data centers

For the semiconductor industry to flourish, all chip ecosystems must embrace closer ties, greater openness, and more flexibility to co-innovate solutions in today’s rapidly unfolding global digital transformation.

From the need for more tech talent to fuel digital transformation across all industries to the great resignation and great retirement of workers en masse, the demand for tech talent continues unabated.

Terry Tsao, Global Chief Marketing Officer at SEMI and President of SEMI Taiwan, recently discussed technology trends with Young Liu, Chairman of Hon Hai Technology Group (Foxconn), as a prelude to SEMICON Taiwan’s five online forums.

U.S. consumers are flush with cash, the American economy is hurtling back from the depths of the COVID-19 pandemic, and the semiconductor industry is flying high on skyrocketing chip demand, with chip equities soaring since the initial outbreak in early 2020 as virus outbreaks worldwide supercharged demand for the digitization of everything from factories to home offices. “Wow, what a difference a year makes,” said Jennie Raubacher, Global Head of Semiconductor Electronics Investment Banking at Wells Fargo, speaking at a recent SEMI webinar. The two rounds of government stimulus payments in 2020 and 2021 gave many U.S. households the safety net to withstand the heaviest blows dealt by the COVID-19 pandemic and stoked consumer spending that has helped lift a hobbled economy. Durable goods spending in the U.S. has also seen a sharp rebound, surging more than 60% from its April 2020 trough, Raubacher said. The twin forces have driven a blistering U.S. economic recovery after GDP shrunk about 10% by the second quarter of 2020 only to bounce back in the first quarter of this year to roughly $19 trillion, regaining the lost ground to match the GDP charted at the end of 2019. With the U.S. economy continuing to gain steam, inflation has, as expected, edged higher, with price increases particularly acute in used vehicle and lumber markets. Despite surging prices, Wells Fargo sees inflation moderating as durable goods demand slows, easing pressure on interest rates, Raubacher said. Equity Valuations at Record Highs Heady semiconductor stock prices are not new. Over the past 15 years, equity prices of chip companies in the S P 500 have grown more than 460%, outpacing the 230% jump in value of the S P 500 index overall, Raubacher said. And chip stocks continue to shine. Since early 2020, when the spread of COVID-19 hit its rapid clip, the recognition of the growing importance of chips to economies around the world has exploded. That dynamic joined secular technology trends including autonomous driving development, industrial and factory automation, 5G infrastructure buildouts, data center expansions, and smart city and smart home innovation fueled by the Internet of Things (IoT) as key drivers of semiconductor stock valuations. With its price/earnings (PE) ratio now at more than 21x, the S P 500 is well above its historical average of 15x PE. “The S P 500 valuation is at record high any way you look at it, and valuation multiples across the board, currently at 3x Next Twelve Months revenue, have increased dramatically from historical averages,” Raubacher said. Semiconductor stock valuations are on similar trajectory, with the SOXX index now at 15x Next Twelve Months EBITDA (earnings before interest, taxes, depreciation and amortization). “While semiconductor stocks may seem highly valued compared to historical levels, the chip industry has grown faster and expanded profitability by a wider margin than S P 500 companies,” Raubacher said. With that differential, “semiconductor equities are not as expensive as they may seem at first glance.” Earnings expansion and valuation multiple increases for the chip industry over the past 15 years have translated into a more than 500% jump in market capitalization, compared to a 300% increase for the S P 500 excluding chip companies, she said. Chip company revenue growth in the first quarter of 2021 was predictably low due to seasonality, dipping 2.4%, though dropped less than the historical average, Raubacher said. Second-quarter revenue growth for the industry is expected to hew to the historical average of 6%. Semiconductor growth forecasts by market analysts for 2021 range widely from 6% to 17% year-over-year, she added. Chip Companies Raise Capital at Record Pace In 2020 and 2021, semiconductor companies have raised an unprecedented $82 billion in capital to finance maturing debt and acquisitions, a wave that will “likely catalyze further consolidation in the