Molecular Layer Deposition of Polymers – George, Yoon & Dameron [4]

Many exotic materials or materials with special properties are processed using extreme temperature and pressure often with toxic starting materials. In semiconductors, molecular beam epitaxy (MBE) to build single crystal structures and sputtering are common methods of physical deposition to deposit thin films. Both are done using a very high vacuum. MBE heats the atomic materials until they sublimate and land on the desired surface. Sputtering uses a gas plasma to knock a few atoms of material off a “target” and onto the desired surface. There are also different chemical deposition processes including electroplating which uses metal salts dissolved in a solution bath, chemical vapor deposition (CVD) which uses high vacuum, and atomic layer deposition (ALD) which is similar to CVD but uses two half-reactions of gas phase precursors. 

Limitations imposed by extreme temperature, extreme pressure, and toxic materials combined with a typically slow deposition rate make it is difficult to economically run these processes on an industrial scale for high volume manufacturing. But what if there was a process that produced extremely uniform materials economically at room temperature and standard (normal) pressure? And used aqueous solutions with low toxicity while running at industrial scale?

According to Dr. Ben Wang, one of the founders, Savya Nanotechnologies has created exactly that. It was my pleasure to host Ben last week to present “Nanostructured Thin Films via Layer-by-Layer Assembly at the Industrial Scale” at the IEEE San Francisco Bay Area Nanotechnology Council monthly event. Svaya has moved layer-by-layer (LBL) assembly from “molecular beaker epitaxy” to an unprecedented scale. As he describes it, molecular beaker epitaxy is simply a graduate student with a steady hand dipping substrates into beakers in an attempt to uniformly coat them. A slightly more advanced process is to use an automated system which dips the substrates into glass beakers. What Svaya has achieved is building high volume equipment including a roll-to-roll system that can process forty-eight inch wide films at fifteen meters per minute (approximately ten inches per second).

Instead of dip coating the substrates, Svaya has implemented spray coating to reduce the volume of liquid required and to decrease the drying time between layers. In layer-by-layer assembly multiple layers, typically with a washing step between each layer, are deposited on the substrate to “build up” the finished coating. Each layer has a uniform thickness due to the molecular layer deposition [1,2,3] (MLD) process which is based upon self-limiting surface reactions. In order to bond (cross-link) to the surface, each molecule of reactant needs a site. If there is no site to bond, the extra fluid is washed away leaving an extremely uniform layer one molecule thick. The illustration above shows a simplified version of MLD using two homobifunctional reactants. Multiple reactants, assuming they will cross-link, may be used and as many layers as required can be applied.

Ben listed many application examples of their MLD technology including several which were “green applications” in themselves: water filtration films, heat reflecting optical nano films, and biocompatible coatings. A car windshield film to reduce the solar heating of a car’s interior, reducing the energy required to cool the car, is a specific application he discussed in detail. This type of film is a distributed Bragg reflector where the thickness and refractive index of multiple layers are designed to determine which frequencies are reflected and which frequencies are passed. As such, they have designed this film to block (reflect) the infrared spectrum but allow visible light to pass through the film. Their film is designed to replace the usual film that is laminated in the center of the windshield to make safety glass. This is certainly a high volume and cost sensitive application which has a green footprint.

In addition to films on flat surfaces, Ben discussed the coating of irregular surfaces. Examples include the coating of nylon fibers, textured silicon solar cells, and concave or convex surfaces. Since the MLD process is self-limiting the layer follows the contour of the surface and the thickness is uniform everywhere. An additional unique application of the technology is the creation of pigments by crushing the nano film. The desired color is selected by the design of the Bragg reflector layers of the film. Then when the film is removed from the substrate and crushed, it leaves the structure of the layers intact – just in much smaller particles than a continuous film – which can then be used as pigments creating unique colors.

Although Ben said that Svaya is building a “printer and ink” business model typical of product companies, it appears as though Svaya is more of a technology company.* As a technology company, the key to growth is to find as many applications as possible to use that technology. They have already started seeding those via their Technology Access Program by providing spray based automation equipment to researchers in the MLD field. (Probably earning the gratitude of many graduate students relieved of at least this drudgery.) The applications already identified, the beneficial economics of high volume, and the attractive environmental profile of their process should position Svaya for significant growth and profitability. 

* A good topic for a future blog post. See this blog post by Binnur Al-Kazily for an introduction of the difference between technology and product management.

References:

1. Molecular Layer Deposition Links on Svaya website.

2. S.M. George Research Group, University of Colorado at Boulder, “Molecular Layer Deposition of Polymers“.

3. ibid. “Introduction to Atomic Layer Deposition & Molecular Layer Deposition“.

4.  ”Surface Chemistry for Molecular Layer Deposition of Organic and Hybrid Organic−Inorganic Polymers“, Steven M. George, Byunghoon Yoon, and Arrelaine A. Dameron Accounts of Chemical Research 2009 42 (4), 498-508. Image above reprinted with permission. Copyright 2009 American Chemical Society.

Joseph and Della Ready for Ski Lessons

While working with our son Joseph on his homework and skiing earlier this year, I was reminded of the importance of fundamentals. The challenges may have seemed an epic struggle from his perspective as an eight year old. As an adult, I was better able to put them in the proper perspective. Upon reflection on the seemingly unconnected events, I find they are both important reminders about learning and life in general.

Like other children and some adults, Joseph was having difficulties with math. He was struggling with his third grade homework multiplying three digit numbers by two digit numbers. After observing him work on his problem set and asking him questions, it was clear that he understood the process even though he was getting frustrated. I discovered that he was struggling because he still didn’t have his basic multiplication table memorized. It was taking him far too long to figure out what the answer was for each simple problem ( 4 x 6 = 24, 8 x 8 = 64, etc.) and sometimes he got these wrong. After working with him over several days to master the basic multiplication table, he was able to confidently and more quickly solve the larger and more complex multiplication problems. Even though he knew he was having problems with the basic multiplication, he couldn’t diagnose this fundamental weakness as the root cause problem. The combination of the lack of experience and perspective often makes proper diagnosis difficult, especially when you are in the “thick of things”.

The other reminder occurred while we were skiing over the President’s Day holiday in Lake Tahoe. On the first day, Joseph selected ski lessons based upon his previous season’s experience since we hadn’t skied since then. This group very quickly went to the top of the mountain and did a rather challenging intermediate (blue square) run that may have been closer to a black diamond. At the end of the day, he told us the instructors moved him down a level at the lunch break even though he was doing well because he was “too slow”. Later that evening we were reviewing a friend and fellow parent’s GoPro video clip that included Joseph on part of this rather difficult run. As it turns out, Joseph was wedging (snowploughs or “pizza” skiing in the new vernacular) most of the way down. He clearly overcame the mental challenge of skiing but was using brute force to make his way down the mountain. The instructors clearly determined that his technique was lacking and moved him to a more appropriate class. Even though he was disappointed at being “demoted”, he later acknowledge that he (re-)learned a lot of fundamental techniques that greatly improved both his skiing ability and enjoyment. Watching Joseph ski a few days later, it was clear he was substantially more efficient and confident especially with his parallel turns (now called “french fries”). Motivation and enthusiasm are important but they can’t always compensate for a lack of technique or fundamental mastery.

