and create leading-edge technologies that will be in high demand once the economy begins to recover.About the authorsHarald Bauer is a senior partner in McKinsey’s Frankfurt office, Ondrej Burkacky is a partner in the Munich office, Peter Kenevan is a senior partner in the Tokyo office, Abhijit Mahindroo is a partner in the Southern California office, and Mark Patel is a senior partner in the San Francisco office.The authors wish to thank Daniel Anger, Stefan Burghardt, Sungwoo Chung, Viktoria Medvedenko, Sebastian Peick, Klaus Pototzky, Larissa Rott, Luisa Russwurm-Bössinger, and Klaus Seywald for their contributions to this article.Republished with permission from McKinsey Company.

On June 20, President Trump signed an executive order (EO) suspending the issuance of H-1B, H-2B, J-1 and L visas for applicants residing outside of the United States without an active work permit. The order took effect today and will be in force through the end of 2020. The suspension of H-1B and L-1 visas, in particular, likely will impact negatively the ability of U.S. companies in the semiconductor manufacturing supply chain and the broader technology community to recruit and retain global talent and to temporarily transfer international engineers and executives to support critical operations in the U.S.According to the administration, the issuance of visas for skilled temporary workers into the U.S. poses a “significant threat to employment opportunities for Americans affected by the extraordinary economic disruptions caused by the COVID-19 outbreak.” Although SEMI fully supports administration efforts to address economic disruptions and job losses caused by the pandemic, we believe blanket restrictions on high-skilled immigration will be counterproductive to government and industry initiatives supporting a broad-based economic recovery. Semiconductors are the foundation of all electronics and information technology (IT), enabling innovation and growth in countless other industries including medical devices and the IT solutions that enable remote work and the connectivity desperately needed in current economic times. Access to global engineering talent and the worldwide mobility of technology executives are central to supporting the industry’s efforts to contribute to economic recovery in fields ranging from healthcare and telecommunications to transportation infrastructure.The EO authorizes the Secretaries of State, Homeland Security and Labor to establish criteria for exceptions to the blanket ban, including employment categories that: are critical to the defense, law enforcement, diplomacy, or national security in the U.S. provide medical care to currently hospitalized COVID-19 patients provide medical research at facilities to help the U.S. combat COVID-19 are necessary to facilitate the immediate and continued U.S. economic recovery The Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) has classified workers in the semiconductor supply chain as essential to the effective operation of critical economic activity as the nation addresses the economic fallout of COVID-19. In lieu of rescinding the total ban on visa applications, SEMI urges the Secretaries to incorporate the CISA guidelines for semiconductor supply chain workers as they assess categories for application exceptions. SEMI will continue to advocate for programs and policies that enhance U.S. economic competitiveness, including immigration rules that ensure the U.S. can attract and retain the highest skilled talent from around the world without compromising employment opportunities for U.S. workers. As Senate Judiciary Chairman Lindsey Graham noted following the issuance of the EO, “Legal immigration is a positive for the American economy, and visa programs allowing American companies to secure qualified, legal labor throughout the world have benefitted economic growth in the United States.”Karl Kailing is manager of Public Policy and Advocacy at SEMI.

