Semiconductor Capital Equipment Trends - Gerson Lehrman Group

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Semiconductor Capital Equipment Trends

Israel Beinglass, PhD, former CTO, CMO, Applied
Materials

GLG Institute

Thursday, November 16, 2006

Yale Club, New York









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Israel Beinglass, PhD, was until recently a CTO, CMO at Applied
Materials. Dr. Beinglass has 25 years of experience in semiconductor
technology, semiconductor manufacturing, and semiconductor
equipment manufacturing. He has extensive experience in CMOS
device fabrications, materials, yield, EDA and device physics. He is
an expert in thin films deposition, lithography, etch, RTP, Ion
Implant, CMP, metrology, inspection and overall industry road map
as well as emerging nano technologies. Dr. Beinglass also was chief
marketing officer at several Applied Materials division. He also was
involved in several M&A activities, including due diligence and
negotiations. Dr. Beinglass holds 27 US patents.













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Table of Contents




An Introduction to semiconductor manufacturing including Moore's
law and scaling




Case study: A major semiconductor manufacturer announcing
CapEx, how does it trickle down & where does the money go?




Industry relationships of Semiconductor capital equipment suppliers



The original Moore’s law

The original Moore’s law prediction from 1965

Cramming more components on integrated circuit


Cramming more components onto integrated circuits

Gordon E. Moore, April 19th 1965



Moore believed that scientific advances affecting semiconductors could be
crucial to economic growth, because an extensive range of applications
would be found for more powerful devices in industry, government and
national defense


He thought that it would depend on a tradeoff between the pace of scientific
advance and the costs of producing more powerful devices



“Integrated circuits will lead to such wonders as home computers


or at
least terminals connected to a central computer


automatic controls for
automobiles, and personal portable communications equipment. The
electronic wristwatch needs only a display to be feasible today.” (Moore,
1965, p. 114)


“… the biggest potential lies in the production of large systems. In
telephone communications, integrated circuits in digital filters will separate
channels on multiplex equipment. Integrated circuits will also switch
telephone circuits and perform data processing.” (Moore, 1965, p. 114)


Scaling

Original Dennard 1972 scaling paper

Scaling Example AMD Moving from

130nm to 90nm


Significant die size
reduction


Smaller die size
increases yield


Initial higher cost but
eventually higher
margin

130nm

193mm
2

130nm

145mm
2

90nm

115mm
2

90nm

115mm
2

Transistor scaling limitations


The question of how to make transistors smaller without affecting
their ability to function


This theory guided the design of semiconductors for 30 years, until
chip makers began using the 130nm production process and classic
scaling practices ran into a brick wall, at that point, chip makers
could no longer scale some transistor features and power
consumption rose sharply


“Transistor size is ultimately constrained by the limits of the physical
world and a time will come when it is
no longer possible, or
economical
, to fit more transistors on a chip. There will be a point
where we're going to have to give up”
-

Hans Stork, senior vice
president of silicon technology development and chief technology
officer at
Texas Instruments


Rising Cost of Semiconductor
Manufacturing

Worldwide Semiconductor units and sales

Semiconductor Capital Equipment analysis


World wide trend of equipment sale


Industry trend and capital spending


Case study AMD new fab


Semiconductor capital equipment supplier


Suppliers analysis and assessment

2006 Market trend


Chip production increased 12% in ‘06, 5995 MSI of
silicon


Q1 ’06
-
1%, +4% in Q2, second half of the year very
strong


77.5B chips were shipped for the first 6 months of the
year, NAND was 5% more


Capacity grew much slower 7% for ’06


Capacity is ~90% and expects to grow to 95%


AMD Fab Announcement from 2003

AMD Breaks Ground on 300 Millimeter Manufacturing Facility in Dresden, Germany


Move to Expand Manufacturing Capacity Driven by Positive Customer Response and Increased
Market Opportunities for AMD64 Processors


