SEMICONDUCTOR INDUSTRY
UPDATE
November 2010
McIlvaine Company
TABLE OF CONTENTS
Wafer Works Invests in Formosa Epitaxy
EV Group Wins Saudi University Order
ON Semiconductor to Invest $15.7 Million in Idaho
Intel Opens $2.5 Billion Fab Plant in China
SMIC to Invest in Wuhan Xinxin
Intel Opens $1 Billion Factory in Vietnam
Japan's Sanyo Semiconductor to Raise Discrete-Chip Output
Hemlock Semiconductor Impact on Education Institutions
Wafer Works on November 15, 2019 announced a US$600,000 investment for a 1% equity interest in Formosa Epitaxy's new subsidiary in Jiangsu, China. Although the acquisition is merely for a small stake, with sapphire substrate prices on the rise in the fourth quarter, the companies are hoping the shareholder relations will strengthen their positions in the LED supply chain.
The new subsidiary will begin operation in mid-December. Other investors include, Amtran Technology, LG Display and Unity Opto, which provide the new company strong connection from upstream materials to downstream end-use markets.
Wafer Works' sapphire substrate capacity is currently at 100,000 units a month, and will expand to 200,000 units in 2011. The company also plans to raise the percentage of self-produced sapphire ingots from 10-20% at present to 30% next year. Since a shortage of sapphire ingots has persisted into the fourth quarter, prices could rise another 10-15% by the end of the year.
In related news, the board of Formosa Epitaxy approved plans to raise funds through issuance of new shares domestically, offshore depository receipts, private placement or convertible bonds in the first half of 2011. In addition to shoring up cash positions for future expansion, the company hopes to bring in strategic partners.
Top university selects EVG systems on strength of flexible technology, local service and support. EV Group (EVG), a leading supplier of wafer bonding and lithography equipment for the MEMS, nanotechnology and semiconductor markets, announced it has shipped an EVG520IS semi-automated wafer bonding system and two EVG6200 automated alignment systems to King Abdullah University of Science and Technology (KAUST) in Saudi Arabia. Students at the graduate-level institution will use the EVG equipment for advanced technology research and development, including projects outsourced to KAUST from technology firms in the region.
EVG’s first customer headquartered in the Middle East, KAUST opened in September 2009 and boasts the largest, most modern cleanroom within the Arab states that comprise the Gulf Cooperation Council (GCC): Kuwait, Bahrain, Saudi Arabia, Qatar, United Arab Emirates and Oman. A key win for the company, this order is testament to EVG’s ability to deliver world-class technology and customer support for its customers centered in emerging new markets, particularly at the R&D level. In the past year alone, EVG has received orders to support a breadth of R&D and university-related projects from the University of Texas at Arlington, the University of Michigan’s Lurie Nanofabrication Facility, the Institute of Microelectronics in Singapore, Europe’s Imec, and the RFID/USN Center in Korea.
KAUST chose the EVG equipment based on several key capabilities, chief among them being the systems’ modularity and flexibility. The university plans to utilize one EVG6200 for bond alignment and nanoimprint lithography (NIL), and the other for lithography mask alignment. According to Dr. Xixiang Zhang, Manager of the Nanofabrication, Imaging & Characterization Core Lab of KAUST, “We were impressed with the EVG systems’ performance and ability to multitask, which will be of great value in working on the variety of research projects that the university is undertaking. Moreover, EV Group has proven its ability to provide us with excellent onsite process and application support so that our local needs can be met quickly and efficiently.”
EV Group Executive Technology Director Paul Lindner noted, “Working with KAUST is an important milestone for EVG, as technology activity in this region of the world continues to expand. Moreover, working with this prestigious institution marks a further step in our partnering with leading universities and research firms around the world in their efforts to develop solutions to today’s challenges as well as explore advancements that will address future needs.”
Taiwan Semiconductor Manufacturing Co, the world's largest contract chip maker by revenue, has allotted US$1.89 billion to expand its wafer plant in Taiwan. TSMC said in a statement that it plans to set up mini production lines for wafer fabrication in the central Taiwan plant and to expand the plant's capacity in 12-inch wafer-level chip-scale packaging and other specialty technology. However, the timetable of the output expansion is not given.
In addition, TSMC has earmarked US$803.8 million for research and development in 2011. It plans to inject EUR 9.4 million into its solar business unit in Europe. TSMC's net profit grew 53.6% year on year or 16.5% quarter on quarter to NT$46.94 billion in the third quarter of this year. The company attributed the strong growth in net profit to strong global demand for consumer electronics and Internet-related products. During the period from January to September, the company's sales rose 24.8% year on year or 6.9% quarter on quarter to record NT$112.25 billion, of which sales of products on the advanced 40 nanometer production process accounted for 17%.
