Chips and Change How Crisis Reshapes the Semiconductor Industry Clair Brown and Greg Linden The MIT Press Cambridge, Massachusetts London, England 6 2009 Massachusetts Institute of Technology All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or informa- tion storage and retrieval) without permission in writing from the publisher. MIT Press books may be purchased at special quantity discounts fro business or sales promotional use. For information, please email special_sales@mitpress. mit.edu or write to Special Sales Department, The MIT Press, 55 Hayward Street, Cambridge, MA 02142. This book was set in Sabon on 3B2 by Asco Typesetters, Hong Kong and was printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data Brown, Clair, 1946– Chips and change : how crisis reshapes the semiconductor industry / Clair Brown and Greg Linden. p. cm. Includes bibliographical references and index. ISBN 978-0-262-01346-8 (hbk. : alk. paper) 1. Semiconductor industry— Management. 2. Business cycles. I. Linden, Greg, 1959 II. Title. HD9696.S42B76 2009 338.40762138152dc22 2009007072 10987654321 Index Accellera, 73 Antitrust laws Acer, 179 Japanese sued on, 22 Actions (firm), 186, 187 relaxing of (US), 20 Advantest, 167 Apple Computer, 92, 162 Agere, 51, 89, 90, 154 Applications Agilent, 154, 156, 157 increased number of, 67 Alcatel, 182 and Intel expansion, 81 Alliances, 146–48, 168, 209 shift on, 63 Common Platform Alliance, 104, Application-specific integrated circuits 147, 148, 168, 195 (ASICs), 21–22 with firms from industrializing coun- and Toshiba design centers, 169 tries, 193 Applied Materials, 167 Taiwanese firms in, 179 ARC International, 70, 71 Altera, 52, 150 ARM Ltd., 70, 71, 72, 75 AMD, 24 ASE Group, 45, 185 in China, 185 ASET, 168, 196, 232n.64 in Common Platform, 148 Asia. See also China; India; Japan; and EUV development, 100 South Korea; Taiwan India design center of, 88 economic liberalization of, 85 vs. Intel, 144, 160 government support for semiconduc- layoffs in, 107 tor industry in, 213–14 process development ended in, new rivals in, 165 146 ASICs (application-specific integrated spin-off from, 5, 154, 198 circuits), 21–22 American Community Survey (ACS), and Toshiba design centers, 169 engineer-earnings data from, 110, ASM International, 167 115 ASMC, 184 Amkor, 45, 185 ASM Lithography (ASML), 97, 167 Analog chips, 42, 149, 158 Assembly stage of production, 10, 12, Analog Devices, 88, 90, 149, 150 44–45 Analog vs. digital circuits, 67 Association for Superadvanced Antidumping laws, Japanese sued on, Electronics Technologies (ASET), 22 147 242 Index ATI, 89, 150, 152, 163, 179 and economic crisis (2008 et seq.), Atmel, 89 197 Avago, 51, 52, 156, 157 engineer capability in, 170, 171, 172, 173, 185 Baldrige, Malcolm, quoted, 15 fab investment in, 56, 58 Bangalore, India, 85, 86, 88–89, 128, in future, 212 172, 190, 192–93 global integration of, 194 Barrett, Craig, 211 government support in, 37, 213–14 Benchmarking, 19 higher education in, 174–77 foundries used in, 49 investment in, 164, 202 Berkeley Sloan Semiconductor Pro- liberalization of chip market by, 82 gram, 13 loss of competitive advantage to, 207 Berkeley transistor simulation model loss of industry leadership to, 165 (BSIM), 46 manufacturing in, 92 Brain circulation, global. See Global market demand for engineers in, 124 brain circulation as new fear replacing Japan, 5 Brazil, and future, 212 start-ups in, 186, 189, 191 BREW (binary runtime environment and Taiwan, 181–82 for wireless), 162 US engineering PhDs to students Britain (United Kingdom) from, 125 and consumer multimedia, 169 and return home for career, 128 restructuring in, 152, 154 See also International comparisons Broadcom, 32, 52, 86, 88, 90, 138 China Resources Semico, 187 BSIM (Berkeley transistor simulation Chip design, 40 model), 46 automation and separation of, 46, 66 Business model, needed with technol- in China, 185–88 ogy, 213 functional integration in, 61–62 Buy-outs, private equity, 152–57, 209 and hardware-software co-design, 66 in India, 190–91 Cadence Design Systems, 67, 73, 74, international comparison on (number 91 of designers), 171, 172–73 Canon, 97, 152, 153 and lithography, 101 Career paths, for semiconductor pro- in low-cost locations, 84–92, 94 fessionals, 119–23 for manufacturing, 101 CDMA (code division multiple access) miniaturization in, 9–10, 45, 64 technology, 160, 161 limit of (0.032 micron), 168, 195 CEC Huada, 186, 187 stages of, 64 Ceva, 70 in Taiwan, 179, 181 Chang, Morris, 48 ‘‘Chipless’’ firms, 71 Chang, Richard, 49, 182–83 Circuit simulation system, SPICE, 46 Chartered Semiconductor (foundry), Cisco Systems, 32, 92, 152, 153 48, 51, 139, 140, 147 ‘‘Clean room,’’ 40 China, 182–89, 194–95, 196–97 CMOS (complementary metal-oxide benefit for consumers in, 6 semiconductor), 9, 209–10, 212 cooperation with US leaders in, 193 Code division multiple access design centers in, 87 (CDMA) technology, 