SUNNYVALE, CA AND DRESDEN, GERMANY
--

November 20, 2003
--
AMD (NYSE: AMD)
announced today that it has broken ground on a 300 millimeter (mm) manufacturing facility (or
“fab”). The facility, named AMD Fab 36, is part of AMD Dresden Fab 36 LLC & Co. KG and will be
located in Dresden, Germany, adjacent to AMD Fab 30. AMD Fab 36 is expected to be in volume
production in 2006. The new facility is expected to require approximately 1,000 employees, most
of them highly skilled engineers and technicians. “Positive customer response and increasing
momentum for our AMD64 processors make it clear that the time is right to expand our
manufacturing capacity in order to effectively meet future demand,” said Hector Ruiz, president
and CEO at AMD. “Our aggressive push into the enterprise computing market continues to gain
traction, as evidenced by Sun’s recent adoption of the AMD Opteron™ processor and the growing
success of server and workstation solutions from IBM, Fujitsu Siemens and others.”


“By building in Dresden, we are able to leverage the outstanding capabilities of our existing AMD
Fab 30 and gain access to the most substantial government
-
backed financial incentives package
available to us,” said Bob Rivet, chief financial officer at AMD. “
We expect AMD Fab 36 will cost
approximately US$2.4 billion over the next four years
.

We have arranged external financing and
government support of approximately $1.5 billion during that period. We believe AMD Fab 36
offers the best solution for meeting future customer demand while advancing long
-
term
shareholder value.”


Fab equipment Allocation


Total cost $2600M


25% building $650M, $1950 for Equipment


How does the $1950 divided between the
different equipment type


Litho: $410M


Track (Coater, Developer): $97M


Removal (Etch and CMP): $487M


Deposition: $390M


Thermal (Furnace, RTP): $78M


Implant:$78M


Process control (Inspection and metrology): $292M


Factory Automation: $78M



New AMD Fab Announcement

FOR IMMEDIATE RELEASE:

June 23, 2006

GOVERNOR PATAKI AND AMD'S CEO RUIZ ANNOUNCE PLANS FOR MULTI
-
BILLION DOLLAR 300 MM SEMICONDUCTOR MANUFACTURING PLANT


Plan Would Allow for the Largest Private Investment in NYS History Most
Advanced Plant in the World, Creating Over 1,200 High
-
Tech Jobs, Thousands
of Construction Jobs and More Than 3,000 Indirect Jobs


Governor George E. Pataki, Dr. Hector Ruiz, Chairman and CEO of Advanced Micro
Devices (NYSE: AMD), Senate Majority Leader Joseph L. Bruno and Assembly
Speaker Sheldon Silver today announced plans for one of the largest private sector
industrial investments in New York State history
--

a multi
-
billion dollar deal that would
enable AMD to build and operate the most advanced semiconductor manufacturing
facility in the world at the Luther Forest Technology Park. This unprecedented
economic development project is projected to create more than 1,200 new high
-
tech
jobs, thousands of construction jobs, and more than 3,000 indirect jobs.


Under the terms of the agreement, AMD would be able to construct a new,
$600
million, 1.2 million square foot facility, equipped with approximately $2.6 billion in
state
-
of
-
the
-
art tools

designed to produce 300 mm wafers using 32nm process
technology.

Applied Materials


Applied Materials, Inc. (*Nasdaq: AMAT) is the global leader in
nanomanufacturing technology solutions for the electronics industry with a
broad portfolio of innovative equipment, service and software products. At
Applied Materials, we apply nanomanufacturing technology to improve the
way people live.

Founded in 1967, Applied Materials creates and commercializes the
nanomanufacturing technology that helps produce virtually every
semiconductor chip and flat panel display in the world. The company
recently entered the market for equipment to produce solar

arrays and
energy efficient glass.
From the company web site
www.appliedmaterials.com





By far the largest Semiconductor Equipment Manufacturing company with
revenue of $7B FY ’05 and estimated $9B FY 06’


A “supermarket” of equipment almost all but Litho.


Recently entered the solar market equipment business


Very strong service business, trying to grow the business with IBM and GE
model in mind

Applied Materials


cont’d


Strong position: PVD, DCVD, Epi, CMP, RTP


Week position: Ion Implant, Etch, Inspection and Metrology, Cu ECP,
LPCVD


Since the company plays in most of the equipment they are competing with
almost all the other equipment vendors: Novellus, KLA, Lam, Varian Semi,
TEL etc.