When things aren’t working out or you want to grow to the next level, it is important to analyze the situation from the proper perspective and consider if there are fundamental weaknesses. That is what good teachers, coaches, and consultants do every day.

Some consider the many of billions of dollars invested in the semiconductor supply chain to be huge bets on yet to be proven technology and future business. Even if you take a strict view of this as simply business it is possible to learn something from gambling.

The Atlantic tells the fascinating story of how Don Johnson took Atlantic City casinos for $15 M playing blackjack. Last year he won $5 M from Borgata in February, $4 M from Caesars in March, and $6 M from Tropicana in April. This wasn’t luck and he wasn’t card counting. How did he do this and how does this connect to semiconductors and Apple?

Mr. Johnson is not simply a skilled blackjack player. Yes, he always made the right strategic decision based upon statistics and probability as he played. But what he has is very specific knowledge of how the gaming industry works and calculating odds gained over a lifetime of working in this industry. He started in horse racing as a jockey and worked his way up to running betting operations and finally managing a casino in Pennsylvania. In the casinos’ desire to land high rolling customers during these recent lean economic times, they often negotiate special deals in terms of rules of play and financial discounts. Mr. Johnson not only capped his downside potential he negotiated the house’s advantage from over 1% to less than 0.25%. He changed the rules before playing to win. As a result, Borgata and Caesars have banned him and Tropicana will only allow him to play under the regular rules. But he truly is laughing all the way to the bank.

At last week’s Semiconductor Equipment and Materials International (SEMI) Silicon Valley Lunch Forum “Manufacturing For Mobile Solutions: The Impact of Mobile Devices on Supply Chain Dynamics“, Tracy Weed (Sr. Director of Strategic Business Development, Synopsys) provided highlights of this year’s Industry Strategy Symposium. As discussed in my coverage and that of others for ISS and more recently in Two Conferences – Two Industries Challenged By Post PC Era, it is clear that mobile devices are the driving force in electronics today. Dean Freeman (VP Research, Gartner) in “The Shift to Mobility” discussed the economic impact and outlook based upon the changes driven by mobile devices enabled by the cloud. In addition he examined some of the challenges and opportunities ahead for semiconductor equipment manufactures based upon advanced process technology nodes, future shift to 450 mm semiconductor wafers, and thru-silicon vias (TSVs). Tom Quan (Director Open Innovation Platform Marketing, Design Technology Platform, TSMC) was the final speaker who discussed their efforts to develop the 28 nm processand the one beyond (20 nm) align with advanced packaging (such as 2.5D using silicon interposers and 3D to enable these cutting edge devices.

All were good speakers providing interesting updates and insights in to the markets and their company’s offerings. However, the presentation that stood out the most when connected with Mr. Johnson’s story is Colin Baldwin’s (Direct of Marketing, Open-Silicon) “The Evolving Ecosystem for Mobile SoC Development”. He did a good job of describing Open-Silicon’s design and engineering offerings tailored for companies building application-specific integrated circuits (ASICs) for mobile applications. He used the term “Design Lite” to describe how companies are now outsourcing major portions of the ASIC design process to companies like his. This is similar to the way product companies have outsourced both the process development and fabrication processes for semiconductors. The reason there is an increasing need for “Design Lite” services is that the IC development process for mobile devices have become exceedingly complex. And the timelines are too long to support the rapid introduction of new mobile products that often require new ASICs.

To support his analysis of the situation that companies are being overwhelmed due to the introduction of new designs and revisions of old designs, he presented this slide which has a tally of new mobile phones released in 2011:

Open-Silicon's Analysis of Mobile Phone Design Announcements in 2011 (Click to enlarge.)

At the high end, Motorola introduced 53 (yes fifty-three!) new phones in 2011, Samsung 25, and Nokia 20. By comparison, Apple only introduced one new phone: the iPhone 4s. In fact, Apple has only introduce one new phone per year since they entered the mobile phone business. Yes, there is a color option (white or black) which is a simple change of the case and there is a memory size option which is achieved by loading a different set of NAND Flash memory parts which are soldered to the printed circuit board (PCB). These options are simple configuration items which require neither a change to the design nor to the ASICs. Wherever possible, the other phone vendors attempt to reuse the ASICs between their models. But this is not always possible especially if the desired functionality differences between models can only be done in hardware (typically within the ASIC) instead of software.

There is very good reason to attempt to reuse the ASIC due to the development cost and time. It has been estimated that the photolithography masks alone used to generate an ASIC at the 45 nm node (the process technology used in the Apple A5 microprocessor in the iPhone 4s) costs $800,000 to $900,000 to produce. And the masks for leading edge 32/28 nm could be as high as $2 M per ASIC design. This is in addition to the estimated $80 M to design a 45 nm part and the even great $130 M for a 32/28 nm part. And as Mr. Badlwin accurately describes in his presentation that product companies have insufficient resources to complete all the designs in the time required by the market. The higher the number of models of phones or other mobile devices, the higher likelihood of requiring multiple ASIC designs.

By simplifying their product offering to one phone per year and sharing their ASICs among multiple product, Apple has greatly reduced their ASIC development costs and resources required. They have greatly increased their risk by having a simplified product line if customers dislike their one offering. However their product refresh rate of one year on phones and roughly eighteen months to two years on other devices minimizes their down side risk of customer rejection.

So, how was Apple able to change the rules to win by building only one phone per year while the competitors are producing six to fifty three? Being a computer manufacturer – with significant ASIC design expertise – along with having retail channels (Apple stores and website) independent of the wireless carriers provided them a significantly different perspective than most of their competitors. Through their retail channels, Apple was able to sell directly to the end customer whereas the other brands have to sell mostly through the carriers. In many ways the carriers are Motorola’s customer more so than the end customer since the carriers often dictate features and functionality of the phones they carry.

Apple also changed the rules via their initial exclusive contract with AT&T Wireless. They had sufficient leverage to have AT&T pay dearly for exclusivity and accept terms that are not their norm. The exact terms of the original exclusivity contracts are unknown. Here, here, and here are a few articles that discuss the contracts. What is known is that there was revenue sharing on the initial iPhones versus a flat subsidy and Apple was given full control over the phone’s software both still atypical behavior from a wireless carrier.

In the end by approaching the market differently than an existing supplier and using their corporate knowledge along with aggressive negotiation, Apple was able to achieve remarkable success with their iPhones. As long as they continue to be successful by building hot products, they will be a market leader with the influence to change the rules. In the long run, to avoid Mr. Johnson’s fate Apple will need to know when to change strategy since they cannot simply walk away with their money.

