Effects Unknown

The prospects of stacked die and double patterning are creating uncertainty in a well-oiled supply chain.

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f you really want to know what’s going on inside the IC design world, pick up a copy of the annual reports of the largest foundries. Then triangulate that with the earnings reports of the largest makers of computers and mobile electronics and the makers of EDA tools and IP.

All three areas are experiencing a massive uptick, which is good news considering the travails of the past couple of years. The problem is that retooling in each sector proceeds at a different pace, which is bad. In manufacturing, for example, it takes months to add enough manufacturing capacity to meet a spike in demand. That means foundries will have to limit capacity for smaller customers.

While that makes good business sense from a foundry standpoint—TSMC’s annual report this year notes that its 10 largest customers accounted for 54% of sales—it has a ripple effect on design starts and EDA sales. TSMC’s report also showed that the number of fabless design starts actually dropped slightly in 2010, offset by an increase in chips designed by IDMs.

All of the major foundries are investing in new equipment to expand their fabs. But how quickly that capacity comes on line is hard to sync with increases in demand. And it gets even murkier once double patterning begins at 22nm, because that slows down the whole manufacturing process, and 2.5D stacking begins taking off, probably at the end of next year. Will the biggest customers still drive the volume, or will they produce pieces of designs that may be used as subsystems in a bigger stack? And will capacity that has been readily available for the biggest customers now be distributed among even smaller companies looking to package multiple chips in a package?

There is a lot of talk about the upside of all of this, but how it unfolds is unclear. The proof: Dozens of executives on all sides of the supply chain are all asking the same questions. They’re probably the right questions, too, but so far there are no clear answers.

–Ed Sperling