While the full contours of the next normal are still unclear, semiconductor companies largely acted decisively at the beginning of the crisis to build resilience and position the sector for future growth. To plan ahead, now is the time to think about the next normal and set the strategic direction needed to emerge even stronger from this humanitarian and economic crisis.Global GDP recoveryMcKinsey has developed nine GDP recovery scenarios, and as the economic situation has developed, we surveyed more than 2,000 global executives to discover that two of those scenarios are most likely. Both of those scenarios assume that the spread of coronavirus is eventually controlled and catastrophic economic damage is avoided. In the first scenario, global GDP is expected to recover in the first quarter of 2021; in the second, recovery is forecasted to be delayed until late 2022. The geographies of recovery will vary, as some industries and regions will recover faster than others.Semiconductor Demand Forecast for 2020 and 2021The COVID-19 crisis has created an unprecedented challenge for the semiconductor industry. During the 2007/2008 recession, consumer demand stagnated. This crisis, however, has affected both demand and supply, creating dual pressures. Our demand forecast is based on the two most likely McKinsey GDP recovery scenarios as well as on extensive surveys, expert interviews and research on the recovery in China. Charts 1 and 2 (below) show that the semiconductor market as a whole is expected to decline by up to 10% in 2020 due to the COVID-19 outbreak and the resulting slowdown in the global economy. In 2021, however, most segments are expected to grow, with total market size surpassing 2019 value in the more positive scenario. The PC market segments will see the least growth, while the wireless communication and automotive segments should expect to be hit hardest by this crisis with a decline of as much as 21% and 27% respectively in 2020. However, they are expected to bounce back in 2021 with growth of up to 19% and 36% in the positive outlook scenario.It might take some time for the semiconductor market to fully recover. The timing of the industry’s recovery depends largely on the containment of the virus, government economic stabilization efforts, and the global economic recovery.1. Products include memory, micro components, logic, analog, discrete, optoelectronics, and sensors/actuators.2. 2020 estimates were calculated using 2019 baseline and percentages have been rounded.3. Gray values indicate 2020 growth forecast; blue values indicate growth forecast for 2021 only. Sources: IHS, Expert Interviews 1. Products include memory, micro components, logic, analog, discrete, optoelectronics, and sensors/actuators.2. 2020 estimates were calculated using 2019 baseline and percentages have been rounded.3. Gray values indicate 2020 growth forecast; blue values indicate growth forecast for 2021 only.Sources: IHS, Expert Interviews Emerging stronger from this crisisSemiconductor companies had already developed effective crisis-management strategies during past crisis and industry downturns. However, this situation is unique. Overall, we see three main activities that can help semiconductor players with through-cycle resilience and growth: Define the starting position: Creating a baseline can help inform future strategic decisions by providing a holistic view of the current strategy, internal capabilities and external position. Develop economic and political recovery scenarios: Developing and deciding which economic and political recovery scenarios to focus on will enable companies to create company specific scenarios. Therefore, it is important to analyze demand in the short and long terms, along with the effects of subsidies, stimulus packages and industry dynamics. Prepare for the next normal: To prepare for the next normal and emerge even stronger from this crisis, companies should focus on how to gain market share during the downturn. As competitors focus on resilience, companies who see themselves in a financially stable position can focus on increasing their company’s growth and market share. This mindset, however, is most effective when established across the entire organization. Opportunities to emerge even stronger include defining a strategic, systematic approach to investment and divestment as appropriate. This means that several smaller deals that accrue to a meaningful amount of market capitalization over the years often have a more positive impact than one large transaction. History tells us that finding pockets of growth and revising capex, R D and M A strategies are the building block to emerge stronger from a crisis. As Gordon Moore, co-founder of Intel once said, "You can't save your way out of a recession." This translates into moderate capex and R D budget cuts with the focus on future growth drivers. These approaches are supported by insights from previous crises.Although the crisis has presented a major challenge, it also offers the chance for companies to set themselves apart from competitors. The semiconductor industry as a whole has been more resilient than many other industries. The global push toward digitization has also been a major tailwind that will likely be a key element of the global economic recovery.Ondrej Burkacky is a partner with McKinsey Company based in its Munich office. He leads McKinsey’s semiconductor and software work in Europe, as well as its global COVID-19 semiconductor task force. For McKinsey’s latest insights on the business implications of the coronavirus pandemic, visit its website, which is updated daily.

Included in this outlook is a discussion of the financial impact of the current pandemic and a forecast for GDP growth by major region for 2020 and 2021.