Speed and Power

If we were focused on just these two parameters, we could be talking about horses, cars, or airplanes. But throw in density, endurance, and price and it is a horse race of different color. Not only does the winning technology have to balance speed and power, it needs to pack more functionality per area at a lower cost than existing solutions. Along with the endurance to last ten or more years.

With annual revenues once exceeding $60 B and now running $45 B due to dropping demand and prices, the global market for semiconductor memory is an exciting race. It is hard to believe that NAND Flash has grown to $20 B/year alone since it’s mainstream introduction as removable media only seventeen years ago. With the demand for mobile devices now dominating the electronics market, NAND Flash, which was once the ignored step-sister of the far sexier dynamic random access memory (DRAM), is now gaining all the attention. Most mobile devices have far more non-volatile memory (NVRAM) in the form of NAND Flash than volatile memory such as DRAM in terms of both bits and number of physical semiconductor integrated circuits (ICs) otherwise known as “chips“.  (For a detailed example, see iPad Memories for my description of the memory contained in an iPad.)

So the level of interest at the recent IEEE San Francisco Bay Area Nanotechnology Council’s (SFBA Nano) “Emerging Non-Volatile Memory Technologies” full day symposium shouldn’t have been a surprise. As a member of the SFBA Nano Executive Committee, I knew that we had excellent schedule of world-class speakers. But we were still pleasantly surprised with the final attendance of nearly two hundred which far exceeded our original estimates. As a session chair, I was only one of two speakers that day who did not have a PhD and who was not addressed as either doctor or professor. Even though we had several professors presenting this was not an overly “academic” event since several talked about commercialization work. We also had several extremely distinguished industry researchers including R. Stanley Williams (HP fellow leading the team to develop the memristor) and Stuart Parkin (IBM fellow leading the IBM-Stanford Spintronics research group developing Racetrack and other memory technology) who both presented keynotes.

From lab to fab to killer app?

Yes, all the technologies and approaches presented enable non-volatile storage of information. What differentiates one from the other is how well each performs in the areas of speed, power, functionality and cost. Each needs the right mix of performance for the targeted end application. Both mobile devices and supercomputers need low energy storage and high bit density.

Matthew Marinella from Sandia National Laboratories‘ Advanced Semiconductor Device Research Group discussed the need for memory densities exceeding 1 terabit/cm² per layer and bit switching energies of significantly lower than 1 pJ to enable future generation supercomputers beyond the exaFLOPS systems currently being designed. This is orders of magnitude higher performance in terms of memory density and power consumption than the midterm needs of mobile devices. However, building a supercomputer has substantially higher performance requirements with a budget to match.

As the speed of the computer increases, the main memory size needs to increase along with the speed of the memory (including communications delay time usually expressed as latency), otherwise the processors run out of data and cannot achieve peak performance. Dr. Marinella points out that at the current memory power consumption levels (for both bit storage and communication) it is impractical to build larger memory arrays for next generation supercomputers. (Think requiring one or more nuclear power plants per supercomputer.)  He is marginally optimistic that the recently developed Hybrid Memory Cube will provide sufficient performance to build an exaFLOPS system and believes the higher level of performance described is needed for the future. In particular, they are looking at resistive memory (ReRAM) as a possible path forward since a NVRAM, in general, will consume less power than a DRAM since there is no need for a refresh cycle.

In terms of commercial status, Adesto Technologies is the furthest along with their conductive bridge RAM (CBRAM) according to Michael Kozicki, Professor of Electrical Engineering at Arizona State and Adesto’s Chief Scientist. They are currently shipping a 1 Mbit serial electrically erasable programmable read-only memory (EEPROM) and are building this and other embedded memories with their partner Altis Semiconductor. (I’ve previously written about Adesto’s technology here.)

Yiming Huai, Vice President of Technology at Avalanche Technologies, discussed their 64 Mb magnetoresistive random access memory (MRAM) prototypes built using a 65 nm low power complementary metal-oxide-semiconductor (CMOS) process. Lastly, Dr. Williams disclosed that HP has built memresistors on 300 mm wafers and that their manufacturing partner SK Hynix would be making an announcement later this year.

So which will finish first? It is difficult to say without knowing the race to be run and how these technologies perform in the real world. But it will certainly be exciting to see how these innovative technologies compete for market share.

Greetings!

2012 is off to a busy start and I have discovered that it is difficult to keep up-to-date with everyone. Therefore I decided to put together brief updates every month or so.

Still here? Great – I’ll keep it short.

On this blog, I started the year with Think Outside the Box in 2012! followed by Big Numbers – The Semiconductor Supply Chain where you need to follow the money and head to China.

SEMI holds their Industry Strategy Symposium early in the year. I posted my summaries in Snapshot of a Wild Ride Session 1 and Session 2 along with other coverage of this excellent event.

At the end of February, I attended the IPC APEX EXPO followed by the Burn-in & Test Strategy (BiTS) Workshop earlier this month. I commented on both in Two Conferences – Two Industries Challenged By Post PC Era where I described companies that are innovating to differentiate versus those that are struggling to keep up.

Recently I attended an industry event with five hundred or so attendees. Due to “confidentiality” they didn’t provide printed or electronic proceedings. Hard to believe, but they must not have wanted us to share any of the interesting content…

Two upcoming events:
April 6 – IEEE Nanotechnology Council symposium “Emerging Non-Volatile Memory Technologies”. As part of the Nano Executive Committee, I think this will be a great event.

June 10-13 – IEEE Semiconductor Wafer Test Workshop – where I will be discussing the test implications of 450 mm wafers.

Several of Feldman Engineering’s recent consulting projects involve market studies and market penetration strategies for new and existing products. A few product architecture reviews along with the definition of an innovative design tool for a non-electronic project have also been in the mix. If you’d like to discuss any of these further or how they may relate to your needs, please let me know and I will share what I am able.

That is it for now – I hope you found this short and to the point. Let me know what you think and please don’t hesitate to contact me if Feldman Engineering can be of assistance.

Kind Regards,

Ira

Feldman Engineering develops and markets unique high technology solutions and business strategies. We assist companies in the semiconductor, nanotechnology, and MEMS industries move products from concept to customers.

Tim Cook introducing Apple's latest iPad

The “Post Personal Computer” (Post PC) era became the hot topic when Tim Cook introduced the latest iPad last week. Yes, calling it a “revolution” is definitely hype that is part of Apple‘s Post PC marketing campaign. Hype aside, it is clear that there has been a marked shift in digital hardware for the consumption of content and communication. The PC – be it a Windows, Mac, or Linux based system – is no longer “the device”. It is now one of many devices including portable music players (dominated by iPods), smart phones (lead by iPhones and Android based systems), and tablets (dominated by iPads). The shift is large and the impact is huge. To understand how big, watch the first three minutes of Mr. Cook’s presentation. Then you will understand why Apple had the largest market capitalization of any US company in February – the numbers are staggering.