Great in introduction new products and taking big market share


Very weak in


Etch <20% SOM

against
Lam
, the biggest disappointment since the market is
so large


No progress in the inspection and metrology
-
against
KLA

~20%.


Lost a lot of Market in the Ion Implant
-
against
Varian Semi


Disaster in ECP, never got of the ground
-
against
Novellus


Practically the market leader in


PVD
-
against
Novellos, Ebara


CMP
-
against
Novellus, Ebara


RTP
-

against
Mattson


DCVD
-

against
Novellus, ASMI





Lam Research



Founded in 1980, Lam Research Corporation is a major supplier of wafer
fabrication equipment and services to the world's semiconductor industry.
The Company's innovative etch technologies empower customers to build
the world's highest
-
performing integrated circuits. Lam's etch systems
shape the microscopic conductive and dielectric layers into circuits that
define a chip's final use and function.
From the company web site
www.lamrc.com


Lam Research is the premier company for etching Q3 revenue of $604M


Very solid business execution


Main competitors


Applied Materials, TEL


Lam is taking Market share both from Applied Materials and TEL


Company is trying to get into the cleaning business no product announced
yet. In the past other business besides Etch was very dismal and had to be
shut down


Major draw back
-
lack of diversity and relying on one product only





Novellus


Novellus Systems designs, builds, and services manufacturing
equipment that is used in the production of semiconductor devices,
or chips.


Our chemical vapor deposition (CVD), physical vapor
deposition (PVD), electrochemical deposition (ECD), chemical
mechanical planarization (CMP), and surface preparation systems
are used worldwide for the volume production of advanced
semiconductor devices at the lowest overall cost to our customers.
Novellus was established in 1984.
From the company web site,
www.novellus.com


Novellus is very successful company in the CVD and ECP. ’06
estimate revenue $1.45B. The increase of products offering was
done through acquisitions


CMP
-

IPEC


PVD
-
Varian


ECP
-
JV with IBM


Cleaning
-
Gasonix


Novellus
-
cont’d


Novellus is a long time competitor of Applied Materials
especially in the CVD area


Novellus strength is in the following market place


Certain DCVD deposition


Tungsten CVD (very high SOM)


Cu ECP (practically 100% SOM)


Novellus weakness is the following market place


PVD


CMP


Last two years hired many Applied Materials executives

Tokyo Electron (TEL)


The Number 2 Semiconductor Capital Equipment in the world based
in Japan


In 1963, a group of young and innovative entrepreneurs established
TEL, the first company to introduce American semiconductor
production equipment and integrated circuit (IC) testers to Japan.
Since then, the company has grown to encompass nearly 80 offices
in 16 countries that engineer, manufacture, sell, and service wafer
-
processing or semiconductor production equipment (SPE), as well
as flat panel display (FPD) equipment. As the world market share
leader in several product lines, TEL plays a vital role in the evolving
global semiconductor industry.
From the company web site.

www.tel.com


2005 revenue $6B


TEL is the Japan “Applied Materials” a diversified manufacturer


Tokyo Electron (TEL)
-
cont’d


Strength


Thermal process furnaces practically 100% SOM _”commodity“


Track coater/developer
-
practically 100% SOM, raising the price all the time,
printing money machine!!!!


Special MCVD


ETCH
-

number 2 after Lam


Number 1 in wafer probing

KLA
-
Tencor


KLA
-
Tencor Corporation is the world's leading supplier of process control
and yield management solutions for the semiconductor and related
microelectronics industries. The company's comprehensive portfolio of
products, software, analysis, services and expertise is designed to help IC
manufacturers manage yield throughout the entire wafer fabrication
process
-
from R&D to final yield analysis. Since yield improvements are key
to increasing manufacturing productivity and profitability, the yield
management market that KLA
-
Tencor leads has outperformed the
semiconductor capital equipment market segment as a whole.
From the
company web site
,
www.kla
-
tencor.com



FY’06 revenue $2.1B, Q1’07 revenue $630M.


The premier company for Inspection and metrology with little or no
competition in several markets it compete.