ON Semiconductor will buy $15.7 million in new production equipment for a manufacturing plant in Pocatello, the manager of the eastern Idaho plant said.
Manager John Spicer said the new equipment should be installed by the end of the year and be operational by June.
He said the equipment will be used to make 8-inch silicon wafers, and that it will increase production by 35 percent. The company makes chips used in cars and cell phones.
The equipment purchase announced is in addition to $11 million in production equipment for the Pocatello plant the Phoenix-based company announced last summer.
The company is hiring additional workers for Pocatello but how many will be needed is unclear.
"We are actually working on that right now," Spicer told the Idaho State Journal. "It certainly will add some jobs to the plant. It will secure jobs that are here now. We are hiring engineers. We're hiring technicians. We're hiring facility engineers, industrial engineers. It's the whole gamut."
About 635 workers are now employed at the Pocatello plant.
"As a business grows and as the needs arise, the company will put additional capital into the operation here in Pocatello," Spicer said. "We're thrilled about this announcement for this $15.7 million. It certainly marks a continuation of the work we started at the beginning of the year to expand the operation."
Spicer said the semiconductor business dropped off 18 months ago but has rebounded with a surge in the automotive industry and cell phones.
Intel opened a 300mm wafer fabrication facility in China; its first semiconductor manufacturing plant in Asia Intel opened the company's first Asia-based advanced chip manufacturing plant in China, the company said Oct. 26. "This manufacturing facility helps deliver on our vision to contribute to sustainable growth in China while giving us better proximity to serve our customers in Asia," said Paul Otellini, Intel's chief executive, in a statement. Located in Dalian, the wafer fabrication facility will focus initial production on chipsets for laptop computers, high-performance desktop PCs and Intel Xeon processor-based servers, according to Intel. Intel Semiconductor, or Fab 68, has already begun producing 300-millimeter silicon wafers, which will be available by the end of the year, the company said.
Fab 68 is Intel's eighth 300mm wafer fabrication facility worldwide and is already using the advanced 65-nanometer process technology, according to Intel. Intel recently announced it will invest between $6 billion to $8 billion to build two more facilities in Oregon to produce next-generation 22nm microprocessors.
Fab 68 is staffed with local employees trained to fill skilled, well-paid positions in high-tech manufacturing, Intel said. When fully operational, Fab 68 will have about 1,500 employees, Intel said. Intel's focus on regional workers meshes with the Chinese government's initiatives to revitalize the region with work force development in "strategic emerging industries" and upgrade the area's economic structure, the company said. An estimated two dozen companies have also set up shop in Dalian to be near and do business with the new plant, and Intel has started doing business with more than 80 existing suppliers based in Dalian, said the company.
Intel is investing $2.5 billion in the facility, bringing the company's total Chinese investment to date to $4.7 billion, the company said. Intel has been investing and partnering in China for 25 years. Intel also has a large assembly and test site in Chengdu as well as research and development centers and labs scattered throughout China, including in Beijing and Shanghai. Intel plans to continue investing in China, said Otellini, but he did not give any further details. The "smart" revolution taking place in the computing industry creates exciting opportunities for Intel to pursue in China, he said. Under construction since 2007, Fab 68 is roughly the size of 23 football fields at 163,000 square meters (1,753,880 sq. ft.) of factory space, Intel said.
"Fab 68 models the exacting design and construction standards that Intel applies globally for environmental performance, including water, energy and chemical waste management," said Kirby Jefferson, general manager of Fab 68. Dalian is located in northeast China's Liaoning province about 288 miles east of Beijing and 545 miles north.
The Wuhan East Lake Hi-Tech Development Zone Administrative Committee and Semiconductor Manufacturing International Corporation ("SMIC," NYSE: SMI, SEHK: 0981.HK) signed a cooperation framework agreement in Wuhan's East Lake Hotel in which both parties agreed to cooperate and jointly invest in the 12-inch wafer production facilities of Wuhan Xinxin Semiconductor Manufacturing Corporation (Wuhan Xinxin) through cash injection.
The official signing ceremony was attended by the President of the Chinese Academy of Engineering Zhou Ji; officials from the National Development and Reform Commission, China Development Bank, and Hubei Province; Wuhan City Party Secretary Yang Song; Wuhan Mayor Ruan Chengfa; SMIC Chairman Jiang Shangzhou; SMIC President and C.E.O. David N.K. Wang; and others.
SMIC began its cooperation with Wuhan City in early 2006 when its government funded and constructed Wuhan Xinxin and engaged SMIC to manage it. Wuhan Xinxin commenced production in September 2008, with its fab construction and operations meeting global industry standards. The signing of this new agreement strengthens the commitment between SMIC's new management team and the Wuhan government to move towards greater expansion and development.