sector,” Raubacher said. None of the financing has stemmed from liquidity crunches. Since Raubacher joined Wells Fargo 10 years ago to lead its semiconductor practice, the group has executed more than 175 transactions including $40 billion in mergers and acquisitions and $360 billion of financing for its semiconductor industry clients. “With a strong macroeconomic backdrop and demand environment, relatively low interest rates, semiconductor companies showing strong business fundamentals and robust valuations, we expect a pickup in M A activity,” she said. Growth Forecast Across Most Semiconductor Applications The next four years will see the chip industry grow across most applications including wireless communications, consumer electronics, transportation and medical. Automotive and industrial/aerospace will lead the way, expanding at an expected compounded annual growth rate of 14% and 10%, respectively, from 2020 to 2025 to “drive a significant portion of the TAM expansion during that period,” Raubacher said. Across all applications, the semiconductor industry is expected to grow at a 6.8% CAGR from 2020 through 2025, adding $183 billion in revenue by the end of the forecast period, she said. ESG Rises in Importance For their part, investors now focus on more than pure business performance when valuing individual companies. The ability of businesses to reduce their carbon footprint, promote workplace diversity and take other steps to serve the greater good as part of Environmental, Social and Governance (ESG) programs are carrying more weight in valuation models. “Investors are paying more and more attention to ESG initiatives and targets,” Raubacher said. “On the debt side, we’re seeing things like green bonds and interest rate reductions tied to ESG targets. Only a few semiconductor companies have incorporated ESG measures into their financing, so it’s still early days. It really comes down to the metrics you can track in your companies and the goals and targets you can commit to. It will be a very company-specific approach rather than an industry standard.” In the chip industry, Raubacher noted that ESG targets are geared not only to manufacturing equipment and processes in fabs and other semiconductor facilities throughout the supply chain, but increasingly also to chips themselves. As technology innovation continues to spur the development of chips to power more electronics for consumers and businesses, their proliferation comes at a cost: greater energy consumption. The upshot is that semiconductor makers are becoming more focused than ever on power-efficient designs to bolster their ESG initiatives, Raubacher said. Many semiconductor players across the supply chain are reducing their carbon footprint by switching to energy-saving equipment and reducing water waste, Raubacher said. At the same time, more semiconductor executives are recognizing the rising importance of highlighting corporate achievements across all aspects of ESG. More Governments See Vital Importance of Semiconductors As shelter-in-place orders took hold in countries worldwide after the initial COVID-19 outbreak, work-from-home offices, online shopping, virtual classes and remote doctor’s visits became the norm. The electronics at the heart of this connectivity – born of both necessity and convenience – and the chips that power them took on outsized importance around the world. Geopolitical skirmishes intensified and supply chains across the semiconductor industry were reimagined and redrawn. Governments jockeyed for advantage in the race to build new semiconductor manufacturing facilities and upped their chip investments. An acute chip shortage that started in the automotive industry and quickly spread to other sectors magnified just how pervasive and vital semiconductors had become in making the world go round. “There’s no question that the semiconductor industry is vitally important to global and national economies as governments around the world now recognize its strategic importance,” Raubacher said. That puts the industry in an even stronger position to help lay the regulatory groundwork for its own future. “There’s a unique opportunity for semiconductor industry executives to shape the public policies that could impact the direction of the industry for the next 30 years,” she said. More than 750 people attended the June 2nd webinar, Surging Chip Demand, Digital Transformation, and the Pandemic – What’s Next?, sponsored by SEMI members Brooks Automation, Hitachi, JECT, KLA and TEL. Sven Smit of McKinsey Company also delivered his talk Leading in COVID-19 Exit at the event.

