Semiconductor Consolidation
Encyclopedia
Semiconductor consolidation
is the recent trend of semiconductor
companies collaborating in order to come to a practical synergy
with the goal of being able to operate in a business model that can sustain profitability
.
Advances in the semiconductor industry made the market extremely competitive, companies began to use a technology roadmap that helped pave goals for the industry to set its eyes on, this roadmap became to be known as Moore’s Law, a statistical trend seen by Intel’s co founder Gordon Moore
in which the number of transistors on an integrated circuit
is doubled approximately every 2 years. This increase in transistor numbers meant that chips were getting smaller and quicker as time progressed.
As chips continued to get faster so did the levels of sophistication within the circuitry
. Companies were constantly updating machinery to be able to keep up with production demands and overhaul of newer circuits. In order to produce faster chips, companies raced to make transistors smaller in order to pack more of them on the same size silicon
, this practice became known as “shrinkage”.
Companies were now in a race against each other and themselves to create the next fastest chip as all goals were to meet or exceed Moore’s Law. With the shrinking of sizes in semiconductors, production became much more intricate. Fabrication machines which were producing chips at the millimeter level in the 60's were now operating in the micrometer
and heading into the nanometer scale. As of 2011 most cutting edge processor
makers are working in the 32 nm level and heading into full 22 nm production; sizes comparable to the human DNA
strand. [1]
The process at which most of these intricate chips are being produced at is called photolithography
, and the cost of equipment and operating them has grown astronomically resulting in an inevitable consolidation of semiconductor companies.
and Western Design Center were pioneers and the first to realize the practicality of not having to sustain a fabrication plant model. As costs continued to grow and competition grew fierce, resources could not be focused on maintaining a business model that had to sustain research and production. The solution became the Fabless semiconductor company
model, where a company could focus all its resources to the design, marketing, and sale of its devices while outsourcing the production of its devices to manufacturers called fabs.
This business model grew in such popularity that the new initiative was being promoted by a group called the Fabless Semiconductor Association (FSA) which is now the Global Semiconductor Alliance
.
These fabs were able to update assembly and photolithography systems much easier than their counterparts as all they focused on is handling bulk orders that come from these fabless businesses commonly referred to as foundries. As well, the bottom line
of these two business models became much stronger.
now has billions of dollars of research put behind it, with months and even years of research in creating the micro circuitry, teams of hundreds of engineers testing, and developing a chip. It has now gotten to the point that even keeping fabrication and development apart is not enough.
“On one side will be Intel and a select few that can afford their own fab plants—which will cost between $2.5 billion and $3 billion to build in 2003 and $6 billion by 2007—and perform basic research on transistor design or new chip materials. These new fabs will process wafers with 300-millimeter diameters, larger and more complex to make than today's 200-millimeter variety. On the other side will be everyone else. They will have to share fabs, pool research, buy technology or rely more heavily on outside foundries, which in turn will have to seek help” [2]
The theory, Rock’s Law, was first seen by venture capitalist, Arthur Rock in which he proposes that the cost of a fabrication plant doubles every 4 years and eventually gets to the point in which it will collide with Moore’s law. The idea being if these plants effectively become too expensive to build, then Moore’s law cannot be met.
The next logical solution was to collaborate between companies and consolidate efforts.
Companies began to share ideas and have mutual interests. In turn this also meant many compatible companies ended up being takeover
targets in order to strengthen relationships and help the businesses bottom line
.
AMD spins off its fabrication business model into another entity and calls it Global Foundries. It as well has large interests in Canadian GPU manufacturer ATI and buys out the company for a direct acquisition.
TI
and Infineon have said they will outsource some production to Shanghai
's Semiconductor Manufacturing International Corporation
.
Motorola
, ST Microelectronics, Philips
and Taiwan Semiconductor Manufacturing Co. are collaborating.
Sony
teamed up with IBM
to work together on developing the Cell processor which is used in the PS3 gaming console and future high level server based systems.
seen by analyst is that there will be an industry wide move towards collaboration. Companies such as Intel, IBM
, and Toshiba
will be able to survive on their own as they are currently market leaders in the microprocessors, servers
, and memory
field ( within that order). These companies have such market dominance that they are able to afford fabrication costs and expenses, but for how long is left to speculation.[4]
Consolidation (business)
Consolidation or amalgamation is the act of merging many things into one. In business, it often refers to the mergers and acquisitions of many smaller companies into much larger ones. In the context of financial accounting, consolidation refers to the aggregation of financial statements of a group...
is the recent trend of semiconductor
Semiconductor
A semiconductor is a material with electrical conductivity due to electron flow intermediate in magnitude between that of a conductor and an insulator. This means a conductivity roughly in the range of 103 to 10−8 siemens per centimeter...
companies collaborating in order to come to a practical synergy
Synergy
Synergy may be defined as two or more things functioning together to produce a result not independently obtainable.The term synergy comes from the Greek word from , , meaning "working together".-Definitions and usages:...
with the goal of being able to operate in a business model that can sustain profitability
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
.
