Travelling On The Silicon Road

Call it as seismic changes or consolidation, the chip manufacturing world is going through some upheaval. While on one end, quite a few IDMs are transitioning to a fab lite strategy (albeit in different flavours) - especially with the high costs & risks involved in sub 65nm, on the other end heavyweights like TSMC are spreading their reach into the IP arena too.

As I noted in an earlier post, TSMC is leveraging on its resources and market reach.It may start off as “strengthening the design collaboration for critical sub circuits” (who doesn’t want FTSS??) but the intensity of the move has been enough to spread ripples in the till now independent IP biz world. By doing so, TSMC may well be doing its share in mitigating some of the risks involved in DSM design and thus catalyzing more of these design starts; and subsequently fill up its high-end fabs.

In the recent spate of takeovers by the private equity world and at a time when the chip industry is undergoing consolidation, a blip has occurred – Temasek Holdings’ wholly owned subsidiary, Singapore Technologies Semiconductors Pte Ltd. (STSPL) has failed to complete its attempted buyout of test and assembly provider STATS ChipPAC Ltd. STSPL now has a majority stake of 83.1 percent in the company, falling short of the 90% required to make STATS ChipPAC completely private

Renesas seems to be bucking the trend of IDMs relying more and more on foundries for advanced process technology development.

Renesas believes in working (on its own or in collaboration) on advanced process development. With plans to increase sales in system-on-chip solutions and microcontrollers, it may make sense to keep the advanced process development in-house in order to have more control and direction for their major product offerings.

This, however, will not prevent it from outsourcing for volume production on advanced devices

Mark LaPedus reports in his article in EETimes about TI’s approach towards IC manufacturing – while bolstering its in-house effort in analog production, TI is shifting more of its logic based work & process flow to foundries.

TI is adopting a 3 pronged approach based on its product categories - At the 65-nm node, TI has three foundry partners for its wireless chips: Chartered, TSMC and UMC. For wireless chips at 45 nm, TI will continue to use UMC and TSMC. For DSPs, TI develops the processes & makes its own 65nm DSP. However it will rope in TSMC too for the next node. TI has been manufacturing Sparc processors for Sun; a foundry, probably UMC, will take over production at 45nm.

Shifting the responsibility of digital processes to outside foundries, while focusing on analog processes for in-house manufacturing does seem to be the right direction, especially now when the production costs & risks are escalating. However, this is not an all together new approach. If I recollect well, STMicroelectronics had followed this approach along with TSMC. While the base/digital process was same across the two companies, STM developed its own spin-offs e.g. analog, high power, RF for and based on its market requirements.
The advantages are: risk sharing (in certain cases, offloading) in base process, retaining its niche in customized or spin-off processes and having the second source options when capacity is needed.

The article mentions that by using leading-edge foundries, fabless Qualcomm Inc. has been able to close the manufacturing gap with rival TI. I would say that it wasn’t just using leading edge foundries; it was close co-operation with multiple leading edge foundries coupled with the adoption of what it termed as Integrated Fabless Manufacturing Strategy (IFM) that helped Qualcomm. As I noted in my earlier post, “Fabless Qualcomm zooms to next node“, (incidentally a comment on another article by the same author!) Qualcomm developed its own virtual manufacturing organization.

According to a news report, LSI Corp. is considering whether or not to continue its Consumer Electronics (CE) business. It was however clarified that this would not impact the company’s focus on its chips for mobile phones.

This comes closely on the heels of the revelation by LSI Corp. that it repurchased 5 million shares, worth $43 million, of its common stock in the past couple of days following its stock tumbling more than 12%; investors sold off the stock following the chipmaker’s April 25 earnings report, in which LSI said its sales for the quarter ending in June would fall $100 million of Wall Street’s expectations

While 60% of the revenue of the new combined company ((LSI Logic finalized its merger with Agere Systems in April and the new entity is called LSI Corp.) continues to come from its storage chips and systems business, does it mean an inclination of LSI Corp. towards the strengths of Agere Systems i.e. communications, networking and mobile phone industry?

While CE is generally considered to be a major revenue generator, it is not exactly a smooth sailing - decreasing market window, multiple features, growing design & packaging complexity, falling ASPs and convergence are some of the existing challenges

TSMC is broadening it’s portfolio of internally developed IPs and 3rd party IPs. It had started a program called IP-9000, later renamed to Active Accuracy Assurance Program, to qualify various IPs in its foundries. The objective was to expedite the design time with silicon proven 3rd party IPs.

With shorter design cycle time and with IPs becoming mandatory blocks in a design, the need for silicon proven IPs is not just desirable but also essential. Having a broad and quality IP portfolio is a big asset. If TSMC is getting into the ASIC like biz model, then indeed it is worrisome for the 3rd party IP vendors; especially the smaller ones who aspire to gain market share on the basis of their expertise in niche areas. The field gets all the more “unlevel”. But then it is a competitive world and TSMC would be leveraging on its resources and market reach.

