Is Moore’s Law becoming academic?

EL SEGUNDO, USA: The high cost of semiconductor manufacturing equipment is making continued chip-making advancements too expensive to use for volume production, relegating Moore’s Law to the laboratory and altering the fundamental economics of the industry, according to iSuppli Corp.

“The usable limit for semiconductor process technology will be reached when chip process geometries shrink to be smaller than 20 nanometers (nm), to 18nm nodes,” said Len Jelinek, director and chief analyst, semiconductor manufacturing, for iSuppli.

“At those nodes, the industry will start getting to the point where semiconductor manufacturing tools are too expensive to depreciate with volume production, i.e., their costs will be so high, that the value of their lifetime productivity can never justify it.”

While further advances in shrinking process geometries can be achieved after the 20nm to 18nm nodes, Moore’s Law will no longer drive volume semiconductor production. iSuppli expects the semiconductor industry to reach this milestone in 2014.

More on Moore
Moore’s Law, named after Intel Corp. co-founder Gordon Moore, represents the foundation of the semiconductor industry, stating that the number of transistors that can be placed on an integrated circuit doubles every two years. For more than four decades, shrinkage of semiconductor processes to smaller and smaller sizes—known as geometries—has allowed Moore’s Law to remain on track.

This rapid advancement has enabled a continued rise in computing power that has yielded everything from PCs, to video-game consoles, to today’s advanced smart-phone products. It also has brought down the cost of electronics to the point where capabilities previously available only in supercomputers now can be found in inexpensive consumer-electronics devices.

Process procession
Historically, manufacturers of advanced semiconductor products like microprocessors or high-density memory migrated to more advanced smaller-geometry processes at a fast pace. They did this in order to reduce their manufacturing costs at the same or at a quicker rate than their competitors.

This caused revenue generated by a specific semiconductor geometry to fall off rapidly after it had peaked. However, with the rising costs of new manufacturing equipment, semiconductor processes are expected to have more lengthy periods of revenue generation.

“The semiconductor industry will be living with historical generations of technology longer than it did before,” Jelinek said. “You are not seeing these geometries rise and fall off the way they did before. Rather, they are living on.”

As presented in the figure, semiconductor revenue generated the old 90nm micron geometry tailed off dramatically after peaking. The newer 65nm geometry is not declining so dramatically after reaching its zenith. The following geometry is likely to remain a major revenue generator for many years, Jelinek predicted.Source: iSuppli, June 2009

The new dynamic
For the semiconductor industry, the slowdown in process technology transitions will mean that the industry will become more driven by economics than technology, with chip manufacturers attempting to squeeze as much as they can out of current geometries before moving on to the next level.

“Historically, the focus in the semiconductor industry was always how quickly you could move to the next geometry node,” Jelinek said. “Now the question is how to make money by sustaining a specific node.”

Among the ways semiconductor manufacturers will try to keep existing processes going will be to employ 3D structures that allow more transistors to be packed into a single device.

Semicon to grow 12pc in 2008: Future Horizons

If there is going to be a global economic recession, the chip industry (but not all companies) is in the best shape possible to weather the ensuing storm!

According to Malcom Penn, CEO, Future Horizons, we are dealing with a semiconductor industry in 'deep trauma.' He was delivering the company's forecast at the recently held International Electronics Forum (IEF) 2008 in Dubai, predicting a 12 percent growth this year despite signs of a wobbling US economy.

Is there a need to get back to the industry basics? “Semiconductors are a peculiar business; the only sane strategy is to bet the company regularly,” once remarked Dr Gordon Moore.

Penn noted that the current industry status is somewhat confused and uncertain. Short-term issues are dominating the agenda.

Longer-term structural trends are unclear. The traditional IDMs are currently going through a mid-life ‘new business model’ identity crisis, and the start-ups are struggling to even reach critical mass! And all of this has been happening amidst intense economic uncertainty

"Now is the time for strong nerves and determination," Penn said. According to him, the underlying industry fundamentals are sound and there is no end in sight to the 'make-lunch-or-be-lunch' ethos.

The emerging economies like India and China have so far been less affected by the financial market's turbulence. In fact, the emerging and developing economies were shifting the global growth dynamics.

Chip industry in best possible shape
A forecast health warning is: IF the global economy collapses, it will take the chip market with it. However, Future Horizons feels that if there is going to be a global economic recession, the chip industry (but not all companies) is in the best shape possible to weather the ensuing storm.

The ASPs are an enigma wrapped up in riddle. The course of ASPs (like love) never runs smooth. Wobbles happen! ASPs are also the perennial (and least understood) industry wild card. ASPs are generally driven by new IC designs, and that takes time (sometimes three to four years). Post-2001, value recovery lost one generation (130nm impact). The ASP recovery ‘wobbled’ in 2007 (memory and MPU price wars). Barring a recession, Future Horizons forecasts that ASPs will recover in 2008 (it has already started).