Even though many were surprised to learn that we are now “Post PC”, some of us who have been developing strategies for the electronic supply chain have known this for a while now even if the term wasn’t in use. The earliest I recall the term used was in Glen Burchers’ presentation “MEMS Sensors: Becoming Pervasive and Intelligent” at the Globalpress Electronic Summit 2011 early in 2011, where he described the proliferation of sensors as mobile devices become the dominant computing platform. I started using the “Post PC” term mid-last year after William Chen’s keynote at the IEEE Semiconductor Wafer Test Workshop (SWTW) discussed the proliferation of semiconductor package technology and news reports of Apple outselling Lenovo in China. Before then, the shift was lumped in with the growth of mobile devices and “More than Moore“.

The basic architecture of the PC was defined originally by IBM and over time Intel has increasingly driven the specification of the system. Even though there are multiple PC vendors, they all satisfy these basic specifications which result in fairly similar systems at a hardware level – i.e. PCBs and semiconductors (both microprocessors and chipsets) are similar regardless of vendor. As Mr. Chen describes, in the Post PC world most companies want a differentiated product which results in different specifications and functionality. This in turn leads to innovation with each company pushing the functionally of their semiconductors resulting in the proliferation of the different types of semiconductor packaging used. Long gone are the days when there were only a handful of different devices and packaging types due to the similarity of PC hardware.

The result of this proliferation along with other implications of the Post PC era was clearly visible at the recent IPC APEX EXPO. APEX EXPO is a conference and exhibition focused on the design and fabrication of printed circuit boards (PCB), electronic assembly (placing components on PCBs and other assembly work), and test. It has always been a challenge to efficiently and economically attach components (semiconductors, passives, and other electronic parts) of widely varying shapes, sizes, and weights precisely on PCBs using automated equipment. Some of these tools place upwards of 100,000 components per hour in a mind boggling and/or mesmerizing “dance” of precision motor-driven modules.

Of the handful of automated component placement companies exhibiting, there were several that are clearly challenged with some of the older packaging technology. It is unlikely they are up to the challenges of more advanced packaging such as Package-on-Package, bare die, or the upcoming 2.5D and 3D packaging all driven by the Post PC era. At the other extreme, some of the companies were showing unique innovations to differentiate their products and offer needed solutions to their customers. For example, Universal Instruments was quietly demonstrating their unique Innova Die Handler which allows their placement system to pick bare die directly from the wafer tape frame for a variety of advanced applications.

Since the Post PC world revolves around mobile devices, small devices and low power consumption (longer battery life) are critical features. In addition to pushing to more advanced packaging due to higher levels of integration within the package reduce both power and space, the smaller devices have pushed PCB material systems in terms of accommodating these typically finer pitch devices (closer space of electrical terminals) in all aspects of electrical connectivity and properties, thermal compatibility, and mechanical stability. These advanced materials and solutions were also on display from the different vendors and the wide selection and variation between solutions can make selection difficult.

Many of the challenges posed by advanced packaging driven by the Post PC products were also seen at the recent Burn-in & Test Strategy (BiTS) Workshop. Several of the presentations focused on test contactors (used to temporarily provide electrical interconnect to test a packaged device) to support advanced packages such as wafer level chip scale packages (WLCSP) which are moving from 0.4 and 0.5 mm interconnect pitch to 0.3 mm and lower. In addition, as operating frequencies increase, power delivery and signal integrity are becoming more challenging in the test environment. The PCBs, which are becoming more complex for the end product as seen at the APEX EXPO, are becoming horrendously complex when designed for test applications between the requirements of the test systems and the desire to test multiple packaged parts at once (sometimes eight or more in parallel).

As these advanced packages shrink in size, they often become more fragile and difficult to handle both manually and with automated handling equipment. There are many concerns about handling 2.5D and 3D packaging due to the unknown robustness of multiple thinned die in one package. As a different approach to handling devices, Tom Di Stefano of Centipede Systems discussed the benefits of their Test-In-Tray system to manage gang testing of multiple packaged parts or bare die.

From their presentation “Package Level Test Challenges – Delivering More Than A Technology”, it was clear that Intel managers John Morrissey and Mark Hopman have their organizations focused on addressing the challenges of a Post PC market. As Intel shifts their business to include more system-on-a-chip (SOC) products they are moving from their extremely high volume with low mix environment to one of high mix and high volume. As the mix increases, their teams will have to manage substantially greater number of designs of “test tooling” (fixtures that are specific to each semiconductor design including load boards and wafer probe cards). As product generations are accelerated, they have less time to design and implement this tooling which has grown increasingly complex as the end product complexity has increased. These challenges have forced Intel to reexamine and improve their basic processes while reevaluating their suppliers. They are in search of better solutions from more vertically integrated suppliers. If they can’t find appropriate solutions to these issues, they may resort to doing it themselves.

At both of these events, it was clear that many companies that are simply reacting to today’s market needs based upon their industry knowledge . Some of these companies are struggling to keep up – especially those who only saw the incremental changes to their markets. The real market leaders recognized the potential for disruption from these global forces, even before they had a name such as “Post PC”, and proactively developed solutions and positioned themselves for the future. As Messrs. Morrissey and Hopman reminded their suppliers, you either have the solutions we need or we will go elsewhere to find them.

___________

Please see my post “iPad Memories… or Memory Magic via More Than Moore” for a discussion of the incredible packaging technology of stacked NAND Flash and Package-on-Package technology that is used in all of the iPads.

Fastest Way to Lose Customers - click for full infographic

Regardless of language or adage used, customers are the lifeblood of any business. Without customers, there is no business. How is it that businesses lose sight of this? Sometimes customers are taken for granted and are not part of a company’s core values. Other times, as organizations and processes grow in complexity they loose sight of the customer. And quite often teams don’t take sufficient time to look at themselves from the customer’s perspective.

As shown in the infographic above, it is really about the customer experience if 68% of lost customers leave due to poor treatment. It doesn’t matter whether your product or service is consumer focused (groceries, clothing, electronics, medical, legal advice, etc.) or industrial (semiconductor capital equipment, wafer test probe cards, nuclear power plants, etc.). The only difference may be the time scale and the magnitude of the relationship.

I know plenty of industrial customers who loathingly purchased products from Company X since there were no other suppliers who could meet the requirements. Company X historically was well known for its high prices and arrogance based upon their technically superior products. But I can assure you that these “customers” did everything in their power to enable the competitors. The competitors not only drove the price down, they developed more cost effective technology and have since taken significant market share. Company X is no longer the dominant supplier and their stock is now trading below their cash balance after many quarters of significant losses.

Management teams should regularly step back and take a look at their products and markets from their customer’s perspective. In addition, they should regularly audit processes and immediately make corrections especially when a customer takes the time to complain. Various statistics are reported that over half to upwards of 96% of dissatisfied customers don’t complain – they simply take their business elsewhere.

With values, it is often more illustrative to describe examples of behavior than attempt to describe the value itself.

The Good - or should I say “Excellent”?