160, 161 Index 243 Common Platform Alliance, 104, 147, Consumer markets 148, 168, 195 challenges of, 81–84 Common Power Format (CPF), 74 shift to, 63, 75, 77–81 Competitive advantage Consumer price squeeze, crisis of. See business plan plus technology needed Crisis of consumer prize squeeze for, 213 Cooperative efforts and strategy, 74, changes in, 2, 3 75, 99–100, 104, 106, 208–209 crises as influencing (global), 13 drawbacks of, 209 for developing countries, 166 Cooperative venture, 35 difficulty in building, 137 Cores, 69. See also Design cores as fleeting, 36 Cost reduction, through low-cost in fabless sector, 52 locations, 84 and management of complexity, Crises of semiconductor industry, 1–5 74 impacts of, 199–203 from offshore investment, 94 incremental approaches in response in process knowledge, 45 to, 13 recession as threatening to erode, interconnections among, 199 198 lessons learned from, 212–14 and reduction of trade barriers, 82 modes of response to, 203–208 shifting of (global), 36, 164, 202 strategies in response to, 203–204 and software expertise, 65 cooperation, 205, 208–209 (see strategies for also Cooperative efforts and capabilities of firm, 157–59 strategy) product-level barriers, 159–61 offshoring, 84–91, 204, 205, 208 relationships with other firms, 161– (see also Outsourcing) 62 positioning, 205, 208 struggle for, 13 restructuring, 205, 152, 154–57, theories on shift of, 165–166 (see 209 also Large-market pull theory; ‘‘Crisis,’’ 2 Manufacturing-pull theory) Crisis of competitive advantage lost to and wafer size, 42 Japan (first crisis), 2, 15–18, 36– Competitive advantage, loss of. See 37 Crisis of competitive advantage and eighth crisis, 165 lost to Japan impacts of, 200 Competitive Semiconductor response of US, 18–22, 204, 205 Manufacturing (CSM) program, reversal of fortunes, 22–27 19 stumbles by Japan, 27–31 Complementary metal-oxide Crisis of fabrication costs (second semiconductor (CMOS), 9, 209– crisis), 2, 39–44, 58–59 10, 212 and chip design, 61 Computer-aided design (CAD), 67 and fabless-foundry model, 44–54 Consolidation, and fabrication costs, and fabrication as capital intensive, 39 57 Consortia, 146–48 and fab site selection factors, 57–58 Consumer(s), 6, 203 and global shift of manufacturing, Consumer gap, 210 54–58 244 Index Crisis of fabrication costs (second Crisis of talent search (sixth crisis), 2, crisis) (cont.) 107–108, 134 impacts of, 200 and employer requirements, 109, job loss in, 58 123 response mode to, 204–205 and foreign graduate students, 118– and unit costs vs. fixed costs of 19, 124–29, 207 building, 41 from Taiwan, 125, 125–26, 181 Crisis of design costs (third crisis), 2, and high-innovation vs. high- 61–63, 74–75 commitment system, 122–23 and challenges of complexity, 63–68, impacts of, 201 74 and opposing sides of marketplace, and cooperative efforts, 74, 75 108 impacts of, 200 response mode to, 205, 206–207 response mode to, 205–206 and US labor market for engineers, and reusable design cores, 68–72, 109–10, 123–24 74–75 age-earnings profiles by education, and system-level design approaches, 115–18 72–74 career paths for semiconductor Crisis of consumer price squeeze professionals, 119–23 (fourth crisis), 2, 77, 93–94 employment and earnings in, 108, from corporate-to-consumer market 110–15, 131, 132 shift, 63, 75, 77–81 and H-1B visas, 129–34 and challenges of consumer mar- Crisis of low returns and high risk kets, 81–84 (seventh crisis), 2, 137, 162–64 and engineering abroad vs. in US, and high-performing chip firms, 92–93 148–52 impacts of, 200 high-volume fabs made improbable response mode to, 205–206 by, 44 designing in low-cost locations, 84– impacts of, 201 92 and price of talent, 135 Crisis of limits to Moore’s Law R&D as factor in, 42, 144–46 (fifth crisis), 2, 95–96, 105– alliances and consortia as response, 106 146–48 and evolution of optical lithography, response mode to, 205, 207 97–99, 105 (see also Lithography) restructuring (spin-offs and private and fabless-foundry model, 202 equity buy-outs), 152–57 hunt for postoptical solutions, 99– return on assets (ROA) measured, 101 138–44 impacts of, 200 and strategies for competitive advan- and photolithography, 96–97 tage, 157 response mode to, 205, 206 through capabilities of firms, 157– design of manufacturing, 101– 59 104 through product-level barriers, and rising fabrication cost, 39 159–61 and virtual re-integration of fabless through relationships with other and foundry, 104–105 firms, 161–62 Index 245 Crisis of new global competition Developing countries (eighth crisis), 2, 165–66, 194– competitive advantage for, 166 95 and economic crisis (2008 et seq.), and engineer capabilities across 197 countries, 170–74 graduate degrees for students from, in China, 185 118 in India, 191–92 low-cost special products for, 94 and higher education across coun- market demand for engineers in, 124 tries, 174–77 Development alliances.