A point to be noted is that, does this mean the resurrection of ASICs - often ranted about as dead ??

TI’s CEO & President, Rich Templeton, mentioned the importance of medical equipment biz for India’s semiconductor industry during his visit to India.

Applications in the medical area, along with automotive applications hold prominence in the near future for the semiconductor industry in general, albeit a lot more in emerging markets like India and China. While consumer and telecom applications still remain strong contenders and are mainstream applications, the potential for these emerging segments is huge.

The shortened market window & pricing pressures for applications like entertainment/computing etc. falling under the generic consumer umbrella doesn’t give a leveling field to the smaller or niche players. This is where these yet to be fully tapped markets like medical and automotive hold the lure. Emerging market with strong potential which does not necessarily require the leading edge process ….. these can very well also pave the way for process choice in the soon to be set up foundries in India.

Read this article (Nadamuni says, in EE Times) ; Wanted to submit my comments there but looks like a perpetual error while submitting comments…..

2 issues which could be of concern to the fledgling Indian semiconductor market are: potential overcapacity situation and offering an attractive pricing strategy in face of strong competition from established regional foundries.

Investing with new equipment in light of the above and especially with the unavailability of incentives for such plants i.e. with second hand semiconductor equipment will make the potential investors wary.

However, having said that, if India were to offer the same set of incentives for second hand semicon equipment too, it’ll take a long time for it to catch up with cutting edge technology fabs as well as to address the design needs of the local design houses which have emerged from working on trailing edge technos to the leading edge ones.
Perhaps, a different set of incentives could work……???

UMC has announced that it plans to open a support office in Hyderabad, India. The main charter is to support India based customers. This is close on heels with TSMC’s setting up office in Bangalore, India.

Cisco and IBM are planning to develop a platform based on open standards to allow unified communications and collaborations in their applications. IBM will offer a set of application programming interfaces (APIs) as a subset of its Lotus Sametime collaboration software and Cisco will offer communication APIs for accessing voice and video services.
Cisco and IBM also will roll out “specific client offerings” based on the new platform and a set of “plug-ins” to combine the collaboration and unified communications capabilities of both companies.

I had written about the adoption of a similar approach in the EDA industry (Why can’t we do it in EDA). Especially with DFM and other UDSM challenges (and not to mention the standards’ war!), it is to the advantage of the designer if he can get the best of all tools in a unified integrated design flow. Since no single vendor can handle this on its own, a collaborative approach looks to be the best bet.

After several hiccups, India has announced its IC policy.

Dubbed the Special Incentive Package Scheme, the initiative is focused on attracting investments for setting up semiconductor plants and other technology manufacturing industries. Semiconductor companies seeking incentives—which will be 20 percent of the capital expenditure during the first 10 years—will have to invest a minimum $550 million, according to the plan.

The salient points were announced Feb. 22 with details to be out in the coming two weeks in a document that spells out the specifics about the level of equity, the interest-free component and other financial details.

This announcement is most likely to be followed by announcements by potential investors. AMD has already announced a technology pact with SemIndia Inc. for a semiconductor manufacturing facility in Hyderabad.

At least two more semiconductor manufacturing facilities are expected to be announced in the next few weeks, according to Raj Khare, chairman, India Semiconductor Association.
Samsung, Freescale, Motorola, Intel, Infineon, STMicrorelectronics and Toshiba are among the possible investors in a Rs.20,394 crore ($4.5 billion) manufacturing facility being set up by the Hindustan Semiconductor Manufacturing Corp. (HSMC) which is expected to establish a fabrication complex that will include several foundries to be built by HSMC. The fabs will 200- and 300mm wafer lines.

It has to be seen if and how the various consortiums as well as companies like Intel etc. tread on this “red carpet” rolled out by the Indian govt. And having decided to tread, it has to be seen which technology direction will these new fabs take up (as noted in my earlier post, “Vision Summit explores strategies driving semicon industry growth”)

ISA-Ernst & Young, India’s recently released report presents a snapshot of India’s semicon industry.
Some of the salient points are:
Talent quality: Moderate (US rated very high)
Talent Availability & scalability: Very Well (4th amongst peers, US rated 3rd )
Technical education quality: Moderate (rated 5th, US rated very high)
Talent cost advantage: Very well (Best along with China, US rated lowest)
Peer countries selected for study: Canada, China, Czech Republic, India, Israel, Taiwan, the United Kingdom and the United States

Other than the more prevalent known aspects as cited above, the report underscored a few interesting and vital points:
- India’s need to conceptualize & build products and move up the value chain
- Relatively lower level of electronics manufacturing which adversely impacts the semicon market potential
- Need to increase IP registration