Olivier Corvez, senior manager of Environment, Health, Safety and Sustainability at SEMI, sat down (virtually) with Todd Patterson, vice president of global EHS for Entegris Global Operations, to discuss how Entegris has responded to the global pandemic.Corvez manages and Patterson participates in the COVID-19 EHS Task Force currently meeting weekly to discuss industry response and share best practices. SEMI: Was Entegris prepared for the COVID-19 pandemic? How did the company respond?Patterson: Entegris has a strong risk management framework and a risk assessment team of senior leaders who meet at least once a quarter. This focus gives us early visibility into events that could destabilize our organization or threaten our operations. Such a framework helps ensure we have the information necessary to act as soon as possible when the need arises. However, our business continuity plans for a pandemic of this scale were far less than with other more commonly occurring catastrophic events such as earthquakes or hurricanes. The COVID-19 crisis was clearly unprecedented and as such, the necessary systems and procedures were not in place with the depth and detail needed. Our strong governance structure made it possible for us to hold steady even as the pandemic caused increasing uncertainty and disruption around the world. For example, despite major supply chain shutdowns across many industries, to date, our supply chain and manufacturing operations have only been modestly impacted by COVID-19. Our supply chain team was assessing daily the areas of risk with our suppliers and taking appropriate action as well as preemptive steps to ensure our critical supply lines remained open.Our sales team engaged in regular communications with our customers providing them updates about our Business Continuity Plans and our actions to mitigate the risk to any of their deliveries. In addition, we maintained current information about the continuity of our supply chain on the company’s intranet for the global sales team to access as they engaged with customers. Also, a proactive communication plan was implemented immediately to send weekly video messages from senior executives directly to employees’ emails. It was an effective way to communicate with our global teams, to keep them informed about the status of the company’s operations and maintain a common sense of purpose at a time when many colleagues worked from home. In these weekly messages, we also focused significant attention on the health and safety protocols established to protect our manufacturing and lab employees from the virus.Among the health and safety protocols we implemented immediately as the virus moved across different regions were those related to facility screenings, work-from-home policies, social distancing, self-quarantine requirements, contact tracing, increased disinfecting, and travel restrictions. With approximately 5,300 employees worldwide, we had teams in every region ready to implement these comprehensive protocols. We believe we were among the first companies to implement work-from-home policies and travel restrictions.Temperature screening stations at Entegris facilities in Jangan, Korea (left) and Kulim, Malaysia (right). In addition, our CEO led a COVID-19 Steering Committee comprised of senior executives and managers from operations, human resources and communications. The committee met several times a week during March and April to evaluate and formulate responses to the issues that emerged as the virus spread from region to region. The committee’s work created a strong partnership among senior executives and divisional and functional leaders, and the initial guidelines developed by the committee have formed the backbone of a global playbook to limit the spread of the virus to our other sites around the world.Recently, the committee has changed its focus to more strategic issues such as creating a framework for transitioning remote workers back into our office locations. Meanwhile, local leadership teams at each of our global sites have been empowered to address ongoing tactical issues consistent with our thoroughly documented health and safety protocols.Looking to the future, we are using our experience in responding to COVID-19 to develop a more comprehensive pandemic response plan. We have project teams working on better ways to: measure temperatures of personnel entering our sites facilitate social distancing in the workplace redesign common use areas to reduce the number of high touch points disinfect all spaces thoroughly and regularly, and manage emergency pandemic supplies. SEMI: From the SEMI EHS survey, we noted that all members had a Business Continuity Plan. How effective has it been for deploying resources and adapting quickly and minimizing the crisis? Why or why not? Patterson: Because we have operations in China, Entegris experienced the impact of the virus immediately. We quickly formed two task force teams for our two primary facilities in the region. These teams developed the means for communicating key information to employees and started working on prevention plans to protect employees and comply with local requirements for when operations resumed. They met the challenges head on and found quick solutions. An example was finding an effective way of communicating to the employees for each location. Group chats were established through social media. It was this work that led to their success in getting approvals from local authorities to resume operations. Those plans have laid the groundwork on which our other sites around the world could build their response plans.The effective management of our global supply chain also stands out as a key success of the company’s Business Continuity Plan. Entegris has a highly complex supply chain with approximately 6,500 suppliers and a $850 million annual spend, and we ship work-in-progress and finished goods from over 90 sites globally.As I mentioned earlier, despite the virus crippling supply chains across many industries, Entegris experienced very little disruption to its supply chain. The supply chain team was able to accomplish this despite a 90% reduction in global freight capacity. A key factor in keeping goods flowing to our factories was the intensive work the team had done earlier to develop an in-depth understanding of the company’s top suppliers and to mitigate sourcing risks. They had