• Nordstrom – Much has been said about their legendary service starting with the tales told in Peters and Waterman’s In Search of Excellence. I am a big fan and know from personal experience that they simply over deliver on service. Three years ago I bought a new sports coat for a very important meeting. They tailored the coat and I picked it up the day before the meeting. After my meeting, as I was getting in my car in the bright sunlight, to my horror I noticed a one inch pull near the lapel. I immediately called the menswear department to ask what I should do. The salesperson from whom I bought it was not in that day however the salesperson who answered the phone simply said it was “totally unacceptable” when I described the problem. She immediately ordered me a new coat, had it tailored and simply exchanged it, no muss – no fuss – no paperwork, a few days later.
• Apple – Regardless of the issues with their supply chain and corporate culture, their customer service is tops – both under warranty and under their paid AppleCare programs. Novice to moderate tech savvy friends swear by the “Genius Bar“. The few times I have used their support for very specific technical items, I have been impressed by simply entering your data on the Express Lane and getting a call back within the stated time (never more than five minutes). The people I have spoken to actually had considerable knowledge about the specific issue – these are not your typical call center first level employees. On occasion, they even recommended third party solutions when the Apple solution was lacking. And a big plus – the call centers were all in the US!
• Charles Schwab – We have used their financial services for several years. Every time David calls, he asks what have they put in their drinking water? They seem to understand your concerns, the first person you speak to takes ownership of your issue – no passing the buck or transferring your call, they do what they say, and they follow up. Plus they are always upbeat and pleasant. David is intimately familar with help desks having managed a back line support team for mission critical data centers and knows how hard its to have employees do this consistently well.

The Bad -

Most of us have had plenty of bad or mediocre customer service – everywhere from restaurants where the server’s smile is forced to the total chaos of the department of motor vehicles (DMV). Sometimes the employees are trapped by silly policy and procedures. Or sometimes the employees simply do not care or are otherwise indifferent to the customer’s plight. These organizations do not necessarily mean to be mediocre, they simply have not helped their staffs to understand the connection between customer satisfaction and the bottom line.

The Ugly -

This category is reserved for the worst of the worst including companies that have downright “customer abusive” policies and procedures. When you have problems with your wireless carrier, just remember their heritage and mentality of “we don’t have to. We’re the phone company.” (See Lily Tomlin’s Saturday Night Live skit for a good laugh when you are next on hold.) They are trying to improve, but they have a long way to go.

More recently, I ran in to a very abusive software company. The software products are very good – they work exceedingly well and have all the features you might want. As a customer you either pay for a monthly subscription or a slightly discounted yearly one. My yearly subscription ended in December and seeing the charge on my credit card, I decided I should drop the subscription since I was no longer using the product. I went to the website and found there is no button or form to fill out to cancel the service. It turns out you need to contact customer support. And the answer they give you is sorry, no refunds since you failed to cancel thirty days before my renewal date per their terms and conditions:

9.2 Annual Subscription by Credit Card. In the event that Your subscription to the Service is for a year and the payment is by credit card, PayPal charge or direct debit, Your subscription will automatically renew at the beginning of each subsequent anniversary year unless You or XYZ give prior written (including email) notice of non-renewal at least 30 days prior to the expiration of Your current year subscription. Upon any annual renewal, the payment arrangements in place for the prior subscription year shall remain in place, unless You and XYZ agree otherwise

This gem is buried within an eleven page, 6300 word terms and conditions page that is provided via a link when you sign up. (And when was the last time you did more than quickly skim a T&C document when purchasing software?) They don’t even provide you with an email – like many reputable firms do – that reminds you that your subscription is about to automatically renew.

The answer did not change even after escalating this to a support manager and directly emailing the president of this publicly traded company  - no refund, not even a pro-rated refund (for 11 months). A quick Google search turns out they have been pulling this sham on many people with numerous complaints to the Better Business Bureau. After indicating that I had considered buying one of their more expensive subscriptions (for web collaborating software) but would not based upon this experience, they did finally offer to “work something out”. Too late, they have just lost another customer and I am no longer recommending their software to anyone. Bottom line, I do not tolerate businesses that have policies that are simply unreasonable.

In today’s age of social media, one upset customer can have a significant audience and their complaints can influence many potential customers. An extreme example of this is David Carroll’s United Breaks Guitars video which went viral and has 11.5 million (yes, million) hits on YouTube. I’m sure that this is publicity that United would rather not have. Mr. Carroll has turned these “lemons into lemonade” and received a big boost to both his music and speaking career and helped to co-found a website for consumer complaints.

What do the Good companies know that the Bad and the Ugly haven’t figured out? It is that customers who are satisfied are better customers – they form long relationships (brand loyalty) and spend more. One survey claims that “the best customers outspend others by ratios of 16 to 1 in retailing, 13 to 1 in restaurants, 12 to 1 in airlines and 5 to 1 in hotels and motels.” And as Company X found out, dissatisfied customers will do what is necessary to become satisfied even at your company’s expense.

Therefore, you owe it to yourself to benchmark your company against the best in your industry and the world’s best companies in regards to customer satisfaction. Do you know what your customers think of your company and products? Do you proactively ask for customer inputs and are you truly listening to your customers? After looking at everything from your customer’s perspective, what should be changed? What else can be done to exceed expectations and delight your customers? In the end, success and happiness comes from happy customers.

As César Ritz, Harry Selfridge, and Marshall Field said best: the customer is always right!

Full disclosure: I’m long on Nordstrom (JWN) and am thinking of shorting the offending software company.

Michael Splinter (Applied Materials) - Relative industry cost improvements and volumes.

I hope that my summaries of the first day of SEMI Industry Strategy Symposium (ISS) 2012 in

• SEMI ISS – Snapshot of a Wild Ride – Session 1
• SEMI ISS – Snapshot of a Wild Ride – Session 2

provided useful insights to the economic roller coaster that is the semiconductor market and its equipment and material supply chain. There have also been several good reports from others at conference worth sharing:

Michael Fury at ElectroIQ has published these detailed summaries:

• ISS kicks off with IC industry reality talks
• ISS day 2: Cloud computing to drive 450mm, closer collaboration
• ISS draws to a close with innovation on the mind

Pete Singer, the ElectroIQ Editor-in-Chief, summarizes the economic overview in ISS: Top Ten Economic Trends in 2012.

SEMI has also provided a short write-up of the ISS here along with these video interviews by Debra Vogler.

Now that the reporting is finished for the informative presentations at ISS, it is critical to turn this data into actionable plans. I am busy working on strategies for my clients. How about you?

If there is something from ISS that you would like to discuss in greater detail, please let me know via email or comments below.

After a gloomy first session focused on world economics at SEMI Industry Strategy Symposium (ISS) 2012, Session 2 – Semiconductor Markets was significantly more upbeat.

