Big is the new small

13 May 2008

Last week, three of the world's biggest chipmakers decided that they were going to try to move to bigger wafers in the next decade. Today's wafers are the size of vinyl LPs: 300mm across. The next step up is that of a family sized pizza: an impressive 450mm in diameter.

The people who the chipmakers expect to build the equipment to handle these things greeted the news with...very little. They certainly didn't jump up and down, waving to Intel, Samsung and TSMC, shouting out: "Me, pick me!" They might consider investigating the feasibility of boosting wafer size to 450mm if these three were going to pay all of the development costs. But, they had played this game before, with the transition from 200mm to 300mm at the start of this decade and they weren't going to get fooled again.

Last time around, the big chipmakers - and there were about three times as many in the club as this time - said they wanted to do the move early, during the late 1990s. Then there was the Asian crisis and the chipmakers decided they didn't want to move after all. Instead, they decided to speed up the development of the processes rather than use bigger wafers, at least until around 2002. And it was the equipment suppliers left wondering how they were going to explain hundreds of millions of dollars in R&D for products that would not be needed for several years.

Since the end of the 1980s, the industry has not liked moving to larger wafers. Back in 1975, Gordon Moore used historical data to predict how big wafers would get - they were about 75mm across then. At the time, wafer size increased at roughly the same speed as the increase in average chip size. Had this trend continued, fabs would be working with wafers 1.5m across by now. In practice, die size increased faster than wafer size for about 20 years then manufacturers worked out that they could not push die size any further, and stopped.

There is still a good reason for going to larger wafers: you can get more chips onto each one. In principle, that cuts costs, especially for the chemical processes, such as etching stuff off and laying down metals. For the photolithography steps - the most expensive parts of the process - there is not that much of an advantage. However, moving to bigger wafers here does not have so much of an effect on equipment cost. With the other steps, because they need carefully controlled conditions, big wafers are a headache. But, if you can crack the problems, you wind up with cheaper chips at the end of the process.

For Intel, Samsung and TSMC the move is potentially a good way to gain a lead over competitors who cannot justify the move to 450mm. You can get 1500 chips, each measuring 1cm-square, on a 450mm wafer, versus around 700 on a 300mm wafer. That favours companies making chips in very high volumes. For Intel and Samsung, which ship bulk processors and memories, respectively, anything that lowers cost in volume is good. For TSMC, the situation is more complex as it serves a wide variety of customers. However, as the world's largest foundry, it has its eyes on the business of the other companies in the list of top-25 chipmakers. With 450mm, it could undercut smaller rivals such as UMC, SMIC and Chartered without denting margins. It's main competition would probably, by around 2012 when the transition is supposed to start, be Samsung.

However, they will have to do a lot of sweet-talking to the equipment makers or simply do a lot of the work themselves - it may be no coincidence that equipment makers' group SEMI just put out a report about getting their technology ripped off by customers. It is tempting to think that consolidation is concentrating manufacturing capacity in a few hands. In fact, Intel and Samsung have lost share since the move to 300mm.

In 2001, the two companies accounted for almost 22 per cent of chip sales. In 2007, that slipped to just under 20 per cent. If you tot up the companies who decided to install 300mm equipment this decade, they accounted for close to 60 per cent of the market in 2001. Estimating TSMC's share of manufacturing is tough, because you have to extrapolate it from what its customers sell. But it's probably close to Samsung's share today. Let's be generous and call it 10 per cent of the market, just for fun. That's a total of 30 per cent of the chip market.

As an equipment supplier, are you going to go with what 30 per cent of the market wants, knowing that it will damage the ambitions of any other companies that want to do their own manufacturing come 2012? If you pretty much want to guarantee that there will only be two foundries by the end of the next decade, you are going to bet on 450mm. But, knowing that a larger, more varied customer base is good for business, you are not going to bet in that direction.

There is a further problem for the big three. Some of the equipment suppliers have decided that markets such as solar power and displays look a lot more attractive right now than waiting for Intel to tell them how much they will get paid. Applied Materials' latest results, for example, show that display and photovoltaic sales have grown in the last year, while sales to their traditional silicon customers have slipped badly.

4 Comments

I'm not so sure the companies have the foresight to go after the other 70 percent. Most every tech company I know says they go after only the top 4 or 5 customers. Everyone thinks they can get a taste of that cream. It makes sense to serve the larger market, but how often does common sense overcome conventional "wisdom?"

That's a fair point. Also, it probably doesn't work out to 70 per cent as a lot of the rump market is on older processes: the companies at the top of the listings have a stronger weighting to the newest, and most expensive equipment.

However, I get a sense that the equipment makers have had a bellyful from the chipmakers and are not simply going to line up behind 450mm if they can help it, and definitely if they can't get guarantees. There is also the question of whether 450mm is essential to economics. A lot hinges on which way lithography goes. Changes there could have a dramatic effect on wafer economics: reticle size has not increased in something like 15-20 years. With things like double patterning, stepper time is increasing all the time. This has to favour 300mm for the moment.

I am interested in the economics involved with photolithography of big silicon wafers. Specifically what the production cost is. If you know what it is please contact me at
protn7@att.net

I am interested in the economics involved with photolithography of big silicon wafers. Specifically what the production cost is. If you know what it is please contact me at
protn7@att.net