History
Since the rapid adoption of the modern day chip in the 1960’s most companies involved in producing semiconductors were extremely vertically integrated, with all aspects of business tightly controlled. Semiconductor companies owned and operated their own fabrication plants and also the processing technologies that facilitated in creating the chips. Research, design, testing, production, and manufacturing were all kept “in house”.Advances in the semiconductor industry made the market extremely competitive, companies began to use a technology roadmap that helped pave goals for the industry to set its eyes on, this roadmap became to be known as Moore’s Law, a statistical trend seen by Intel’s co founder Gordon Moore
Gordon Moore
Gordon Earle Moore is the co-founder and Chairman Emeritus of Intel Corporation and the author of Moore's Law .-Life and career:...
in which the number of transistors on an integrated circuit
Integrated circuit
An integrated circuit or monolithic integrated circuit is an electronic circuit manufactured by the patterned diffusion of trace elements into the surface of a thin substrate of semiconductor material...
is doubled approximately every 2 years. This increase in transistor numbers meant that chips were getting smaller and quicker as time progressed.
As chips continued to get faster so did the levels of sophistication within the circuitry
Electronic circuit
An electronic circuit is composed of individual electronic components, such as resistors, transistors, capacitors, inductors and diodes, connected by conductive wires or traces through which electric current can flow...
. Companies were constantly updating machinery to be able to keep up with production demands and overhaul of newer circuits. In order to produce faster chips, companies raced to make transistors smaller in order to pack more of them on the same size silicon
Silicon
Silicon is a chemical element with the symbol Si and atomic number 14. A tetravalent metalloid, it is less reactive than its chemical analog carbon, the nonmetal directly above it in the periodic table, but more reactive than germanium, the metalloid directly below it in the table...
, this practice became known as “shrinkage”.
Companies were now in a race against each other and themselves to create the next fastest chip as all goals were to meet or exceed Moore’s Law. With the shrinking of sizes in semiconductors, production became much more intricate. Fabrication machines which were producing chips at the millimeter level in the 60's were now operating in the micrometer
Micrometer
A micrometer , sometimes known as a micrometer screw gauge, is a device incorporating a calibrated screw used widely for precise measurement of small distances in mechanical engineering and machining as well as most mechanical trades, along with other metrological instruments such as dial, vernier,...
and heading into the nanometer scale. As of 2011 most cutting edge processor
Microprocessor
A microprocessor incorporates the functions of a computer's central processing unit on a single integrated circuit, or at most a few integrated circuits. It is a multipurpose, programmable device that accepts digital data as input, processes it according to instructions stored in its memory, and...
makers are working in the 32 nm level and heading into full 22 nm production; sizes comparable to the human DNA
DNA
Deoxyribonucleic acid is a nucleic acid that contains the genetic instructions used in the development and functioning of all known living organisms . The DNA segments that carry this genetic information are called genes, but other DNA sequences have structural purposes, or are involved in...
strand. [1]
The process at which most of these intricate chips are being produced at is called photolithography
Photolithography
Photolithography is a process used in microfabrication to selectively remove parts of a thin film or the bulk of a substrate. It uses light to transfer a geometric pattern from a photomask to a light-sensitive chemical "photoresist", or simply "resist," on the substrate...
, and the cost of equipment and operating them has grown astronomically resulting in an inevitable consolidation of semiconductor companies.
Divergence
Companies like XilinxXilinx
Xilinx, Inc. is a supplier of programmable logic devices. It is known for inventing the field programmable gate array and as the first semiconductor company with a fabless manufacturing model....
and Western Design Center were pioneers and the first to realize the practicality of not having to sustain a fabrication plant model. As costs continued to grow and competition grew fierce, resources could not be focused on maintaining a business model that had to sustain research and production. The solution became the Fabless semiconductor company
Fabless semiconductor company
A fabless semiconductor company specializes in the design and sale of hardware devices and semiconductor chips while outsourcing the fabrication or "fab" of the devices to a specialized manufacturer called a semiconductor foundry...
model, where a company could focus all its resources to the design, marketing, and sale of its devices while outsourcing the production of its devices to manufacturers called fabs.
This business model grew in such popularity that the new initiative was being promoted by a group called the Fabless Semiconductor Association (FSA) which is now the Global Semiconductor Alliance
Global Semiconductor Alliance
The Global Semiconductor Alliance is a non-profit semiconductor organization, which was founded in 1994 , to support the worldwide adoption of the fabless semiconductor business model...
.