Stephen G. Newberry (Vice Chairman of the Board,  Lam Research Corporation) started off with a way forward in “Profitless Prosperity Revisited: Where Do We Go from Here?”. At SEMI ISS 2008, he presented “Era of Profitless Prosperity” which compared the situation of the semiconductor integrated circuit (IC) industry to the aluminum industry in the 1970s. At that time there was sufficient demand however average price (per function or bit) was dropping significantly faster than cost (per function or bit). He identified and recommended changes that needed to occur including: memory manufacturers should restructure (consolidation and/or focus on profitability over market share), independent device manufacturers (IDMs) in the logic and microprocessor space should change their business model (become fabless, fab-light, or consolidate), wafer front end (WFE) equipment and materials suppliers should continue to innovate to continuously reduce costs of production, and collaboration across the entire supply chain should improve.

Ignoring the downturn in 2008 and 2009, demand for semiconductors has increased while average selling price (ASP) has declined and industry profitability has improved. From 2007 to 2011, semiconductor company average operating profit (OP) improved from 12% to 17% for the top 40 firms (43 in 2011). When twenty of these firms such as Intel, Taiwan Semiconductor Manufacturing Company (TSMC), fabless, and analog companies are excluded the remaining 20 companies had only an average of 1% OP in 2007 which improved to a meager 5% in 2011. Only a handful of companies dominate the profits with a lot of companies that are marginally or totally unprofitable. In fact, five of the six worst performers in 2011 with OP lower than -20% were all companies that only produced dynamic random access memory (DRAM).

Using a metric of minimum OP equal to [(capital spending (CAPEX) - depreciation + 3%)] / 75%, the companies in the fabless and mature node analog-application specific IC (ASIC) markets were stable and profitable during both 2003-2007 and 2010-2011. The microprocessor segment improved from one company (Intel) of two in 2003-2007 being healthy to all (only Intel) being healthy in 2010-2011 by Advanced Micro Devices (AMD) switching to a fabless model and being dropped from the segment. The logic IDMs are also improving by switching to a fab-light model in which they outsource fabrication of new designs at advanced process nodes while continuing to operate their own fabs for existing products.

In the foundry segment, currently only TSMC has sufficient OP to fund capital spending for advanced process nodes using cash from operations. With both GLOBALFOUNDRIES and Samsung ramping up their foundry businesses this may change in the future. In the memory market, companies producing NAND flash memory are performing while the DRAM sector is doing poorly. Additional restructuring for the DRAM space is likely ahead.

Looking at the automotive industry, Steve used a 1980 Honda Accord with a manufacturer’s suggest retail price (MSRP) of $6,155 as an example. The price of the 1980 Accord would be $17,887 today when adjusted for inflation. Not only does the 2012 Accord have substantially improved performance and many new features, it also has a much higher MSRP of $25,105. The auto industry has figured out that customers will pay more (almost 50% in this example) if the manufacturer provides more of what the customer wants or values. The increased performance and features were enabled based upon the close customer (auto company) and supplier relationship which includes the auto companies contracting their suppliers to perform R&D to provide innovation. As a result the auto-industry, even with all of its problems, has a global growth rate of 3-4%.

Moving forward, the semiconductor industry needs to similarly increase performance and value as the cost-per-function decline slows. As scaling to the next process nodes becomes more difficult, semiconductor companies will differentiate themselves by becoming the fastest to delver next-generation capability. This will require stronger collaboration with their supply chain and increasing R&D efficiency by focusing efforts on a select number of vendors. System level optimization (not just chip performance improvements from the next process node) will be necessary. In addition, there will need to be increased industry and customer-supplier collaboration to transition to 450 mm wafers in order to lower costs even faster.

Even though there were some painful adjustments (consolidation and restructuring) and there are others underway, there is a path forward to healthy companies in both the semiconductor industry and supply chain.

In “Innovation – Defining The Future of Semiconductors“, Bernard S. Meyerson (IBM Fellow VP, Innovation, IBM) started by answering the question why does IBM spend over $6 B a year in R&D? The reason is that science determines the future of technology and IBM has a long history of focusing on “innovations that matter”.

The semiconductor industry is facing many challenges including:

• The cost of developing new technology from 2004 to 2010 grew at a rate (~12.2% CAGR) faster than revenue (~ 6.5% CAGR). And the estimated cost to develop 22 nm complementary metal-oxide-semiconductor (CMOS) logic technology will be around $2.3 B – over twice the ~ $1.1 B spent to develop 32 nm.
• The rapid increase in the complexity of materials used. This can be seen in the number of elements used growing from six (H, B, O, Al, Si, and P) up to the 1990′s, adding eight more from the 1990′s to 2005. And almost all of the periodic table is in use after 2006,.
• Previously scaling was possible without significant downsides in either electrical performance or materials. Now, each reduction in feature size needs an accompanying change in materials to compensate. We are also approaching the end of scaling due to quantum mechanical effects due to the small quantity (sometimes measured in atoms) of material present.

Yes, there has been innovation to extend the current paradigm in terms of materials, 3D transistors, and system integration including 3D packaging. Beyond these, IBM has focused on what it is next – in particular non-silicon field effect transistors (FETs), 3D integration, and magnetic storage. Bernie presented IBM device research including a gate-all-around silicon (Si) nanowire transistor, sub-10 nm carbon nanotube (CNT) FET, and graphene transistors.

He also showed two 3D integration examples: one of processing multiple layers of logic, memory, and photonics on one device as it is fabricated (not assembly of multiple devices into a stack) and a collaboration with 3M to develop electronic glue that is thermally conductive to allow the stacking of more devices. IBM has determined that it is “useless to pretend they have all the skills to tackle every challenge they encounter. They need to partner and have a supplier ecosystem.” This collaboration with 3M is a good example of that partnering.

Lastly he showed very recent breakthroughs in magnetic storage using only 12 atoms per memory bit (100x the density of today’s hard disk drives) and magnetic racetracks (storage of bit patterns in each memory location).

With the “Silicon Era” of increased IT performance based upon semiconductor scaling coming to an end (in about 10 years), new approaches will be needed to drive future performance. The increased performance will come from solutions of which the IC is only a small part. For example, integration of multiple ICs at the system level and beyond including software and network functionality.

Bill McClean (President, IC Insights) in Shocks and Correlations to the Semiconductor Market examined the interdependence between various markets and the semiconductor capital market. He forecasted a 7% year-over-year growth in world-wide electronics systems which is estimated to translate to a 7% growth in semiconductors for 2012. For 2010 to 2011, even though electronic systems grew 6%, semiconductors only grew 2% so there isn’t a 1-to-1 correlation, especially as companies consume inventory. He did note that the semiconductor industry has experienced a full blown recession.

The material suppliers were not upset with flow down forecast of 7%, however the semiconductor capital companies were rather disappointed at the -16% estimated growth in 2012. (The capital equipment market did however grow 15% from 2010 to 2011.)

In terms of general trends, he did show that neither the Dow Jones Industrial Average (DJIA) nor the U.S. Purchasing Managers Index (PMI) were well correlated or leading indicators for semiconductor market. One leading indicator he does watch is TSMC who discloses their sales every month since they are on the Taiwan Stock Exchange.

