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Semiconductorconsolidationis the trend ofsemiconductorcompanies collaborating in order to come to a practicalsynergywith the goal of being able to operate in a business model that can sustainprofitability.

History[edit]

Since the rapid adoption of the modern day chip in the 1960s, most companies involved in producing semiconductors were extremelyvertically integrated.Semiconductor companies owned and operated their ownfabricationplants and also the processing technologies that facilitated the creation of the chips. Research, design, testing, production, and manufacturing were all kept "in house". Advances in the semiconductor industry made the market extremely competitive and companies began to use a technology roadmap that helped set goals for the industry. This roadmap came to be known asMoore's Law,a statistical trend seen byIntel'sco-founderGordon Moorein which the number oftransistorson anintegrated circuitis doubled approximately every 2 years.[1]This increase in transistor numbers meant that chips were getting smaller and faster as time progressed.

As chips continued to get faster, so did the levels of sophistication within thecircuitry.Companies were constantly updating machinery to be able to keep up with production demands and overhauls of newer circuits. Companies raced to make transistors smaller in order to pack more of them on the same sizesiliconand enable faster chips. 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 1960s, were now operating in themicrometerand heading into thenanometerscale. As of 2011,most cutting edgeprocessormakers are working in the32 nmlevel and heading into full22 nmproduction; sizes comparable to the humanDNAstrand. The process at which most of these intricate chips are being produced at is calledphotolithography,and the cost of equipment and operating them has grown astronomically, resulting in an inevitable consolidation of semiconductor companies.

Divergence[edit]

Companies likeXilinxandWestern Design Centerwere 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 theFabless semiconductor companymodel, 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 calledfabs.

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 theGlobal Semiconductor Alliance.

These fabs, commonly referred to as foundries, were able to update assembly and photolithography systems much more easily than their counterparts as all they focused on is handling bulk orders that come from these fabless businesses. In addition, thebottom lineof these two business models became much stronger.

Convergence[edit]

Although many companies grew and profited well from a fabless business model, new hurdles still had to be dealt with. The modern daymicroprocessornow has billions of dollars of research put behind it, with months and even years of research in creating the micro circuitry and teams of hundreds of engineers testing and developing a chip. Now even keeping fabrication and development apart is not enough[citation needed].

"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." The theory,Rock's Law,was first articulated byventure capitalistArthur Rock in which he proposed 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 implication is that rising plant costs will eventually prohibit further chip improvements. Realizing this, companies began to collaborate. This also meant many compatible companies ended up beingtakeovertargets in order to strengthen relationships and help the businesses'bottom line.

in July, 2006,AMDannounced the acquisition of theGPUmanufacturerATI Technologiesfor $4.3 billion in cash and 58 million shares of itsstockand completed the acquisition on October 25, 2006.[2]In October 2008, AMD announced plans to spin off manufacturing operations in a joint venture withAdvanced Technology Investment Co.,an investment company fromAbu Dhabi.The partnership and resulting new venture, calledGlobalFoundries Inc.,gave AMD an infusion of cash and allowed the company to focus solely on chip design.[3]

TIandInfineonhave outsourced some production toShanghai'sSemiconductor Manufacturing International Corporation[4][5]

Motorola,ST Microelectronics,PhilipsandTaiwan Semiconductor ManufacturingCo. are collaborating.[citation needed]

In 2000,Sony Computer Entertainment,Toshiba Corporation,andIBMteamed up to design and manufacture theCell processor.The alliance of the three companies was known as "STI" and over 400 engineers from the three companies worked together in Austin, Texas in a facility specifically built for the project in 2001. The processor has since been used in numerous commercial products, including someIBM BladeCenterservers[6]and the SonyPS3gaming console.[7]

The outsourced semiconductor assembly and test (OSAT) industry has also seen a considerable amount of consolidation in recent years.[8]This is because OSAT companies are looking to differentiate themselves, and consolidation, in a horizontal sense, is one of the best known ways to achieve better differentiation.[9]

Exceptions[edit]

According to analysts[citation needed],thetrendis that there will be an industry-wide move toward collaboration. However, companies such as Intel,IBM,andToshibawill be able to survive on their own as they are currently market leaders in the microprocessors,servers,andmemoryfields (in that order).

See also[edit]

References[edit]

  1. ^By Jon Mundy, TrustedReviews. “What is Moore's Law?.”February 17, 2016. Retrieved February 26, 2016.
  2. ^CNW Group. “AMD Completes ATI Acquisition and Creates Processing Powerhouse.”October 12, 2007. Retrieved February 26, 2016.
  3. ^By Ashlee Vance, The New York Times. “A.M.D. to Split Into Two Operations.”October 6, 2008. Retrieved February 26, 2016.
  4. ^By Mark LaPedus, EE Times. “TI reportedly to forge foundry deal with China's SMIC.”August 29, 2002. Retrieved March 3, 2016.
  5. ^By Hui Yuk-min, South China Morning Post. “Infineon seals deal with SMIC.”December 10, 2002. Retrieved March 3, 2016.
  6. ^"IBM BladeCenter QS20 blade with new Cell BE processor offers unique capabilities for".12 September 2006.
  7. ^By David Becker, CNET. “PlayStation 3 chip has split personality.”February 7, 2005. Retrieved February 26, 2016.
  8. ^By Mark LaPedus, Semiconductor Engineering. “Consolidation Hits OSAT Biz.”February 18, 2016. Retrieved February 26, 2016.
  9. ^By Mark LaPedus, Semiconductor Engineering. “Inside The OSAT Business.”March 17, 2016. Retrieved March 18, 2016.
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