Semicon fairy tale

SEMICON WEST, JULY 2005–The mood at San Francisco's Moscone Center is upbeat, even jubilant as the semiconductor industry enjoys its second year of prodigious growth. Although some cynical observers look back at the horrendous downturn earlier in the decade as a cautionary tale, others are buoyed by unprecedented chip sales and widespread green-field fab sites and upgrades. The construction or outfitting of dozens of new factories has kept the capital equipment, critical subsystems and components, and process materials companies busy, with supply chains stretched tight and manpower shortages common. Few are complaining though, as quarterly revenues soar in double-digit arcs.

Many observers see the captures of Osama Bin Laden, Mullah Omar, and Saddam Hussein within days of each other in late 2003 as an unexpected geopolitical boost to consumer and business confidence. Others point to the coup d'état in North Korea and subsequent dismantling of its nuclear weapons program, along with the fast-track Korean reunification project, as important to the more positive attitude. Still others say the discoveries of an effective, inexpensive AIDS cure as well as the less-heralded malaria vaccine have given hope to development efforts in the impoverished parts of the world. On the economic front, the serious implementation of strong economic reforms in Japan seems to have snapped that country's long-moribund economy out of the doldrums.

The subsequent outpouring of long-overdue computer, server, and other IT system upgrades by global businesses large and small has led to a sharp increase in demand for a variety of semiconductor products. The consumer side also has taken off, with phenomenal growth in the sales of smart phones and mulitpurpose handsets, the broad embrace of competitively priced flat-panel TVs, and a new-found hunger for language-user interface software. Advanced technology applications have also contributed to the recovery. The launch of the White House's ambitious national fuel-cell initiative earlier this year has stoked interest in microelectronics, MEMS, and emergent nanotechnological products that will play significant roles in the building of a new energy industry infrastructure.

The consolidation of the semiconductor market segment has accelerated over the past two years as well. Motorola's sale of its semiconductor unit to IBM, Infineon's purchase of a majority interest in AMD, and Chartered's surprise acquisition of Chinese foundry SMIC have sent shockwaves through the industry. Capital equipment giant Applied Materials' dominant position has been challenged by the blockbuster merger of long-time AMAT adversaries Lam, Novellus, and KLA-Tencor. Many pundits, however, wonder whether such seemingly disparate corporate cultures and huge executive egos can be successfully meshed into one cohesive organization.

Fears that problems with 65-nm process technology would slow down the inexorable progress of Moore's Law seem to be exaggerated. Many of the difficult lessons learned at 90 nm have indeed been applicable to the current node. Fully integrated, automated advanced process control combined with the rapid integration of dual-damascene interconnect schemes have led to faster-than-anticipated yield ramps. New production-worthy metrology, including reliable in-line measurement systems and enhanced e-line monitoring SEMs, has been added to the fab crews' analytical tool boxes. Unprecedented wafer quality has also made the transition to 65 nm easier than expected, although the price of advanced photomask sets continues to cause concern.

The successful beta testing of immersion and nanoimprint equipment has led to calls for major revisions to the lithography roadmap. Intel and its allies continue to push for EUV's insertion at the 32-nm node. But many others, including IBM and TSMC, are confident that a combination of existing optical systems enhanced or abetted by CEL (cost-effective lithography) tools, improved photoresists, integrated metrology, and more-manufacturable chip designs can push out the timeline for NGL tools.

Although some forecasters warn that overcapacity and pricing pressures may trigger the next semiconductor downturn by early 2006, others see worldwide gross domestic product growth pushing 5% and continued healthy demand for chips as evidence that this upturn has legs.