Electric mobility, renewable energy and other technology innovations like IoT, 5G, smart manufacturing and robotics all require reliability, efficiency, and compact power systems, fueling the adoption of Silicon Carbide (SiC) and Gallium Nitride (GaN) to support lower voltages in significantly smaller devices. But chip designers must overcome the technological and economical challenges of integrating the two semiconductor materials into power systems.SEMI spoke with Elisabeth Brandl, Business Development Manager at EV Group about trends and new developments within the power electronics industry and the devices' application in smart mobility. Brandl shared her views ahead of her presentation at the SEMI SMART Mobility Forum, 18 February, as part of the SEMI Technology Unites Global Summit, 15-19 February 2021, online event. Join us to meet experts from EV Group and other key industry influencers. Registration is open. SEMI: What is driving new developments in power electronics?Brandl: Globally there are significant changes in infrastructure requirements for communication, automotive and power conversion. We need to look no further than the rising adoption of 5G, electric and hybrid vehicles, and renewable energy as examples of drivers of these changes. The device level, particularly in the field of power electronics, figures prominently in these shifts.The power electronics industry faces a growing number of scenarios where conventional silicon power devices are no longer suitable and are easily outperformed by new architectures mainly based on wide bandgap semiconductor materials like Silicon Carbide (SiC) and Gallium Nitride (GaN).SEMI: What industry challenges is power electronics innovation aiming to solve? Brandl: Power conversion efficiency is very important and needs further improvement as the related losses significantly contribute to the overall power consumption. For green power and a better environmental footprint, renewable energy is crucial, but so is overall power-consumption efficiency, yet the role of power devices is often underestimated. High-frequency and high-power applications, such as data center applications and inverters for renewable energy, where silicon power electronics are reaching their limits, are also important areas in power electronics.SEMI: How will the transition from silicon to compound semiconductor materials help?Brandl: The superior material properties of several compound semiconductors can tackle the need for lower losses in power conversion or better high-frequency behavior. Today, we mainly talk about GaN and SiC power devices as they are materials well-suited to address these needs. However, other materials like diamond and gallium oxide are in development for these applications. Material properties of SiC that enable thinner materials with lower power losses and better thermal behavior address power conversion efficiency as well as form factor challenges. GaN, especially in a high electron mobility transistor (HEMT), can be used for high-frequency applications.SEMI: What enables a better and more cost-effective manufacturability of SiC and GaN power devices?Brandl: For the end customer, a typical figure of merit regarding the cost effectiveness is $ per Ampere or Watt. While this seems simple, the reality is of course more complex. It is important to understand the main cost contributors within the manufacturing area. For SiC, this is clearly the substrate cost. In my presentation, I will show a way to reduce this cost via wafer bonding. For GaN, epitaxy – a method for growing or depositing mono crystalline films on a substrate – is the critical parameter. And of course, yield has a very big impact on cost effectiveness too, which means that good process control including metrology is very important.SEMI: Many semiconductor companies are already transitioning to silicon carbide and gallium nitride. Can you give us an example of a success story?Brandl: All the big power device manufacturers have either acquired or developed their SiC and/or GaN power device technology, so they also see a bright future for these wide bandgap semiconductors in the power device market. The most prominent success story is STMicroelectronics with its SiC MOSFET power devices, which have been implemented by Tesla in its Model 3 vehicles since 2018.SEMI: What is coming next?Brandl: New materials for power devices are being explored, such as diamond and gallium oxide. For SiC, the trend is moving toward 8-inch substrates, which is the focus of the funded EU project REACTION under the coordination of STMicroelectronics. Cost reduction and substrate availability also play a big role. All major power device manufacturers have contracts to secure the supply chain for SiC substrates because material availability is the main uncertainty at this time. Finally, collaborations along the supply chain are crucial and generally beneficial for all parties, as development requirements are better communicated and prioritized.Elisabeth Brandl is Business Development Manager at EV Group. She received her master in technical physics from the Johannes Kepler University Linz, Austria in Semiconductor and Solid State Physics. Since 2014, she has been responsible for Product Marketing Management for temporary bonding and compound semiconductors at EVG. The SMART Mobility Forum is the digital platform of SEMI Europe’s Global Automotive Advisory Council (GAAC) for industry stakeholders along the automotive and electronics value chains, from Design, Semiconductor Equipment and Materials Suppliers to Automotive OEMs.Smart Mobility is one of four SEMI initiatives focused on building communities, content, and activities around critical and emerging electronics markets. Read more about our Regional Chapters.Serena Brischetto is senior manager of Marketing and Communications at SEMI Europe.

