Cover Story: Demand for 200MM Tools Outstrips Supply
No doubt about it, 200mm wafer manufacturing is enjoying a strong rebound. Dan Tracy, senior director of industry research at SEMI, recalls an equipment refurbisher who last year “was bemoaning the state of his business. A year later, he is very busy, and business is looking very good.”
A wide variety of systems, ranging from smartphones and autos to wearables, rely on trailing-edge devices made on 200mm wafers. (Source: Applied Materials)
He’s far from an isolated case. Strong prices for 200mm equipment early in 2014 dropped off mid-year, then made a surprisingly strong rebound in the fourth quarter as foundries bought up 200mm equipment, according to Joanne Itow, managing director, manufacturing, at Semico Research. “Now, if you see a 200mm tool, you hang on to it.”
Supporting anecdotes abound. Emerald Greig, a veteran 200mm tools trader and now executive vice president of Americas and Europe at SurplusGLOBAL Inc., also sees tight 200mm tool availability. “There’s a lot less supply and a lot more demand. It just kills me, because every day I could sell so much more if I had the equipment to sell. I get two to three requests that I cannot fill every day—minimum.”
Meanwhile, Daryl Karczewski, division director at Macquarie Equipment Trading, said the business is currently selling a used metrology tool for the same price as a new one, while during the downturn the same piece of equipment was valued at only one-tenth of that price.
Additionally, eight of his 200mm lithography tools, which just 12 months ago were considered scrap and not worth refurbishing, are now on the market for over one million dollars each.
Karczewski said he has seen positive movements in the market and a recent upturn in demand, commenting, “you know things are going well when you have customers in places like Russia, Brazil, and China looking for equipment. Refurbishers are sold out.”
For the Macquarie Group, an Australia-based investment bank with extensive experience in trading used semiconductor equipment, the current upturn means its customers are increasingly turning to arbitrage. “Arbitrage means chip companies tell us, ‘Here is the tool I need, and this is what I am willing to pay.’ We then go out into the market to source a seller and negotiate a price,” Karczewski said.
THE OEM VIEWPOINT
John C. Cummings, managing director of marketing and business development for the equipment product group at Applied Global Services (AGS), said the company’s 200mm tool sales doubled from 2013 to 2014, and are expected to more than double this year. Cummings estimates that 80,000 new 200mm wafer starts per month (wspm) came on line last year, and that another 90,000 wspm will be added this year.
“Unfortunately, core prices are higher for everyone. With 90,000 additional starts per month, what will people do? Some can make the transition to 300mm, but others cannot,” Cummings said.
That’s a major issue because as fewer 200mm fabs close down and release equipment, OEMs like Applied Materials are finding fewer good-quality used cores to buy. “The cores we’re buying now are not in such good condition or aren’t as good a match as before. So, as the supply of used cores dries up, we are adding more new content to a used core. To do that, we are revitalizing our supply chain so we can meet demand by building some models of new 200mm equipment,” Cummings said.
TSMC and its joint ventures own the most 200mm wafer fab capacity, while STMicroelectronics, a power in the MEMS sensor field, is the leading 150mm wafer processor. (Source: IC Insights)
These days “used” equipment includes hybrids that range from a used core with new parts (and often, new chambers) to virtually new tools that start with a brand-new 200mm core and include mostly new parts and components. For example, for 200mm epitaxial equipment, Applied’s 200mm team starts out with a new Applied Centura mainframe and then adds as much used content as possible.
HOW LONG WILL IT LAST?
Why is the rebound so strong, and how long will it last? Greig from SurplusGLOBAL said, “One reason is that a lot of the new technologies coming to the market surrounding the Internet of Things aren’t made with state-of-the-art technology. Consumer stuff, like wearables, can get enough die per wafer by ramping up 200mm.”
MEMS sensors such as accelerometers, gyroscopes and others are an example. They saw record volumes in 2014, according to Rob Lineback, an analyst at IC Insights, Inc., who authored the firm’s Optoelectronics, Sensors, and Discretes (O-S-D) report issued in March. About two-thirds of the 11.1 billion sensors made last year were MEMS-based, and IC Insights sees an 11% compound annual growth rate to 19.1 billion sensors by 2019.[See related article “Growing Scope of 200mm Applications Drives Advances in MEMS Process Technologies” in this issue.]
