memory chips

Policymakers are increasing semiconductor manufacturing capacity to strengthen supply chains and meet growing demand for semiconductors through robust incentive packages totaling hundreds of billions of dollars. This global effort hinges on semiconductor manufacturing equipment (SME).

Orders for critical subsystems evaporated in the second half of 2018 after a very strong start to the year. Subsystems suppliers have been left with depleted order books after OEMs accumulated large inventories as the market for wafer fab equipment cooled off. Although overall critical subsystems revenue growth for 2018 is forecast to come in at +5% YoY, this year has been a tale of two halves with a bumpy ride for the critical subsystems supply chain along the way.The year started very strongly with overstretched OEMs switching from a “just in time” ordering strategy to panic buying and over ordering critical subsystems “just in case” as they battled to keep up with equipment demand from chipmakers. However, falling memory prices and technology push outs from major chipmakers in Q2 saw a sharp reduction in capex and demand for equipment. The whiplash effect through the supply chain has been severe and critical subsystems suppliers running at full capacity were unable to stop fast enough.Comparing inventories of vacuum processing OEMs (major consumers of advanced critical subsystems) and critical subsystems suppliers, warning signs for subsystems suppliers were apparent after the Q2 quarterly earnings reports. After OEM inventories surged in Q2, critical subsystems supplier inventories spiked in Q3. The overproduction of subsystems leading to this spike suggests that the OEMs had been promising orders to subsystems suppliers but turned off the buying as they too struggled to shift their own products earlier in the year. Suppliers of highly customised subsystems such as vacuum valves and power supplies were particularly badly hit. Whereas other subsystems such as vacuum pumps, which can generally be repurposed on other tools or applications, have fared better as the oversupply can be consumed by a wider variety of applications.The bad news does not appear to be finished for subsystems suppliers as Q3 OEM inventories as a percentage of revenue remained at historically high levels, which is a concern in the short term. Nevertheless, the underlying drivers for the industry remain strong and there is light at the end of the tunnel as major fab building projects in Asia appear to be continuing without delay – a promising sign that chipmakers are still intending to increase capacity. There will be a lot of empty fab shells and upgraded clean rooms ready for equipment installations at short notice if required, ensuring that orders for equipment and subsystems will pick up again soon. Although 2018 will appear in the historical data as a flat, if not slightly positive year, it does not quite reflect the bumpy ride that has been experienced by the supply chain along the way.For more information about VLSI Research and Critical Subsystems, visit www.vlsiresearch.com/public/csubs/. Julian West is a technical and market analyst at VLSI Research Europe.

Storage and memory chipmaker and SEMI China member Tsinghua Unigroup is gearing up to meet burgeoning product demand with huge investments in its manufacturing plants. But the high-tech enterprise under Tsinghua University is eyeing a much bigger prize – growth of the region’s semiconductor industry and the realization of its ambition to become a more prominent force on the global stage.Inspired by the national strategy, the Tsinghua Unigroup’s big spends include USD 24 billion in Wuhan (Yangtze Memory Technologies Co., Ltd.,) USD 30 billion in Chengdu, USD 30 billion in Nanjing and USD 100 billion in Chongqing, said Liu Hongyu, senior vice president of Tsinghua Unigroup, speaking at the SEMI China Equipment and Materials Committee meeting last month.Advanced packaging is another rich vein of opportunity the region is tapping for expansion, said Liu Hongjun, vice president of China Wafer Level CSP Co., Ltd., another SEMI China member attending the event, hosted by NAURA in Beijing. Hongjun sees strong growth for Fan-in, Fan-out, FCBGA, 2.5D and 3DIC, with Fan-out out front. Liang Sheng, administrative commission director at BDA, a business advisory firm supporting high-technology manufacturing in the E-Town economic development zone, pointed to 5G chips and smart, networked electric automobiles as drivers of the next growth phase of Beijing’s integrated circuit (IC) industry.Global tailwinds are lifting China’s semiconductor industry and the region’s hopes, with SEMI and major industry analysts raising their semiconductor industry growth projects for 2018 to between 9 percent and 16 percent. According to SEMI’s latest market report, global semiconductor industry manufacturing equipment revenue reached USD 17 billion in the first quarter of 2018, logging all-time highs after jumping 12 percent from the previous quarter and 30 percent year-over-year. Korea was the top-performing region at USD 6.26 billion, followed by China at USD 2.64 billion.Tighter integration with the rest of the global semiconductor industry is critical to the growth of China’s chip sector, and SEMI China is squarely focused on this assimilation, said SEMI China president Lung Chu. The spearhead of this effort is the SEMI Innovation Investment Platform (SIIP) China, established by SEMI China last year to help grow China’s pool of skilled workers, promote advanced technology, generate industry capital, and expand China’s semiconductor industry while developing stronger connections with chip sectors in other regions. To strengthen ties with other regions, SIIP China will stage a number of innovation and investment forums this year including Chinese Night at SEMICON West (July 10-12) and a SIIP China Forum in Silicon Valley (July 15). In August, representatives from the Korea chip industry will visit counterparts in China (August), and a China delegation will travel to Japan for meetings (October). SIIP China is also strengthening the region’s links with Germany and Israel as SEMI serves as a crucial bridge between China’s semiconductor sector and the global industry.At the invitation of Shanghai authorities and the Ministry of Commerce of the People’s Republic of China, SEMI China in November will join the China International Export Import Exposition in Shanghai, an event that will underscore China’s commitment to the openness and cooperation of its semiconductor industry with the international chip community. As part of the exposition, SEMI will work with the Ministry of Commerce and domestic chip manufacturers to begin development of a special integrated circuit (IC) zone. SEMI China members are welcome to participate.With workforce development no less vital to the future of China’s semiconductor industry, the Equipment Materials Committee offered potential solutions to the industry’s talent gap. Measures included targeting university students and engineers with industry lectures and courses in key cities, campus recruiting, talent training that members said they are willing to help SEMI coordinate and stage and, much like the push to better integrate China with the global semiconductor industry, mobilizing member resources around a campaign to polish the image of the industry to make it more attractive to students and young workers. Members of the SEMI China Equipment Material Committee gathered at NAURA in Beijing in June for a warm and lively discussion about global semiconductor industry cooperation and growing China’s semiconductor sector.Cherry Sun is a marketing manager at SEMI China.