established alternate sources, balanced the sources geographically, and placed inventory across our supply chain to buffer risk.The team also had integrated statistical modeling into reporting tools, which made it possible to reset safety stocks and logistics lead times quickly as conditions changed. And a supply chain digitalization provided one aligned and integrated view via dashboards, giving the company the ability to respond rapidly and to communicate in real time with our suppliers. We essentially had a virtual war room where we monitored the daily impact of the spread of the virus and could address bottlenecks and other issues immediately.SEMI: What lessons have been learned, so far? How do you see changes in your company’s operations in the future?Patterson: Institutionalizing what we’ve learned has already begun. Whether the measures implemented during the pandemic are temporary or become permanent is still to be determined. Regardless, the learnings need to be documented and available as a playbook for if – or when – the next pandemic occurs.Entegris is already working on a more comprehensive pandemic plan that will be based on five levels of preparedness. Level 0 will cover annual training requirements and management of emergency inventory of pandemic supplies. Level 1 will include early recognition of an outbreak, and then Levels 2-4 will include requirements for when specific response measures are implemented. Entegris also has formed the “New Normal” task force, which consists of leaders representing a number of disciplines directing the project teams previously mentioned to create a more comprehensive pandemic response plan. One of the project teams is working on improving the facility screening process that performs temperature measurement for personnel entering Entegris sites. The team is looking at the best technology to scan body temperature. As to whether this technology is employed only while COVID-19 is still active or becomes a permanent way of doing business, this is still being discussed.SEMI: EHS is involved in both providing technical support to protect individuals but also in making organizational changes to favorize social distancing. Could you explain some of the successes and challenges while tackling these two fronts?Patterson: Very early in the pandemic, Entegris established a work-from-home policy for non-essential employees. This significantly reduced the number of personnel and the potential for contact at the Entegris locations. Significant facility changes also were required. These included the design of facility screening booths and modifications to common gathering areas such as canteens, meeting rooms, prayer rooms, and smoking points. Physical markings were used to designate 2 meters distancing, and the seating in canteens and meeting rooms was reduced and staggered to minimize the risk of exposure to the virus. Entegris also has a project team focused on developing design solutions for offices and workstations when space makes it difficult to maintain 2 meters social distancing. These changes turned out to be essential for some sites in meeting mandates by local authorities. Our sites in Hangzhou, China and Kulim, Malaysia both were allowed to resume partial operations after demonstrating to government authorities the effectiveness of the preventative measures put in place. One particular challenge we are facing is the range of personal differences and awareness levels within the workforce – including those that don’t understand the importance of the new guidelines. We are working closely in advising supervisory staff to be aware of the need for employees to follow all health and safety protocols we have put in place, including social distancing. That preventative measure is the most difficult to make part of our new behavior – it is unnatural and inconsistent with our human nature, but it is critical to preventing the further spread of the virus.SEMI: How do you envision the progressive steps in deescalating to bring back “normal” operations? Patterson: I don’t know whether Entegris will ever go back to the old “normal.” As previously mentioned, we are working on the “New Normal.” Our focus now is on bringing our work-from-home employees back to the workplace without adding risk of exposure to the virus. We are still exploring options, but we expect to do it in a phased approach so that we can adequately assess the preventive measures that are in place and determine whether adjustments need to be made to any of our health and safety protocols.We are starting to see a variety of different frameworks emerge for evaluating repopulation timing and procedures. We will assess them on an office-by-office, or site-by-site basis, utilizing consistent criteria to define the potential for exposure to the virus. This also applies to our field service workforce. However, I have not yet seen any governmental guidance that offers a recommended framework for returning employees to the workplace. I think this represents an opportunity for SEMI EHS and the Standards groups to work to establish that framework for our industry.SEMI: Anything else you would like to share that you have observed throughout this crisis?We have not discussed the challenges faced in procuring and acquiring pandemic supplies. Almost immediately after the outbreak occurred in Wuhan, it became increasingly difficult to find supplies. Even when confirmation was provided by suppliers and delivery dates confirmed, the majority of the dates were pushed out or canceled. We found that what worked best was to have purchasing teams at the local site work with their local contacts on obtaining smaller quantities while a corporate point person was also managing larger orders. In preparation for any future pandemics, Entegris will be maintaining an emergency inventory for masks, sanitizer, thermometers, and disinfectants.For 18 months, Todd Patterson has held the position of VP Global EHS for Entegris Global Operations. His experience with emergency management and BCP has become invaluable in the past three months. He is grateful to his global response teams around the world for coming together to support the Entegris team in this unprecedented situation. Todd is an active participant on the SEMI EHS COVID-19 response teams led by Olivier Corvez at SEMI. Olivier Corvez is senior manager of Environment, Health, Safety and Sustainability at SEMI.