12 percent growth likely
Future Horizons' 2008 forecast summary and assumptions (as of May 2008) are -- ‘12 percent’ growth -- '10 percent' units / ‘2 percent’ ASP. There may be no global economic recession, although US/UK/Eurozone might wobble -- which they are! No significant inventory correction will probably take place, but there are always Q4>Q1 adjustments, and there's nothing special about that either.

There could be lower fab capacity expansion due to 2007/2008 capex slowdown, which is inevitable and irreversible. There is also a possibility of a more stable memory price erosion -- which means, back to the learning vs. bleeding curve, and prices have since hardened. If the global economy holds, the 2H-08 growth will likely be strong. This, if the capacity, ASP and units are all pulling together, which is said to be happening.

Therefore, Penn feels it is too early to call for a (major) downward revision. Q1 08 was a lot stronger than conventional wisdom feared.

"That’s the rational analysis, but semiconductors aren’t rational. It could just as easily be another single digit growth year," Penn added.

Danger signs to watch out for
So, what are the danger signs one should watch out for? These would be capacity -- it is hard to see how this can spoil 2008, provided unit growth holds up, but there is a need to watch capex. Another factor is demand -- the current IC unit demand is sustainable provided the economy holds up, so there is a need to watch the inventory.

Next comes the economy! The current outlook continues to be uncertain with risks all on the downside. ASPs are the key to recovery, but always the first line of defence. ASPs could still derail 2008, but the trends are encouraging.

What's driving the market?
In semiconductor 7.0 -- or the 7th decade of the transistor revolution, the same things, as always, are driving the market. These are: technology, legislation -- energy saving/conservation and structural -- the relentless analog to digital conversion. All of these are combining to do what the chip industry does best -- enabling something that was previously impossible. Penn contends, "This industry has nowhere near run out of steam!"

New applications continue to drive the market, with automotive, industrial and medical, mobile phones, and PCs and servers, dominating. The PC market is dominating, but going nowhere fast. Mobile phones have become more interesting, but have conflicting priorities. The challenges are: how to protect the existing cost structure and subscriber base and how to add useful and affordable value-add services! Evidently, "chipset suppliers love the high end, market loves the low end."

There is definitely an increasing automotive semiconductor content. A solid annual growth has been prediced (CAGR 2006-11) for vehicles -- 5.5 percent, systems -- 11.5 percent, and semiconductors -- 13.3 percent. Some other new areas are motor control and energy, as well as lighting and photovoltaic, besides medical electronics. Robotics is yet another interesting area.

Key industry issues
It is clear that more chips per wafer equals less cost per chip and more transistors per die equals more functionality. Several billion transistors gives phenomenal design flexibility as well. Considering total ICs and MOS ICs, in the MOS capacity build out by technology node, there has been no change in volume ramp profile despite the hype.

As for the evolution of the technology node, definitely, 45nm is a revolutionary step from 65nm. In all likelihood, 32nm will be a natural evolutionary. However, Penn cautioned that 22nm would be another ‘difficult’ transition!

There is no doubt that 65nm will be tomorrow’s leading-edge workhorse, having the same basic Si gate/SiO2/MOSFET structure. Nevertheless, 45nm will herald a totally different structure -- metal gate/high-k/thin FET/deep trench design, etc. Also, 45nm will herald a new way of system design.

Is fabless right?
Is Fablite a valid option? While there is nothing wrong with being fabless, people are just not sure whether the best starting point is being an IDM. Teamwork has to be perfectly orchestrated as competition is tough.

As for the market share dynamics, the top 10 companies (IDMs) have been losing share. Fabless share has been growing, but it is still relatively small.

Coming to the realities of the foundry market, TSMC's lead is now unassailable. Were it an IDM, it would be No. 2, challenging Intel and passing Samsung. Moving more into design looks inevitable.

Finally, execution, and not technology, is everything! Execution has and will continue to make the difference. Applications (software) will play the role of the key differentiator as well, and it has value. Design is the means to an end, and not the end.

From the chip industry's perspective, the electronics market was traditionally Japan, North America and Western Europe. It now encompasses the entire Asian rim, China, Eastern Europe and India. Far from maturing, the chip industry itself is still in its volatile, high-growth phase, with at least a further 20 years of strong growth in prospect. Penn said, "The underlying growth drivers for chips has never been better."

Back to basics
We started with the need to get back to industry basics. We end in the same way! Stick to basics like:

* Don’t invest in low cost areas just because they are cheap -- they have a habit of becoming high cost tomorrow, plus the hidden extras.
* Don’t make outsourcing decisions just because they are easy -- especially if there’s no way back.
* Don’t make strategic cut-backs just to trim the bottom line -- some decisions, e.g., R&D, take a long time to impact, then it’s too late.
* Stop looking for high volume/high value market niches -- they don’t exist, need to learn how to compete
* Do show strong leadership
* Do have a long-term plan and stick with it -- even if it negatively impacts ‘the next quarter’ balance sheet
* Do show a commitment and determination to succeed
* Do stay focused and resistant to external meddling
* Do execute ruthlessly -- this is the key competitive differentiator)
* Do … just do it with passion -- it’s the passion that makes the difference