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3-D integration and packaging is now well known to all in the semiconductor industry.  Today the focus has shifted away from trying to understand the technology opportunity to one of understanding the practical challenges of technology adoption and commercialization, including who is getting there first, how, and at what cost.  Many see 3-D integration and packaging as an industry inflexion point, not just an evolutionary change—thus there is a natural degree of uncertainty as companies scramble to secure market share, obtain new process and design tools, and of course, new customers and new applications.

This article is posted on behalf of Morry Marshall, who has retired. 

This is a personal thank you to the semiconductor industry, an industry that I have worked in for almost forty years.  My thank you is for a new hand. 

In 1962 I was in a line-of-duty military accident that resulted in the amputation of my left hand.  Soon after, in Walter Reed Army Medical Center, I was fitted with a cable-operated prosthesis, the best then available.  It used a Dorrance hook opened by a cable connected to a strap looped under my opposite shoulder and closed by two powerful rubber bands. 

That type of prosthesis served my needs for many years.  I have nothing but praise for the U.S. Army and the U.S. Veterans Administration for the medical and prosthetic care I received during that time.  After more than forty years using a hook I began experiencing pain in my shoulder.  The strap under my arm had been pulling on my shoulder all the time, creating a strain, even when it was not being used to open my hook.  To lessen the pain, it was necessary to loosen the strap and use only one rubber band to close my hook.  The hook still worked, but not very well. 

Something needed to be done, Enter electronics, especially semiconductors!  I was fitted for a myoelectric prosthesis, the ETD (Electronic Terminal Device), manufactured by Motion Control, Inc., Salt Lake City, Utah. 

Over the last 18 months the semiconductor industry experienced another roller coaster ride as demand outpaced capacity, causing double bookings and raising average selling prices. So are we destined to overbuild capacity, over stock inventory and suffer a corresponding downward cycle that has been so characteristic of the semiconductor industry? A slowdown is inevitable as the growth experienced in 2010 is clearly unsustainable in the long term. The cycles of the semiconductor industry over the past decade combined with the escalating costs and risks associated with manufacturing facilities, design complexities and even assembly and test investments have created a conservative environment that is quite different than the unabashed exuberance that characterized the semiconductor industry of prior decades.

It seems everywhere we turn, there is hype about how low 2011 will go. Our own opinion is that 2011 will be an above average growth year, rising 9.5% over 2010. Considering an average growth year for the semiconductor industry is 8% growth, 9.5% is pretty good.

Our forecast is based on our IPI (Inflection Point Indicator) which has been an accurate indicator of the industry’s ups and downs for 15 years.

For example:
The IPI declined throughout 2000 indicating the slowdown for 2001.

Beginning in the second half of 2002, the IPI increased significantly, pointing to strong growth starting in the second half of 2003.

In 2004, when the market was booming ,the IPI started to turn down, indicating a correction year in 2005.

In 2006, we saw the IPI, again, on an upward trend, which matched 2007 as a peak year.

For most of 2007 the IPI declined, pointing to a decline in the semiconductor market in 2008.

The 2008 IPI hit bottom in February 2008, which pointed to the beginning of the V-shaped recovery starting in February 2009.

So how is the IPI predicting 2011 and beyond?  Take a look at the blue line in the graph above, which predicts the pink and green line about four quarters in advance.

Extrapolating the IPI out to 2014, and we start to see that:

October has been a big month for China announcements. Texas Instruments announced the purchase of Cension Semiconductor, a 200mm fab previously operated by SMIC in Chengdu, China. This week Intel announced the grand opening of their first 300mm fab in Dalian.

China is becoming a more powerful force in the world economic and technology arena. In August 2010 it was reported that China’s GDP reached $1.337 trillion surpassing Japan and making China the second largest economy. With China’s economic growth rates in the 10% range and the U.S. growing at only 2-3%, it’s been predicted that China will overtake the U.S. in 5-10 years. China already surpassed the U.S. in the automotive market.

China also made the news last week regarding their control over rare earths, the 17 elements in the periodic table that are vital ingredients to a number of electronic gadgets and components. China is the largest producer of rare earths. The Economist noted that China is trying to control the rare earths market in a similar manner as OPEC controls oil. China is cutting exports of rare earths 5-10% a year. In July, the export quota was cut by 40% and prices soared. The Economist further speculates that China is curbing exports to persuade foreign firms to move manufacturing to China. That’s probably not the only reason but it may be one of the reasons behind Intel and TI’s recent moves into China.

Right now we have two different segments for e-readers, Electronic Paper Displays, and Liquid Crystal Displays. Mainly, we can consider the two powerhouses to be the iPad with LCD and the Kindle with EPD. Personally, I’m anxiously waiting for the combo platter: the low-power color display.

The low-power screen segment has the potential to reach 1.5 billion units in 2014, up from 1 billion units in 2009.