What happened to their previous forecast of 10% semiconductor growth in 2011? 2011 had eleven natural disasters with an impact of over $1B which exceeded the entire decade of the 1980′s. These disasters resulted in a reduction of approximately 8% resulting in the 2% growth observed. In addition, even though DRAM is only 12% of the total IC market it sustained significant losses which substantially shifted the overall market. Whereas all other ICs except DRAM devices had an increase of average selling prices (ASPs) 2010 to 2011of 3.1%, when the DRAM losses are included the ASP for all ICs  declined 1.6%. And at the same time the overall market for non-DRAM devices grew at 5.0%, but when DRAM as added the overall market dropped 0.3% year-to-year.

In terms of the upcoming presidential election, it generally reduces the overall forecast since people can take bad news better than uncertainty. With bad news, people can make plans and move on with their lives. With uncertainty, they tend to delay action.

The semiconductor equipment forecast has steadily decreased as a percentage of overall semiconductor revenue. In 1996-2002 it was approximately 26%, from 2003-2009 it averaged 20%, and from 2010 thru 2016 it is forecasted to average around 16% as shown in the chart above. Bill also broke down semiconductor equipment spending as a function of device type and wafer volumes.

Lastly, IC Insights ranked the semiconductor companies on the basis of wafer capacity and capital spending in 2011. They identified Intel, Samsung, TSMC, Toshiba/SanDisk, Hynix, Micron, and GLOBALFOUNDRIES as the top companies with the greatest ability to compete. Bill expressed concerns about the viability of the others as these firms increase their market share.

In “Smart Grid: Overview, Issues and Opportunities“, S. Massoud Amin (Director, Technological Leadership Institute, University of Minnesota) highlights many of the challenges of the current and future power supply. By 2020, it is predicted that there will be more than 30 mega cities (cities with over 10 million people each). By 2050 this is expected to double to 60 mega cities and it is estimated that the world’s electrical supply will need to triple to keep up with demand. Over half of the US is coal powered which has been calculated to only have 1.6% overall efficiency in converting coal energy to light from generation plant to residential usage. (One major improvement to this is upgrading from incandescent light bulbs which have an overall 5% efficiency to fluorescent or LED lights with substantially greater efficiencies.)

Electronics have both contributed to energy efficiency and increased demand as greater numbers of devices are purchased and data centers are constructed. By 2030, data centers may consume 20% of the total US electricity consumed. Clearly there are challenges to be solved on both the supply and demand side.

Massoud listed the following as critical to achieve future energy demand while balancing economic and national security concerns:

• Build a stronger and smarter electrical energy infrastructure, ie. a Smart Grid
• Break our addiction to oil by transforming transportation to electric vehicles and other technology
• “Green” the electric power supply
• Increase energy efficiency

A Smart Grid would be an intelligent and resilient network that could manage peak demand, asset utilization, and reliability plus reduce emissions. Semiconductor devices would provide the brains as the grid is transitioned from an electro-mechanically controlled systems to electronically controlled one. Devices on the Smart Grid could be either controlled centrally or programmed to automatically respond to changing conditions. In order to make the extremely complex system or network that is the power grid more robust, requires a mix of intelligent devices that can act autonomously when required.

As part of their research, Massoud’s team has done extensive simulation of sensing and control strategies to optimize the network configuration and to predict how to defend the system from both attack and accidental disruption. The Smart Grid is not only an interconnected power delivery system, it is a sensor and control network where all the devices communicate. At the same time, as the grid “gets smarter”, it needs to accommodate the additional future loads especially if we wish to encourage electric vehicles.

Servicing the Smart Grid is a fairly complex market place of many different vendors supporting different components of the end-to-end network of power generation to the consumer. There is a wide range of estimates as to the global investment in Smart Grids by 2015 from $46 B (ABI Research) to $200 B with $53 B in the US alone (Pike Research). The semiconductor potential market is estimated to be $30 B alone over the next 10 years with a ~ 50% CAGR. There are substantial opportunities at all levels as the Smart Grid is designed and implemented.

James Koonmen (Senior Vice President, ASML and General Manager, Brion) presented “From Lab to Fab: Progress and Challenges for Industrialization of New Lithography Technologies“. The Internet of Things will drive future semiconductor demand. The four main end applications are media tablets, solid state drives, smart phones, and mobile personal computers (including mini-notebooks). All have greater than 15% CAGR and semiconductor revenue greater than $10 B in 2015. (Please see chart to right.)

In the last thirty years, ASML has gone from photolithography tools at 1,200 nm priced at < 0.5 M Euros / each to tools at < 18 to 32 nm priced at > 65 M Euros / each. The R&D cost of these systems has similarly increased from 50 M Euros to 1,500 M Euros. And roadmaps for logic, DRAM, and FLASH continue to call for additional process nodes at smaller and smaller features. The methods of achieving the desired sizes are immersion and extreme ultraviolet (EUV) lithography.

James provided a status update on the development progress of the NXT immersion tool. The tool is capable of 38 nm double patterning and they are working to improve it to provide quadruple patterning. At the same time, they are improving the critical dimension uniformity and production throughput. He also reviewed their “holistic” lithography product suite of tools to optimize masks prior to tape-out to maximize the process window and tools that measure the performance of the tools to control the process window. Mask optimization includes a new model based sub-resolution assist feature (MB-SRAF) and new optical proximity correction (OPC) methods.

ASML has now shipped six of the their NXE 3100 EUV systems. Four are in use by customers for development (in “production” by ASML’s definition), one is  being qualified, and one is being installed. Even though a more costly tool, the EUV systems provide single exposure patterning per layer without having to use double or quadruple patterning. This in turn has a lower total cost of ownership due to the significant reduction in processing steps, additional process equipment and additional floor space for this equipment compared to double or quadruple patterning. In the IMEC development lab, they have achieved 16 nm line / space with a single exposure using the NXE 3100.

The NXE 3300 systems are currently running at 69 wafers / hour with a resolution of 22/18 nm. As ASML continues the commercialization of the these tools over the next two years, they will reach 125 wafers / hour throughput and increase the performance of the tool. By shipping tools today to early adopters, this allows a transition plan to keep customers from over investing in double patterning equipment. Detailed status of both the NXE 3100 and 3300 development was reviewed including the development of the laser-producted plasma (LPP) and electrical discharge (DPP) sources.

Future roadmaps of how to extend EUV to less than 10 nm were shared. And ASML has plans for 450 mm wafers post-EUV transition with volume production in 2016-2018. However, this is predicated on joint industry R&D and availability of other process tools.

In “Tech Trends from the 2012 International CES“, Shawn Du Bravac (Chief Economist & Director of Research, Consumer Electronics Association) provided an overview of recent trends and what was new in this year’s Consumer Electronics Show (CES) held the week before SEMI ISS. The introduction of many new screen based products (displays, tablets, e-readers) was apparent in 2010 especially as the price of display technology went down significantly. Microsoft Kinetic was also introduced in 2010 and has since become the fastest selling consumer electronic device when it was shipped late last year.