KLA
-
Tencor was formed in 1997 as a merger between KLA and Tencor
after Applied Materials entered to the inspection market with the acquisition
of Opal and Orbot Instrument


KLA
-
Tebcor is the Applied Materials of the inspection and metrology
-

a
giant supermarket


KLA
-
Tencor cont’d


Main competitors ; Applied Materials and Hitachi to lesser extent Rudolph,
Nanometrix and PDF solutions


Market KLA
-
Tencor strong


Inspection, dark field and bright field, the “bread and butter” products


Reticles inspection


Overlay inspection


Surface inspection


Market KLA
-
Tencor weak


SEM review
-
Applied Materials


CD SEM recently exit the market
-
Applied Materials and Hitachi


Big effort in Yield and related software but all are to leverage equipment
sales



ASML


ASML systems
--

called steppers and Step & Scan tools (scanners)
respectively
--

use a photographic process to image nanometric
circuit patterns onto a silicon wafer, much like a camera prints an
image on film.


ASML researches, develops, designs, manufactures, markets and
services lithography systems used by the semiconductor industry to
fabricate state
-
of
-
the
-
art chips. Most of the major global
semiconductor manufactures are ASML customers. For chipmakers,
technological advancement in imaging means increased
manufacturing productivity and improved profitability.
From the
company web site
.
www.asml.com



The premier company for stepper over 53% SOM with Nikon of
30% (2005) and Canon as the competitors


The latest immersion 193nm tool is $26M by far the most expensive
tool in the fab


Extremely complicated equipment with a lot of R&D expenses, long
cycle between an order and shipment

ASML
-
cont’d


The only industry in the Semi capital equipment that quote the actual
number of tools that they are shipping.


In Q3 ASML shipped 59 new and 12 refurbished systems for sales
of $1.1B and generated revenue from field option and service sales
of $130M. In Q2 2006, ASML shipped 58 new and 14 refurbished
systems for sales of $1.08B million and generated revenue from
field option and service sales of $129M million.


Summary



The Semiconductor Industry is live and kicking!!


The number of units sold keeps on increasing…


The Semiconductor Capital Equipment Industry is a
cyclical industry and will continue to be like that


The industry plagued by over supply and under supply


Overall only few companies controlling most of the business


The rising cost of new Fabs limits the number of companies that
can afford having a Fab


Rising cost of Litho equipment could become a real crisis


What’s next?




Prediction is very difficult,


Especially if it’s about the future



Niels Bohr



Appendix


Integrated Circuits (ICs)


Single piece of semiconductor (silicon) with many
interconnected transistors and other electronic
devices.



Multiple ICs combined with electronics are used
to create electronic products.



Semiconductors Capital Equipment companies,
sell, and service the chemicals, tools, people and
processes to make these ICs




Basic Industry Terminology

FABs









Place where microelectronics can be manufactured



Requires precise control of lengthy and complex set
of processes



Uses dedicated and highly specialized tools



Conducted by specially trained individuals



Extremely clean environment where good yield can
be maintained




Basic Industry Terms

Wafer Process


Thermal Processing and Ion Implantation


Oxidation


Doping and Activation


Film Deposition


Chemical Vapor Deposition


Physical Vapor Deposition


Electro
-
Chemical Plating


Film Removal/Patterning


Photolithography


Etching


CMP


Metrology and Inspection in the Fab

The original Moore’s law

The original Moore’s law prediction from 1965

Cramming more components on integrated circuit

Technology Progress

1947

8 layers Cu

30nm Gate Lg

Interconnect

Transistor

2006

Topological SEM Views of Poly Patterning (
top
view
)

P
+

N
+

P
+

N
+

90501_21 / 90501_TPI (Strategic Selling Conf. II
-

Q3’99)_21

Poly Gates

Poly Gates

Poly Gates

Copper Interconnect technology

Metal 3

Metal 2

contact

Silicon substrate

Metal 1

via

Metal 1

via

IC’s basic


Overall IC’s industry divided between


Logic


Memory


Logic circuits are the basic building blocks used to
realize consumer and industrial products that incorporate
digital electronics


logic circuits respond to combinations of input signals


Logic networks which are interconnected so that the current set
of output signals is responsive only to the current set of input
signals