E Ink

The main electronic paper manufacturer for E-readers is E Ink, a manufacturer of electronic paper. Since Semico released its e-reader report, there have been some updates to the market. In July, E Ink announced Pearl, the next generation in E Ink technology. While not the color E Ink screen we all want, it did provide an update with 50% greater contrast ratio than their previous screen. This lead the way for Kindle to announce their own update in August.

E ink works differently than LCDs because it relies on electrical charges to rearrange microcapsules. These microcapsules move depending on where the positive charge is, either rearranging to be on the top of the screen or bottom of the screen. This arrangement is also referred to as “shades of grey.”

Over the past two years the semiconductor industry experienced one of the most dramatic business cycle swings in the history of the industry. Through the ups and downs, semiconductor technology continued to advance on a two-year cycle. But it’s more than just the electronics. We are changing the way we work, socialize and entertain.

Essentially, we are changing the way we live. In order to provide the functionality that consumers want, new electronic devices are smart, connected, and always on. We are demanding more bandwidth and more storage. This ‘connected’ phenomenon is driving a new round of upgrades to the Internet infrastructure. This includes server farms and fiber-optic highways. In addition to the tsunami of consumer electronics, businesses are finding ways to use these products to make business operations more efficient.

Semico Research sees the semiconductor industry entering a new frontier. But it’s not just the semiconductor industry that will benefit. The entire supply chain can reap the benefits of the last several years of research and development. The Semico SUMMIT is the industry's premier executive level conference that will focus on this changing electronics landscape and how to take advantage of the change. A company’s ability to understand and prepare for the upcoming ‘new frontier’ may result in its viability and profitability as the frontier reveals itself. This is an event no executive should miss.

MEMS (Micro Electro Mechanical Systems) are perceived as being simple mechanical devices manufactured on 6-inch wafers or smaller, utilizing mature semiconductor fab technology.  Recently MEMS devices have experienced high growth rates as they revolutionized the smart phone screen orientation and game controllers for motion detection. Now the foundries and EDA/IP vendors are salivating over the revenue growth potential for MEMS development.

Just like CMOS image sensors filled the mature, unused fab capacity in 2003, MEMS is now expected to be the fab filler for this decade.  CMOS image sensors experienced quick adoption as it penetrated the consumer digital camera market but it grew from millions of units to billions when almost every cell phone integrated a camera into its handset.  That is one example of a success story.  But what about RFID?  RFID was suppose to be on every retail product tracking sales and inventory at Walmart and on every passport and drivers license for personal identification and security.  Those units have not materialized.  

MEMS has the potential to be much more than just a fab-filler.  For years MEMS have been used in hard disc drives and airbags for automotive markets.  They are now making inroads into other safety and engine control sensors in automotive applications.  MEMS are now gaining more recognition as they make their way into consumer devices even beyond smart phones and game controllers. 

On September 15^th, 2010 Panasonic Corp. quietly announced they would begin shipping 32nm gate-first HKMG LSI parts for use in their consumer line of Blu-ray Disc^TM players.  This announcement is notable for several reasons.  First, this is another endorsement for the gate-first HKMG team.  IBM and the Common Platform foundries are going with gate-first.  Intel and TSMC are the other big players going with the gate-last HKMG technology. 

 Panasonic developed their process with Renesas Electronics Corp. based on a research program with IMEC.  Panasonic uses a hafnium based high-k dielectric with their metal gate electrodes.  Assuming this chip is being manufactured in Panasonic’s Uozu fab in Japan, that means Panasonic is the second company to mass produce and ship a 32nm HKMG product. Of course, Intel was the first.  AMD has manufactured chips at GLOBALFOUNDRIES using their 32nm gate-first HKMG technology but is not expected to begin shipping product until 1H 2011. 

The WSTS/SIA released the August monthly semiconductor sales statistics Friday. Worldwide revenue was right in line with Semico's forecast for the month of August. Worldwide sales were 0.4% higher than our forecast adding to our confidence that the market will top $298 billion or 31.8% growth for the year.

This is the same forecast number that we've had for several months. The real question that everybody is asking now is, how does 2011 look? Our monthly inflection point indicator still points to a healthy first half. Check out our IPI report (sent to subscribers on Friday, Oct. 1) for more information on the third and fourth quarter. We believe 2011 will produce a 9.5% growth for industry revenues. The semiconductor industry will exceed the $300 billion mark for the first time in history!

While the US economy may still appear to be on shaky ground, the recession has ended and economic strength is slowly improving. However, it will continue to take some time for the macro-economy, including employment, to log significant gains. But don't let the employment numbers fool you. The new consumer buying patterns have changed with electronics on the top of everyone’s wish list while cars and houses have dropped significantly. Furthermore many of the other economies around the world in countries such as China, India, Brazil, Taiwan and Korea are showing sustained strength and growth.

Jim Feldhan
President