Nikkei Electronics Asia --August 2010
Cover Story
Semiconductor Giants Conquering the World with Volume, Quality

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Jul 31, 2010 23:56 Motoyuki Oishi

Foundries are leveraging their overpowering production capability to take on the IC manufacturing needs of the world. By applying the expertise and experience they have gained in IC production, they are emerging as global technology leaders as well. Equipment manufacturers may have to learn new ways of dealing with these foundries as they evolve into semiconductor giants.

"If we continue developing the core SoCs for digital cameras and other products with major Japanese semiconductor firms, I fear we'll eventually run out of avenues for growth," admits Mr. Masao Kuribayashi, Executive Managing Officer, Olympus Corp. of Japan, expressing his apprehension about future IC development (Fig.1).

Fig.1 Changing Markets, Changing Roles
Leadership in the electronics equipment market is shifting from the industrialized nations to newly emerging economies and regions, and as a result new players are emerging to supply the core equipment components. Horizontally divided companies like foundries and fabless semiconductor manufacturers are beginning to wrest control from the vertically integrated IDMs. Foundries handle production under consignment from semiconductor manufacturers around the world, including IDMs, gaining expertise and technology in the process, and as a result have emerged as global technology leaders.

His comments stem from the recent trend among major Japanese semiconductor manufacturers to switch to "fab-light" stances, reducing the scale of their manufacturing facilities. The move is designed to improve profitability in the face of soaring capital investment requirements into new fabs and R&D for ever-shrinking IC geometry.

Until recently, major Japanese semiconductor manufacturers have kept to vertical integration, handling their own design and manufacturing as Integrated Device Manufacturers (IDM). Fujitsu Semiconductor Ltd. of Japan has made the decision to outsource production of 40nm devices and beyond to Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) of Taiwan. Toshiba Corp. of Japan, according to the firm's President&CEO,Norio Sasaki(Fig.2), is taking the same approach: "It is simply not possible to continue the IDM stance. We will shift to a strong fab-light approach."

Fig.2 Manufacturing Ability a Key Competitive Strength
2009 semiconductor revenue trends for the four top-ranked companies and TSMC. Revenues for TSMC based on the firm's public data; other data based on IDC through 1996 and Gartner Japan for 1997-2009.