The cooperation framework agreement proposes a possible joint venture driven by corporate responsibility and profitability, which will focus on 65-40 nanometer integrated circuits with a goal of achieving a production capacity of 45,000 wafers per month within three years of its establishment. Capacity planning for this new phase will be consistent with industry standards for profitable development, with products and technology driven by market demand.
This cooperation will benefit both parties and serve as a strategic component in SMIC's expansion plan over the next five years. It also will become a key contributor to the Chinese and global semiconductor industries, as a reliable platform for high-end chip manufacturing.
Through this agreement, SMIC and Wuhan City will collaborate extensively in areas such as talent development, chip design, and supply chain improvement, to promote the economic development of Wuhan's "Optics Valley" and upgrade Hubei Province's information & technology industry. As East Lake High-tech Zone is developing its strategy to build the "National Innovation Model Area" and "China Optical Valley," this cooperation will become an innovation engine to drive their development.
Intel's new $1 billion factory, which has a clean room the size of five-plus football fields, rises up from former rice paddies.
"On behalf of Intel's 85,000 employees, I would like to say, 'Hello Vietnam,''' company CEO Paul Otellini told an auditorium packed with enthusiastic government officials, employees and other dignitaries during a ceremony that featured a dragon dance and women in ao dais, traditional Vietnamese gowns. The Santa Clara chip giant's arrival in the Southeast Asian country put it "on the map for high-tech investment and helped the country attract significant investments from several leading global technology firms, including Foxconn and Compal," he added.
While China's role as the assembly line for iPhones and PCs remains unchallenged, countries like Vietnam hope to peel away a significant amount of tech business to become global subsidiaries of the world's factory floor. Intel's decision to build the plant in 2006 in a country without a single world-class university and over countries like India and China jolted the global tech world.
At full capacity, Vietnam's first semiconductor factory, which produces chipsets for mobile devices and laptops, will double Intel's assembly and testing capabilities. The complex has the ability to produce microprocessors in the future.
"Companies in China have been looking for an alternative," said Lam Nguyen, IDC's Vietnam analyst. "Labor costs are rising in China. The cost of doing business in China is rising. Vietnam is the right alternative."
The massive factory, located in the city's more remote District 9, underscores the complex strategic bets Intel makes years ahead of its moves. The process of choosing Vietnam began with secret meetings in Santa Clara between company executives and high-ranking government leaders from Hanoi so as not to trigger protests from anti-Communist Vietnamese-American groups in Silicon Valley. Nearly a decade in the making, the 500,000 square-foot factory -- twice the size of the company's next largest plant in Malaysia -- had to be built on top of 8,800 stilts that burrow six stories down through unstable sandy soil to reach bedrock.
Intel has also faced a dearth of qualified job candidates. While Vietnamese workers are known to be smart and hard-working, the country's school system focuses more on theory than practical learning. About two years ago, the company tested 2,000 graduating Vietnamese students. Only 90 were able to score at least 60 percent on the standard exam, and half of those failed an English competency review. The company is supporting various education initiatives and has helped to train 87,000 teachers in the country.
Increasing, supply chain experts say, multinationals will be looking at diverse regions to plant their new plants.
Hewlett-Packard recently started soliciting for software engineers to staff a new outsourcing operation in Ho Chi Minh City, an investment reported to be $18 million. And Vietnam-based software outsourcing companies say they are experiencing more interest from companies thinking of moving some of their projects away from higher-cost India and China.
"I've met with a handful of outsourcers who are in China, India -- or both -- that are now looking at Vietnam," said Rick Yvanovich, founder and CEO of Ho Chi Minh City-based software company TRG International.
Vietnam is cheap and hungry for tech companies like Intel. The country's estimated per capital income of $2,900 is less than half that of China's. Vietnam gave Intel a virtual hot-line to top government officials. Rick Howarth, Intel's general manager of the 115-acre site in the new Saigon Hi-Tech Park, has an open invitation to visit the country's top leaders any time he is in the nation's capital of Hanoi.
Still, China, with its booming economy, growing middle class and abundance of component makers is virtually impossible to replicate, experts say.
"There is no rival to the infrastructure in China," said Roger Kay, president of Endpoint Technologies Associates.
Companies will spread operations around to hedge against environmental disasters, such as earthquakes, or even political ruptures between governments, said Al Kwok, a Silicon Valley entrepreneur in the semiconductor industry who splits his time between San Jose and Suzhou, China. But, he added, "I don't see anyone closing down operations in China. That would be madness. You have a huge customer base in China. Intel has to have a big presence in China."
Indeed, a few days before Intel flipped the switch on its Vietnam factory, which will eventually employ about 4,000 workers, it fired up its $2.5 billion wafer fabrication facility in the northeastern Chinese city of Dalian. The complex is the size of about 23 football fields.