In the two months since the COVID-19 outbreak in January, the Chinese economy has shifted from shock to ongoing recovery under the guidance of the Chinese government. China has worked tirelessly to restore production at its chip manufacturing facilities, a core strategic industry in the region, and the effort is paying off. Operations at several fabs and OSATs – the domestic semiconductor industry’s chief growth engines – have begun to stabilize.As of mid-March, SMIC had restored its manufacturing lines to over 90% of production capacity and expects to be operating at full bore in the next few weeks, while the company’s R D line has returned to full operation. Huahong Grace reestablished normal supplies of various equipment parts and production raw materials. At Huahong Fab2, 12 new pieces of equipment went online to help increase production capacity, and production at Huahong Fab1 and Huahong Fab3 is now stable. JCET said the company's overall return rate has exceeded 90%. Meanwhile, IDM maker Silan Microelectronics' 6-inch and 8-inch lines maintained 90% production.Production lines at Huahong Group, SMIC, CanSemi, GTA Semiconductor, Samsung (Xi'an) and other mainland China chip manufacturers have been generally operating at normal capacity since the Spring Festival. Lines at YMTC, Tianma, CSOT, and BOE, all in the Coronavirus epicenter of Wuhan, have also returned to normal operations. China’s chip industry is finding its footing, and an impressive host of semiconductor companies are gearing up to participate at SEMICON China 2020, rescheduled to June 27-29. The list includes the major domestic wafer foundries such as Huahong, the major packaging and testing companies such as JCET, TFME, Huatian, and large domestic and foreign equipment companies, among them TEL, ASMPT, DISCO, ULVAC, VAT, ASML, KLA, NAURA, AMEC, Anji, CETC, Sinyang, SMEE, CAS, CANON and SPIROX.DigiTimes, a daily newspaper covering the semiconductor, electronics, computer and communications industries in Asia, interviewed SEMI China President Lung Chu in mid-March about what’s ahead for China’s semiconductor industry. Following is an English translation of the interview. DigiTimes InterviewAs China continues to ramp back up to normal activity, SEMI China is making every effort to hold SEMICON China 2020, a leading international semiconductor industry platform for promoting growth and innovation in China's semiconductor industry supply chain. SEMI China president Chu emphasized that the strong support of SEMICON China 2020 exhibitors and the Chinese government made rescheduling the event to June possible.Chu, a semiconductor industry veteran who has experienced numerous economic and industry upheavals over his career including the SARS shock in 2003, said current global economic uncertainty stems from two black swans – the global COVID-19 pandemic and how long it will take to contain it, and the sharp drop in oil prices triggered by the recent geopolitical dispute between Russia and Saudi Arabia. In China, the government responded with strict containment actions and promoted public awareness of self-isolation, resulting in effective domestic containment as of mid-March. As a major oil consumer, China sees the lower prices as relatively favorable to its economy. Those dynamics should allow China to recover sooner than many other regions, and it could emerge even stronger once the pandemic is contained, despite the current slump in global semiconductor demand, Chu said. Once the epidemic has passed, China is in a position of "turning crisis into opportunity," and the semiconductor industry will recover from the trough, he said. Companies in semiconductor supply-chain sectors face various challenges in restoring normal operations. IC design companies experienced relatively low impact since employees can work from home and most companies are located in major cities in China, where epidemic prevention control is strict. For most chip manufacturers, production has not stopped but is hampered by manpower shortages from restrictions on employees returning to work. IC packaging and testing companies are suffering bigger impacts because of the more labor-intensive nature of their operations. However, all companies in the supply chain will be affected by the decline in demand for electronic products and ICs in 2020. As the COVID-19 threat recedes in China, the region remains unwavering in its commitment to semiconductors as a strategic industry with its