The major themes of CES 2011 were portable vs. pocketable devices (large displays, tablets, etc.), intelligence of things (smart pill bottles, appliances, etc.), “sensor”ization of consumer devices (increasing in many devices not just cell phones), and “application” (customizing the behavior of hardware with user selectable applications). The US household on average has twenty-five consumer electronic devices and the rate of adoption is increasing.

At this year’s CES the second decade of the “digital transition” started. In the first decade, analog devices (audio devices, telephones, cameras, televisions, etc.) were converted to digital formats. In this decade we will see power of digital technology – from fully interconnected / networked devices to systems for managing the increasing digital content of our lives.

Simultaneously, computing power is being moved out of (personal) computers. In the past, it was all about how much computing power could be built in to a notebook computer. With ultrabooks it more about weight, size, battery life, or other functionality than computing power. As such, Intel was touting the sheer number of design wins for ultra books (75) over processor specifications. Google Chromebooks and tablets were also prevalent showing the rise of thin clients where the computing power is in the cloud not on the device. As the computing power is redistributed from the PC it is showing up in other devices such as televisions and smartphones.

Many new devices are built on the premise of ubiquitous network connectivity which in turn enables additional thin client applications. Several new devices were introduced either with built in connectivity (such as the Nikon D4 camera which has a built in web interface) or to connect other devices (such as personal hotspots). More natural user interfaces were also featured to make device operation easier and more intuitive. We have come full circle from the original four button television remote (limited by technology) of the 1960-70′s to too many buttons on multi-function remotes to MEMS sensor based remotes with only a handful of buttons last year to voice control (no buttons) this year.

Lastly, device use-case scenarios of many products are being defined by the end user. Original equipment manufactures (OEMs) are delivering customizable hardware and services to enable this. Everything from smartphones where the user can install applications and buy a wide range of accessories to home automation modules to vehicles remotely controlled by a smart phone and often including a video camera.

Beyond the progress in the technologies discussed in this session, all the end user markets discussed have the potential for promising growth. The day definitely ended on a high note. More summaries to follow…

Like the roller coaster ride that is the semiconductor industry, the SEMI Industry Strategy Symposium (ISS) 2012 had its share of ups, downs, twists, and turns. Semiconductor Equipment and Materials International – better known as SEMI – as the industry association of suppliers to semiconductor manufacturers has held this annual conference in early January for thirty five years to provide updates on business conditions and technology roadmaps to enable SEMI members to plan for the coming year. The conference was packed with senior management paying close attention to the industry leaders, analysts, and customer presenters. All of the presentations, even the most poorly disguised sales pitch or infomercial, contained several valuable insights.

In his keynote presentation “Technology Law Still Delivers“, William Holt (Senior Vice President; General Manager, Technology & Manufacturing Group, Intel Corporation) opened the conference with much optimism based upon the rate of transistor demand growth of 15x in 5 years (from 2005 to 2010 and again from 2010 to 2015). This growth far exceeds the reduction of cost predicted by Moore’s Law. [I calculate a 5.7x reduction = 2^(5 year period / 2 year Moore's Law cycle).] Even though there is substantial benefit by moving faster, Intel continues to scale to the next technology node every two years, simply because they can’t go any faster. And though we are closer to the limits of scaling we are not close enough to predict when it will end.  ”Perceived barriers” to scaling will be “surmounted, circumvented, or tunneled through”. Future performance improvements will come from transistor structure, materials, and integration (including new interconnects and packaging beyond current 3D under development).

The mood then turned gloomy in Session 1 - Geo-Economic Trends. Duncan Meldrum (Senior Director, Center for Forecast & Modeling, IHS) in “The Global Outlook in a Post-Financial Crisis World“ predicted slower gross domestic product (GDP) growth of 2.7% world-wide in 2012. US GDP is predicted to grow only 2% while China’s growth will slow to 7.8% and Brazil’s growth will heat up to 3.2%. This translates to a forecasted baseline of weak semiconductor consumption (measured in total wafer area) growth of 1.7% for 2012 (year over year) and 6.0% for 2103 (over 2012). All the potential risk scenarios Duncan discussed were negative, if any are partially true they would lead to even lower consumption than forecasted.

David Townes (Managing Director & Co-Founder, Needham & Company) discussed his outlook of being short term bullish and long term bearish. He reviewed data of long term trends such as the dollar having lost 99% percent of its value over the last 100 years and the average unadjusted real rate of inflation being closer to 8% than 4% as published. (Data shown in chart above.) If the real inflation rate is 8%, the real return of many investments including treasury bills (T-Bills) is negative. This chart and many of the charts presented were from Shadow Government Statistics which publishes data with the political adjustments removed. In terms of debt, he is concerned about the possibility of default leading to an accelerated debasement of the currency. He highly recommends Reinhardt & Rogoff’s book This Time is Different: Eight Centuries of Financial Folly which discusses the debt crisis. In terms of coping, at both a corporate and personal level, he suggests global diversification, holding cash of countries with net exports of raw materials (such as Canada, Australia, and Norway), keeping capital structures simple, owning real (tangible) things including equities (which is the focus of Needham’s business), and maintaining liquidity.

Lastly, in “Economic Outlook“ Robert Fry (Senior Economist, DuPont) forecasted GDP growth of 1.9% for 2012 with a possibility of higher growth in 2013 however he wouldn’t take his forecast of 3.1% seriously (yet). His leading indicators including oil prices (he prefers Louisiana Light Sweet since it more closely correlation to both gasoline prices and Brent crude from the North Sea than the oft quoted West Texas Intermediate which measures oil flowing to Oklahoma where there is a glut) points to a recession in Europe and continued slow growth in the US and elsewhere. In previous years, the semiconductor market was not correlated to general industrial production. However now that the semiconductor market has reached maturity the correlation has greatly improved with semiconductors being a slight leading indicator of general industrial production.

Robert had some good news based upon the decline in natural gas prices due to the abundance of shale rock production. This should lead to increased manufacturing in the US since most US chemicals and industrial heating uses natural gas while much of the rest of the world use oil. The lower energy costs of US natural gas should be advantageous for many industries.

His largest concerns are the risk of default in both Europe and China and US future growth. US growth is troubling since outstanding government debt is close to 100% of GDP and Reinhardt & Rogoff’s analysis shows that growth slows significantly when this ratio exceeds 90%. If an economy is growing at 4% or higher then shocks (such as defaults) can be managed. If an economy is growing at 1% or less these shocks can lead to a recession. What isn’t clear is what happens between 1% and 4% growth. The last major risk to Robert’s forecast is the quality of China’s reported economic data since he doesn’t always believe the released data and he has not found any clear leading indicators.

Following these sets of gloomy forecasts, the next session provided much needed positive news…. I will post additional summaries shortly.