“There is also a lot of demand for analog and mixed-signal products, and nearly all of that is on 200mm,” Lineback said. “Demand from mobile devices will stay strong, and most of the chips used in IoT end-use products will be made on 200mm wafers.”
Does all of that add up to capacity constraints? “I haven’t heard of anybody not being able to meet their orders yet, but everything points to that,” Lineback said. “It’s pretty clear it is a tight market right now to get the tools to add capacity, which is creating a little bit of a chess match. Especially if you think your competitor is going to get it, you might buy a tool even though you don’t need it right away.”
A SEMI report on secondary equipment issued earlier this year estimates there are about four hundred 150mm and 200mm fabs in operation around the globe, representing about 40% of the industry’s total capacity. Only 10–20 fabs are expected to shut down through 2018, said SEMI’s Tracy. “Sixteen 200mm fabs are operating in China, a rapidly expanding region for 200mm investments,” he added. [See related article in this issue.]
SWITCHING TO 300MM IS NOT EASY
Semico’s Itow noted several MEMS manufacturers have recently moved from 150mm wafers to 200mm fabs. MEMS are not going to 300mm for a long, long time,” she said.
But the picture is less clear for other parts, particularly high-volume analog and communications ICs. Also, while power discretes with thick films are currently limited largely to 200mm wafers, some power management ICs with a bipolar-CMOS-DMOS architecture are being switched to 300mm wafers at some high-volume manufacturers.
Lineback said most of the O-S-D companies he tracks are using processes that currently “may not work on 300mm. They use thick films, advanced deep RIE, wafer bonding, and quite a few other process steps that play a bigger role. Overall, 200mm can serve a lot of the O-S-D applications for a long time.”
Itow, however, said many companies are actively studying a move to 300mm wafers. “Companies are all doing their own analyses to figure out how long they can stay on 200mm. All it takes is one major competitor to make a move and show they can be more efficient on 300mm. It may not happen overnight. But that does limit the price of 200mm tools, which can’t go up to where it would create a higher cost curve than 300mm production,” she added.
Production of analog devices will account for nearly half of all 200mm production in 2015. (Source: SEMI)
The shortage of some used tools raises the question, will foundries and IDMs begin moving production to 300mm wafers if they can’t buy more used 200mm equipment?
Karczewski, the Macquarie executive, said, “It is a big decision to switch to 300mm tools, and we have seen a limited audience to date. Companies will stay with 200mm tools for the most part.”
“What we are seeing is more companies trying to get more throughput and adding capacity to their existing 200mm fabs,” he said, adding that OEMs such as Applied are selling capacity and other improvement packages for their existing tools.
AGS’s Cummings noted, “Although we’re selling legacy equipment, we’re continuing aggressive development programs to improve the tool performance, and develop entirely new 200mm processes and materials as part of our focus on precision materials engineering. Our new Applied Vita controller, for example, offers advanced control and monitoring capabilities that bring the system up to modern levels of performance. It includes a much more powerful processor, flash memory and USB ports, and enables the advanced monitoring, analytical and control capabilities needed to help fabs achieve new, critical productivity goals.”
Cummings also said Applied Materials has revamped its own 200mm manufacturing operation.
“Since the first quarter of 2014, our competitiveness has improved a great deal in terms of lead times, cost and pricing. We intentionally decided to compete not just on technology, but also on the commodity or capacity buys that we had not addressed significantly in the past,” Cummings said.
EQUIPMENT IS “MUCH PRICIER”
Cody Harlow, Applied Materials director of AGS manufacturing operations at the company’s Austin, Texas, facility.
Cody Harlow, a director at the AGS manufacturing operation in Austin, Texas, said the price of used cores has gone up sharply over the past year—that is, when those used cores are available at all. Earlier this year Harlow went to the Semicon Korea trade show, where he normally would be able to buy 15 or more used cores for refurbishment back in Austin. This year, he came back empty handed. At Semicon China in March, the story was similar.
“Some companies with available cores said they were going to hang on to them for another six months because they believe prices will keep going up,” Harlow said. The result is that “there’s less used equipment available, and it is much pricier; it has effectively doubled in the last six months.”
Harlow said Applied Materials has been able to buy multiple 200mm cores coming off the market in the past few years. That stockpile, and continued purchases from chipmakers, inventory holders and brokers, is what gives Applied’s technicians the opportunity to take used cores and add new parts, brand-new chambers, and upgrades such as the new Vita controller.