continuing efforts to evolve sustainable and reliable localized supply chains, Chu said. Investments in “new Infrastructure” for 5G, the Internet of Things (IoT), data centers, as well as public health services should help drive semiconductor demand for smart applications and devices associated with the new infrastructures as are all powered by ICs, benefiting companies in the global supply chain. The COVID-19 outbreak triggered a slowdown in new factory construction after the Chinese government implemented restrictions on the flow of people resulting in a worker shortage. SEMI has revised downward its forecast of wafer equipment spending in China to just a 3% increase this year.Market analysts revised downward forecasts for 2020 annual global semiconductor revenue growth from 7-10% to 0-5%, while some expect negative growth. The recent COVID-19 outbreaks in Europe, the United States and other regions have created more uncertainty. Declining end-user demand for electronics will drive down spending on upstream equipment for both memory and logic IC device makers. For Chu and his SEMI China staff, the postponement of SEMICON China 2020 has been a “major challenge,” he said. “It is a huge project to communicate and coordinate with the government and to reconfirm with exhibitors and industry leaders.”As a leading industry platform, SEMICON China attracts a large number of global customers and suppliers each year. The major China domestic suppliers, leading foundries and OSATs have confirmed their attendance in SEMICON China 2020. Most key foreign suppliers are planning to staff the event with local teams in case some executives are unable to enter China by June due to travel restrictions if the COVID-19 virus has not been brought under control in the United States, Europe and other regions. To assure the success of the concurrent Forums, SEMI has prepared multiple contingency plans, including live broadcast, video and slide presentations. SEMI will also hold the grand opening session at a larger venue than last year’s event to accommodate more attendees with more sitting distance apart. SEMI will follow government guidelines to implement appropriate public health and safety measures during SEMICON China. "Ensuring the welfare of all exhibitors and guests and providing a safe exhibition environment is SEMI’s top priority," Chu said.Cherry Sun is a marketing manager at SEMI China.

The world of work is transforming. I believe digitalization can be a force for better quality work, unleashing higher productivity and opening up new opportunities to work in different ways. For this to happen, we must set the right framework. We must set the right conditions to enable everyone to reap the benefits from the digital era.One crucial condition is that people have the right skills. That's why the European Commission launched a "Skills Agenda for Europe" in 2016. It sets out 10 actions to make the most of Europe’s human capital, which is crucial to keep Europe on a competitive edge and growing. One of its focus areas for example is better skills intelligence – understanding skills bottlenecks and anticipating needs, including through stronger business-education partnerships. Education needs to be more responsive to labour market needs.The microelectronics industry is one such area in Europe that faces an acute talent shortage. But this technology is crucial for Europe’s competitiveness. Microelectronics enable many of the key technologies and innovations required for advancing a secure, sustainable and digital economy. Data centers, online platforms, autonomous spacecrafts, blockchain algorithms and 5G infrastructure may serve different purposes but share one vital element: microelectronics. The deepening penetration of electronics in the digital economy and new applications is giving rise to industry requirements for a workforce pool with soft skills and expertise in production technologies, software and data science.This is why the European Commission encourages new collaboration models between the worlds of education and industry across all business sectors, including in microelectronics. I welcome the fact that SEMI, the industry association representing the electronics manufacturing supply chain, is fully committed to building and maintaining the needed talent pipeline in Europe. I wish you best of luck in your endeavors. Marianne Thyssen is European Commissioner for Employment, Social Affairs, Skills and Labour Mobility.