"Vietnam has the potential to be a small China in tech manufacturing," said Intel's former country manager in Vietnam, Than Trong Phuc.
Japan's Sanyo Semiconductor Co. plans to boost production capacity for discrete chips used in cellular phones by 40 per cent to 500 million units per month by fiscal 2012.
The company is adding production lines at a plant in Shenzhen, China, that handles late-stage processes such as wafer cutting and wiring. The site was recently established to consolidate two plants in Guangdong Province. It began shipping products in June and supplies the Asian locations of Japanese cell phone manufacturers.
The expansion will increase the plant's monthly capacity from 180 million units at present to 300 million units. The number of employees at the location will also be gradually raised from just under 600 currently. The required investment has not been disclosed.
In addition, plants in Thailand and Taiwan with a combined capacity of 180 million units a month will be modified to lift productivity.
In fiscal 2012, Sanyo Semiconductor aims to boost discrete-chip sales to around 30 billion yen (US$368.8 million), a 20 per cent increase from fiscal 2009.
The Sanyo Electric Co. (TSE:6764) unit is being sold to ON Semiconductor Corp. of the U.S. in a deal expected to close before year's end.
Austin Peay State University Chemical Engineering Technology Director Chester T. Little looks at $2 million worth of equipment in the university's Hemlock Semiconductor Building.
It takes hundreds of educated workers to run the huge operation at Hemlock Semiconductor Corp. in Saginaw County, and it will take a similar work force to staff its facility under construction in Clarksville, Tenn.
That’s having a big impact on education institutions in both locations.
Delta College in Bay County spent five years creating a program to train people to work at Hemlock Semiconductor or its bigger brothers in the region, Dow Corning Corp. and Dow Chemical Co.
It’s paying dividends today.
Since February 2008, 107 students have finished Delta College’s chemical engineering technology program and 95 have received offers or have been hired. The college’s sixth “fast-start” class started in September.
Austin Peay State University in Clarksville, Tenn., near where Hemlock Semiconductor will open a $1.2 billion polycrystalline silicon plant in 2012, just completed construction of a 20,069-square-foot facility to run an academic program that mirrors Delta’s.
Austin Peay President Timothy Hall said it was the fastest building project ever completed on campus.
“It was amazing how things worked,” Hall said. “The state gave us money for a building, Hemlock gave us money, and we were up and running.
“Normally, things like this don’t happen this fast.”
Austin Peay got a helping hand from the state of Tennessee when it awarded $6.4 million for the university to build the new Hemlock Semiconductor Building, which serves as a gateway to campus. Hemlock Semiconductor Group also awarded $2 million to purchase laboratory equipment for the building.
The building opened in September at the start of the school year.
Delta and Austin Peay now are forming a partnership to run chemical engineering technology programs that can supply a steady stream of workers for Hemlock Semiconductor.
“Delta College was contracted by (Hemlock Semiconductor) to put together a lot of the labs and exercises for Austin Peay,” said Pat Graves, director of business partnerships for Delta. “If we can be a liaison, a conduit to someone else to be successful, it’s really a pleasure to us.”
The partnership goes beyond sharing curriculum. Graves said there are talks to create a “two-plus-two” program where students could finish their associate’s degree at Delta and finish a bachelor’s degree in an engineering field at Austin Peay, if a student chooses to relocate to Clarksville and work at the new Hemlock Semiconductor plant there.
Even with the potential of students leaving the region and working outside Michigan, Graves said there isn’t any competition between Delta and Austin Peay.
“If there are more opportunities, more jobs that are related to (Hemlock Semiconductor) down there, it’s more opportunities to our residents,” Graves said. “If any choose to relocate, while that’s not our first choice, it can help Hemlock be more successful.
“It’s a win-win for both areas, because there would be a backfill of jobs here.”
Austin Peay’s first class started last year with about 120 students, and about 100 of those students will graduate this May.
Expansion already is on the minds of professors at Austin Peay. Inside the Hemlock Semiconductor Building is a laboratory that is twice the needed size.
“Other businesses can come in here, and I’ll tell them, ‘This is the measuring stick, you have to meet this,’ ” said Chester T. Little, program director at Austin Peay, pointing at the lab equipment.
Graves says Delta’s 2,500-square-foot facility is at maximum capacity, but there are no plans for expansion in the near future.
“We may be offering classes at off-campus centers like the planetarium in Bay City, the Midland Center or the Ricker Center in Saginaw,” Graves said. “It’s getting tight, here.”
Hemlock Semiconductor’s affect on public, K-12 schools is felt in both states as well. The Clarksville-Montgomery County Public Schools added 600 students this year alone, for a total student population of 29,000, in part because of families moving to the area for the plant. Other families are moving to Clarksville to work at the nearby Fort Campbell Army base or other industrial factories near Hemlock Semiconductor.
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