These fabs were able to update assembly and photolithography systems much easier than their counterparts as all they focused on is handling bulk orders that come from these fabless businesses commonly referred to as foundries. As well, the bottom line
Bottom Line
The Bottom Line was a music venue at 15 West Fourth Street between Mercer Street and Greene Street in the Greenwich Village neighborhood of Manhattan, New York City...
of these two business models became much stronger.
Convergence
Although many companies grew and profited well from a fabless business model, new hurdles still had to be dealt with. The modern day microprocessorMicroprocessor
A microprocessor incorporates the functions of a computer's central processing unit on a single integrated circuit, or at most a few integrated circuits. It is a multipurpose, programmable device that accepts digital data as input, processes it according to instructions stored in its memory, and...
now has billions of dollars of research put behind it, with months and even years of research in creating the micro circuitry, teams of hundreds of engineers testing, and developing a chip. It has now gotten to the point that even keeping fabrication and development apart is not enough.
“On one side will be Intel and a select few that can afford their own fab plants—which will cost between $2.5 billion and $3 billion to build in 2003 and $6 billion by 2007—and perform basic research on transistor design or new chip materials. These new fabs will process wafers with 300-millimeter diameters, larger and more complex to make than today's 200-millimeter variety. On the other side will be everyone else. They will have to share fabs, pool research, buy technology or rely more heavily on outside foundries, which in turn will have to seek help” [2]
The theory, Rock’s Law, was first seen by venture capitalist, Arthur Rock in which he proposes that the cost of a fabrication plant doubles every 4 years and eventually gets to the point in which it will collide with Moore’s law. The idea being if these plants effectively become too expensive to build, then Moore’s law cannot be met.
The next logical solution was to collaborate between companies and consolidate efforts.
Companies began to share ideas and have mutual interests. In turn this also meant many compatible companies ended up being takeover
Takeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
targets in order to strengthen relationships and help the businesses bottom line
Bottom Line
The Bottom Line was a music venue at 15 West Fourth Street between Mercer Street and Greene Street in the Greenwich Village neighborhood of Manhattan, New York City...
.
AMD spins off its fabrication business model into another entity and calls it Global Foundries. It as well has large interests in Canadian GPU manufacturer ATI and buys out the company for a direct acquisition.
TI
Texas Instruments
Texas Instruments Inc. , widely known as TI, is an American company based in Dallas, Texas, United States, which develops and commercializes semiconductor and computer technology...
and Infineon have said they will outsource some production to Shanghai
Shanghai
Shanghai is the largest city by population in China and the largest city proper in the world. It is one of the four province-level municipalities in the People's Republic of China, with a total population of over 23 million as of 2010...
's Semiconductor Manufacturing International Corporation
Semiconductor Manufacturing International Corporation
Semiconductor Manufacturing International Corporation, is a semiconductor foundry in mainland China, providing integrated circuit manufacturing services at 350 nm to 45nm technologies...
.
Motorola
Motorola
Motorola, Inc. was an American multinational telecommunications company based in Schaumburg, Illinois, which was eventually divided into two independent public companies, Motorola Mobility and Motorola Solutions on January 4, 2011, after losing $4.3 billion from 2007 to 2009...
, ST Microelectronics, Philips
Philips
Koninklijke Philips Electronics N.V. , more commonly known as Philips, is a multinational Dutch electronics company....
and Taiwan Semiconductor Manufacturing Co. are collaborating.
Sony
Sony
, commonly referred to as Sony, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan and the world's fifth largest media conglomerate measured by revenues....
teamed up with IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
to work together on developing the Cell processor which is used in the PS3 gaming console and future high level server based systems.
Exceptions
Although the trendTrend estimation
Trend estimation is a statistical technique to aid interpretation of data. When a series of measurements of a process are treated as a time series, trend estimation can be used to make and justify statements about tendencies in the data...
seen by analyst is that there will be an industry wide move towards collaboration. Companies such as Intel, IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
, and Toshiba
Toshiba
is a multinational electronics and electrical equipment corporation headquartered in Tokyo, Japan. It is a diversified manufacturer and marketer of electrical products, spanning information & communications equipment and systems, Internet-based solutions and services, electronic components and...
will be able to survive on their own as they are currently market leaders in the microprocessors, servers
Server (computing)
In the context of client-server architecture, a server is a computer program running to serve the requests of other programs, the "clients". Thus, the "server" performs some computational task on behalf of "clients"...
, and memory
Memory
In psychology, memory is an organism's ability to store, retain, and recall information and experiences. Traditional studies of memory began in the fields of philosophy, including techniques of artificially enhancing memory....
field ( within that order). These companies have such market dominance that they are able to afford fabrication costs and expenses, but for how long is left to speculation.[4]
See also
- Semiconductor sales leaders by year
- Foundry modelFoundry modelIn microelectronics, the foundry model refers to the separation of a semiconductor fabrication plant operation from an integrated circuit design operation, into separate companies or business units.-Overview:...
- Semiconductor device fabrication