Semiconductor Industry Ecosystem and Market
In 2014, the global semiconductor sales touched a record $335.8 Billion, a Y-o-Y growth of nearly 10%, from the $305.6 Billion in 2013. Major product segments for this industry are:
- Discrete Semiconductors: Diodes, Transistors, Thyristors etc. These are basic semiconductor devices.
- Optoelectronic Devices: Photo Diodes, LED’s Laser Diodes etc.
- Sensors: Thermal sensors, Chemical Sensors, Gas Sensors etc.
- Memory IC’s: NAND, NOR, DRAM, SRAM
- Analog IC’s: Amplifiers, Filters, power management devices
- Processors & Controllers: CPU’s, GPU’s
- Logic: ASIC’s and SOC’s (System-on-chip); Application specific chips and systems on chip. Examples are network processors, chips used in mobiles,
It is estimated that ASSP’s (Application specific standard products) in smartphones, DRAM in ultramobiles and & NAND flash in Solid State Drives (SSD’s) will be the growth drivers for the industry. WSTS forecasts worldwide sales to reach US $344.5 Billion (@ 3.4% growth) in 2015 and reach US$355.3 Billion by 2016 (3.1% growth).
Some of the key application areas for semiconductor devices are computing, communication and navigation, medical devices and instrumentation, image processing, robotics, automotive systems and avionics systems. It is expected that the ‘Internet of things’ trend will further provide a boost to the sensor and SoC devices market.
Semiconductor Industry Ecosystem
- Integrated Device Manufacturers (IDM’s): These are companies who own the complete product life-cycle of the product; from design, manufacture to marketing and selling. Examples: Intel, Toshiba, Texas Instruments, Philips
- Fabless Companies: These are semiconductor companies who own the design and the marketing and selling of the product, but outsource the manufacturing to foundries. Examples: Nvidia, Qualcomm, Broadcom
- Foundries: Foundries (also called fabs) manufacture the integrated circuit chips. Fabrication plants are capitally intensive. Leading pure-play foundry TSMC has budgeted $12 Billion in capex for 2015.
- Semiconductor Equipment manufacturers: These are companies which make wafer manufacturing equipment used by fabs. The semi equipment industry is characterized by few players dominating the fabrication tools for key processes. Example: ASML in photolithography, Applied Materials (AMAT) in Deposition & Etch , KLA Tencor in Metrology and Inspection , Teradyne in Automated Test Equipment.
- Assembly and Test Providers: These companies provide wafer packaging and testing services to IC manufacturers. Amkor is one of the leading players in this segment.
- EDA Tool Vendors: EDA tools are software tools for the design of electronic systems such as PCB’s and IC’s. The tools enable the digital design flow and are used for steps like high level design, simulation and functional verification. Cadence and Synopsys are some of the leading players.
- IP Core Vendors: An intellectual property core is a re-usable unit of logic or design that is typically licensed by the owning party to product makers. IP Cores are available as soft cores (RTL or netlist) or hard cores (GDSII format). IP cores for various peripherals / processors / inter-connects are available. Example: Analog to Digital Converters (ADC), Memory Interfaces, Ethernet PHYs and general purpose microprocessors. ARM, Xilinx, Altera, Synopsys are some of the IP Core vendors.
- Design Vendors: These are engineering services vendors offering design and development services to different market segments in the ecosystem. Examples are: HCL Technologies, eInfochips, Alten etc.
- Component and Subsystem Providers: These are players in the supply chain who provide components like Laser, Optical components, High-Precision components, Image Processors etc.
- Material: These are raw materials like chemicals, gases, silicon ingots etc.
Overview of the Semiconductor Manufacturing Process
1. Wafer Fabrication process is a complex process of conversion of a super clean disc shaped silicon wafer into a disc of integrated circuit chips. It involves the following key steps:
a. Epitaxy: deposition of a crystalline overlayer on a crystalline substrate.
b. Photo-Lithography: The step is used to transfer a pattern from a photomask to the surface of the wafer. The pattern information is recorded on a layer of photoresist which is applied on the top of the wafer. A photoresist is a material which becomes soluble/insoluble when exposed to certain types of light.
c. Etch: Removes material from the wafer to create patterns (as defined by etch masks)
d. Implants: Dopants are introduced in a controlled manner to obtain desired electrical characteristics.
e. CMP (Chemical Mechanical Planarization): Previous processes modify the topography of the wafer surface leading to a non-planar surface.
2. The back end process involves cutting individual chips out from the wafer, testing, assembling and packaging the chips in the form as we see them. CMP is used to plane the surface.
This is a recursive deposition and masking process to define patterns of doped areas, isolation films and metal conductors to create solid state devices.
Market Segments and Industry Revenues
Data Source: WSTS Forecast & Blogs on WSTS
- From the small sample of the top companies in the semiconductor space, the fabless companies seem to be investing much more in R&D relative to their revenues [20% – 30%] as compared to IDMs [10% – 20%] .
- Semi Equipment makers are investing 15% – 18% of revenues in R&D. Investment of TSMC (foundry) is 7.45%.
- TSMC makes a remarkable 35% profit margins.
- Qualcomm is a top performer with net margins of 30%.
- In scale, INTEL is by far the biggest spender on R&D [$ 11 Billion] and also the biggest revenue grosser [$56 Billion]
Check out the Data Visualizer to compare performance across companies.
Key Trends in the Semiconductor Industry
|Internet of Things||Market for connected devices to be between 50 billion –100 billion units by 2020. Current estimate is of 10 billion devices. Only 10% of financial value is in the “things” … 90% of it is in the connectivity.
Semi companies need to create the IOT ecosystem by partnering with downstream enablers. E.g. Cloud service providers.
|IOT / Big Data mega trend will drive market for DRAM & Flash||DRAM and Flash segments estimated to grow by 20% as compared to the rest (6.7%).|
|FAB Diagnostics||Analytics based cost reduction programs enable fabsto have better control and view on material procurement & consumption across the fabrication process. It is estimated that 'Indirect materials' (substrates, films, spares, chemicals etc.) make up 30% of the costs of front end fabrication for foundries.|
|Continued Market Consolidation within Semi. |
Acquisition driven capability enhancement
|Companies withing the storage, data center and industrial applications are consolidating to maximize the Big Data and IOT market opportunities.
Example: Avago-LSI merger , Cypress - Spansion merger, Acquisition of Wilocity (wifi) and CST Plc (digital imaging) by Qualcomm.
|3D IC Integration||- Adoption of 3D FINFET's in logic and Foundry segments
-Investments are happening in 3D NAND Manufacturing
Semi equipment makers are innovating across process for 3D chips
|Increasing demand for "Automated Analytics"||Tool users (litho/metrology/inspection) want to correlate the data it generates with other tools across the process to better understand process adjustments.|
|Advancements in Lithography||Logic Scaling targets lower cost and improved performance. Scaling in lithography in the near term by “Immersion” with multiple patterning. In the longer term by EUV.|
|200mm & 300mm wafer sizes to continue. No visibility for 450mm wafer.||Stakeholder buy-in is still not there for 450mm wafer. Intel alone seems to be pushing the agenda.|
|Chip Verification and Validation Efforts are increasing rapidly with more complex SOC's.||A Mckinsey study has revealed that actual efforts on verification and validation of chips exceed planned efforts by 25%. Verification is planned poorly by most companies leading to Time-to-Market delays. At least a 10% improvement in productivity is estimated by streamlining chip verification.|