Powerful winds of change are re-shaping the semiconductor industry as it flexes and re-positions to power a new wave of growth on the back of emerging applications. Today, the industry is thriving, with growth expected to continue through 2019 even as Moore’s Law – the trusty doubling of transistors roughly every two years – begins to pump the brakes. Product mix and production technology are shifting as the dominant smartphone and PC markets, having seen their growth peaks, start to give way to large markets with relatively low semiconductor penetration, such as automotive.What’s more, new potentially ubiquitous technologies and platforms such as AI, blockchain and smart manufacturing are redefining market dynamics and the semiconductor ecosystem that underlies them.Troublingly, the most significant threats to the continued growth of the semiconductor industry are not of its own making. Macroeconomic trends and trade policy disputes loom.These were some of the key takeaways from the SEMI Market Symposium kicking off SEMICON West in San Francisco this week. Following is a deeper look.Semiconductor MarketThe consensus view, reflected in forecasts presented by Clark Tseng of SEMI and Bob Johnson of Gartner, is that the semiconductor industry could top $500 billion in 2019 after reaching $400 billion in 2017. According to Gartner, smartphones and PCs will continue to account for large parts of the market, but will be displaced as major drivers of market growth by the emergence of industrial, automotive and, to a lesser extent, storage, from 2017 to 2022. Johnson noted that while communications and data processing applications drive logic device demand, average sales prices (ASPs) are a bigger contributor to revenue growth than unit growth.Leading-edge processors are a big part of the ASP picture, with equipment costs increasing ~20 percent per node. One challenge is that as Moore’s Law loses steam, leading logic producers are increasingly going their own way with new production technology. The volatile DRAM market – now in a “super cycle,” according to Tseng, and expected to peak in 2019 – has been stoking memory market growth.Initially, supply shortages fueled memory price increases as three of the four leading memory makers invested in flash rather than DRAM capacity. However, memory prices have been more recently been lifted by technology complexity, particularly as DRAM has moved to 3D architectures. The good news is that pricing, at long last, appears to be driven by value.Automotive MarketWith automotive accounting for less than 10 percent of semiconductor demand, there is room for growth. Rudy Burger of Woodside Partners noted that while the end market for automobiles is growing slowly, at 3 percent CAGR, the market size is nearing 100 million units. In market segments such as electric vehicles, the semiconductor content exceeds $1,000 but can be much higher.For example, the BMW i3 sports over $4,000 in semiconductor content. Burger said connectivity, autonomous driving and shared mobility services are also key opportunities for semiconductors to deepen their penetration in automobiles. For instance, the auto market for cameras, is expected to grow from $2 billion in 2017 to $6 billion in 2022.On average, high-end vehicles feature over $1,000 in semiconductor content, whereas low-end vehicles hover in the $400 range, said Anand Srinivasan of Bloomberg. Because the automotive market is segmented by function or subsystem, with different suppliers focusing on different areas, there is little supply concentration. Srinivasan also pointed out that because of significant differences in their objectives, automotive safety and automation systems should be developed separately.BlockchainThe chief benefit of blockchain is the trust it begets among all parties to a digital transaction through four fundamental features, said David Treat of Accenture: The tracking of provenance (knowing who has touched data, and what has happened to it) Tamper evidence (knowing if someone has tried to change the data) Control (which data elements to share with which parties) Security at the data element level While most of the hype over blockchain focuses on tokenized assets and ledgers (bitcoin and other cryptocurrencies), the fundamental application in the semiconductor industry is sharing trusted access to reference data at the data element level. This ability to provide shared trust can reduce costs throughout the supply chain and across enterprises. For example, future blockchain implementations will offer a full ecosystem view to any supply chain participant. While blockchain has typically been deployed through centralized control or platforms, peer consortia, such as SEMI, could help weave the benefits of blockchain through various ecosystems by enabling equipment and material suppliers, device manufacturers, designers and system integrators to share business and technical information securely and, if desired, anonymously.Global and Macroeconomic TrendsThe biggest threats to the continued growth of the semiconductor industry are exogenous. After a decade of steady recovery since the financial crisis, the global economy appears to be heading for a slowdown. Duncan Meldrum of Hilltop Economics made the case that the global economy is at or just past the peak of the business cycle, and semiconductor equipment is past the peak.A key indicator of a looming recessionary is the movement toward an inverted yield curve, in which long-term interest rates fall below short-term rates – a phenomena that could materialize this year or next.The increasingly heated trade climate, marked by high-stakes confrontations between the U.S. and China, threatens complex supply chain arrangements, though mercurial policy statements could do even more harm than stiffer trade tariffs. Underscoring competing interests between the U.S. and China and the unpredictability of their relations, Robert Maire of Semiconductor Advisors pointed out that, in 2019, 60 percent of all semiconductors are expected to be used in China, deepening the dependency of several U.S. semiconductor companies on China.Paul Semenza, for SEMI Industry Research and Statistics