Microprocessor are the most complicated but also the
most profitable logic circuit the industry is involved with

DRAM Basic

Overview of Different Memory types


DRAM
cell has one transistor and one capacitor. The charge on the
capacitor need to be refreshed frequently. When the power removed
from the device the information on the DRAM chip is lost



SRAM

Cell has 6 transistors. Very fast memory chip with relatively big
and complicated cell. No need to refresh!! Used mainly as an on board
of a
m
P memory. The information in the SRAM memory chip is lost
when the power is switched off. Stand alone memory market for SRAM
is declining



FLASH

memory has the advantage that the information stored in the
chip is not lost when the power is switched off. The charged is stored
in a capacitor between two poly gates the floating gate and the control
gate

Semiconductor memory market

Basic DRAM concept


DRAM
: Dynamic Random Access Memory


RAM memory: data storage (writing) and retrieving (reading) are
done rapidly and the cells can be accessed in random order


DRAM: the data storage is done by charging a capacitor


Dynamic: the charge on the capacitor leaks and needs to be
periodically restored or refreshed (volatile memory)


The data is not retained for a long time, even when power is on.
Data retention: a few msec to a few seconds


The DRAM is the most widely used form of semiconductor
memory (needed in all computing & communicating systems

DRAM Cell Basics


A DRAM circuit is made out of the 3 following blocks:


Memory array (array of cells)


Circuits aligned to the memory pitch (pitched blocks)


Periphery circuits (periphery blocks)

Pitched blocks




Memory array

(only 55 to 65%

of the chip area)


Periphery blocks


A modern DRAM cell or bit is formed with 1 Transistor (a switch)
and 1 Capacitor (a storage element): 1T/1C cell


The cell holds binary information in the form of a charge on the
capacitor


The cells are connected to 2 conductive lines:


The Digit line or Bit line or Column to bring/retrieve
information


The Word Line or Row to control the switch

DRAM Cell Basics

Vcc/2

Word Line

Bit Line

Vcc for logic «

1

»

0 for logic «

0

»

Q = +/
-

C Vcc/2

T

C

Vcc or 0

DRAM Market



DRAM is a homogeneous product, and a standard one


DRAM market is very volatile and highly cyclical


There are only a handful of major DRAM manufacturers in the
global market


The top 3 manufacturers controlled over 75% of the global
market


Major issues for DRAM manufactures are


Cost of new Fabs


Cost of Fab has no salvage value


Fab’s cost just going higher and higher


R&D cost is also continues to escalate


Imbalance between supply and demand


DRAM market growth is correlate to the growth in the world economy

DRAM Cost and Profit


DRAM: lowest cost memory (1T/1C): today 10
-
7

$/bit


DRAM production costs:
-
26% per year for cost/bit


DRAM Bit price trends:

Most US

DRAM

makers

exit

Many

mergers

FLASH Basic

NOR vs NAND

Flash Type
/Key players

Advantages

Disadvantages

Key
Applications

NOR

Intel, Spansion,



High speed
random access




Byte
programming




Well Encrypted



Slow
programming




Slow speed in
erasing



Programming
storage for

-
Cellular phone

-

Set top boxes

-

DVD

Bios for PC and
Peripherals

NAND

Samsung,
Toshiba



High speed
Programming



High speed
erasing



Smaller Block
size




Slow random
access



No byte
programming



Suitable for
Data memory


-

MP3


-

PDA


-

DSC

Flash Read /Write /Erase Mechanism

Erase

Read

Write


Apply voltage to
control gate


e
-

tunneling occurs
from channel to FG

FG

CG


Apply voltage to
source


e
-

transfer occurs
from FG to source

CG

FG

FG

CG


Apply voltage to CG


If e
-

present in FG
-

no conduction
between source and
drain


If e
-

is absent
conduction happens

2006 Market Trends


Chip production increased 12% in ‘06, 5995 MSI of
silicon


Q1 ’06
-
1%, +4% in Q2, second half of the year very
strong


77.5B chips were shipped for the first 6 months of the
year, NAND was 5% more


Capacity grew much slower 7% for ’06


Capacity is ~90% and expects to grow to 95%




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