But what happens if the availability of used cores dries up completely? “That is a different paradigm, a real game changer. We are already there with epi, and it will stay that way until someone releases them,” Cummings said.
Harlow also sees a shift toward new 200mm equipment, with the industry “approaching a crossover point, where it is cheaper to build new than to chase these escalating prices for used cores.”
A LONG CYCLE FOR 200MM?
Karczewski said over his 23 years in the industry he has found that sharp upturns such as the current one for 200mm tools are, unfortunately, as common as sharp downturns. He pointed to the aftermath of the Internet stock bubble in 2000, and the 2008–09 financial crisis downturn as examples. “Another financial crisis, war in the Middle East, or a broad parts oversupply, could all potentially trigger another downturn,” he added.
Foundries are ramping up 200mm capacity as demand from the Internet of Things market picks up. (Source: SEMI)
Cummings also is bracing for the next downturn. “I have been at Applied a little over 20 years, and I have seen the upturns and downturns. But 200mm is an interesting space. Other wafer sizes have dropped off, but 200mm is seeing a whole revival, a second life cycle.
“Take the new iPhone 6 Plus as an example. Some 75% of its chips are made on 200mm wafers, including 16 MEMS, A/D converters, power management, and other chips that don’t require super-small transistors,” he said.
“A lot of people think this upturn will last forever. I do believe it will last this year, and another year after that. It does seem that with such broad demand, and so many products made on 200mm, that we are in a different situation,” Cummings said.
Mike Rosa, director of strategy and technical marketing for 200mm products at Applied Materials, says that although smartphones continue to dominate consumption of devices built on 200mm, he also sees enough new technologies emerging to sustain extended demand.
“200mm is a house built on many stilts,” he said, with automotive and consumer applications and now wearables and the looming IoT sector further driving the need for the myriad devices already being built on 200mm equipment. “Power ICs, MEMS-based sensors, and analog and mixed signal devices are all enjoying growth, and promise to be important sources of new demand.”
Gartner Inc. analyst Bob Johnson predicts that in 2020, more than 8 billion connected things will be shipped worldwide, containing 35 billion semiconductor devices requiring production of 4.5 million wafers.
Tom Salmon, director of global member services and standards at SEMI, said, “Not all of the IoT opportunities will be done on 200mm. Some of the microcontrollers or RF devices may be done on leading-edge technologies. But with the IoT adoption coming early to industrial and automotive, we foresee a big pickup, one that will drive 200mm demand for a long time.”
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SMARTPHONES AND CHINA: TIPPING POINT?
The majority of all smartphone device content consists of chips made on legacy equipment, so the implications for 200mm manufacturing are significant. Applied Materials’ Mike Rosa said the worldwide smartphone market is at “a tipping point in 2015, in which more than half of all smartphone sales will be in China.”
|Mike Rosa, PhD, director of strategy and technical marketing for 200mm products at Applied Materials.|
This comes at the same time that many Chinese semiconductor firms are targeting lower-cost smartphones and IoT applications. At the 2015 Semicon China show in Shanghai, Rosa said he attended several presentations where Chinese speakers discussed the need for 200mm equipment.
“Their main message is ‘we have a huge market, and huge government backing over the next ten years,’ ” Rosa said, noting there are more than 100 smartphone makers in China, all of them needing chips made on 200mm wafers. [See related article “China: Investment Fever Kicks IC Industry Into High Gear” in this issue.]
“If China’s domestic smartphone makers continue to see increasing sales, it is likely to result in new 200mm fabs in China,” he added. China’s government has set a goal of domestic chip companies supplying 40% of China’s domestic IC consumption by 2020.
Going forward, if Chinese phone vendors are supplied mainly by the established IC and MEMS vendors, it would result in incremental additions of equipment to increase capacity at existing fabs around the world. But if Chinese IC and sensor companies spring up to supply smartphone component demand in China, whole new 200mm fabs may be built there, adding significantly to worldwide equipment sales, Rosa said.
He noted that China’s policy to supply itself also extends to equipment. “None of us should think that when China ramps up, that we will all just walk in and sell them tools. There already are existing domestic equipment manufacturers. And China’s government is saying, ‘Buy domestically unless you absolutely can’t get what you need in China.’ ”