Fab Tool R&D And Ramen Noodles

The business model is broken in the fab tool and materials industry.

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The semiconductor equipment and materials industry has always been a tough business.

Over the years, vendors have been under pressure to develop new technologies for a shrinking but demanding customer base. And as a result, many vendors could not keep up, or elected to exit the business, causing a massive shakeout in the industry.

It isn’t getting any easier, though. Today, tool and materials vendors are in the midst of the most challenging period in the industry’s history. The main customer base—the leading-edge chipmakers–are making a major transition from planar structures to various 3D-like architectures, such as 3D NAND, finFETs and stacked die.

Vendors must develop new and advanced systems to meet customer requirements. But the cost to develop new technologies is soaring. And yet, there are just a handful of leading-edge customers today, creating some uncertainties in terms of the return-of-investment.

Clearly, the current business model is broken and not sustainable in the long term.

The industry needs to think differently. One thing that needs to change is the re-distribution of R&D dollars. Typically, fab tool vendors develop systems using an inordinate amount of their own R&D dollars. They also obtain funding from their customers. And in some cases, vendors obtain funding from governments.

Going forward, should chipmakers foot more of the R&D bill for fab tool vendors? Should governments get more involved? Should companies float multiple offerings? Clearly, there are more questions than answers.

Cry for help
To be sure, though, there is a cry for help in the industry. The stress is being felt across the entire food chain, from materials, to photomasks, to front-end tools, and to test.

In the materials industry, for example, the size of the worldwide photoresist market is smaller than the Ramen noodles business in Japan alone. “The Ramen market in Japan is a $7 billion market,” said Nobu Koshiba, president of JSR, during a panel discussion at SEMI’s recent Industry Strategy Symposium (ISS). “When you think about the photoresist market, the size of the market is very small, roughly $1.3 billion globally. Including the tri-layer chemistries, maybe the size of the market is $2 billion.”

Obviously, photoresists is a much more difficult industry than noodles. In general, resist makers spend 10% to 20% of their overall sales on R&D. Today, suppliers are developing complex resists for EUV and other lithography applications. “You really have to carefully design the chemistries, the supply chain and everything at the beginning of R&D,” Koshiba said.

Needless to say, resists are difficult to develop. The materials are delicate and beset with impurities. And the payback, especially with EUV, is unclear. So in many respects, the demands on the resist industry are difficult, if unrealistic. “Photoresists is useful for patterning. But also, it’s the first (thing) that people blame once they have defects,” he said.

Meanwhile, on the photomask side, Aki Fujimura, chairman and chief executive of D2S, said: “Mask technology, and the investments in the mask industry, are increasingly important. But so far, the investment dollars that the community is willing to spend on it isn’t commensurate with the value, importance or difficulty of it. As we extend 193nm immersion, there is more and more pressure on being able to print more precise and flexible shapes on the mask. This will improve the performance of the wafer. So you would think that there is a shift to bring more of the value, and investments, to produce those masks more reliably.

“There are a number of companies, as well as members of the eBeam Initiative, that are working on this. But we are all struggling to make sure we can make the right amount of investments necessary to get there on time. That concerns me. There is also a lack of awareness. For example, the mask industry has been good at meeting the challenges of Moore’s Law for the last 30 years. The world got used to that and the industry often says: ‘The mask industry will figure it out.’ But now, it’s getting to the point where it’s so difficult. It’s just not getting there. It’s going to take money,” Fujimura said in a recent interview.

Like the materials and mask industries, the front-end equipment market also has an assortment of challenges. “Every part of the (equipment) business is seeing changes, which requires innovation and investment,” said Randhir Thakur, executive vice president and general manager for the Silicon Systems Group at Applied Materials, at a recent event.

Indeed, tool vendors are under pressure to stay on Moore’s Law. For example, multiple patterning places new demands for deposition and etch. There are also new demands for CMP, epi, ion implantation and other tools. “All of these require the upmost precision,” Randhir said.

“Moore’s Law continues,” said Dave Hemker, senior vice president and chief technology officer at Lam Research, at the ISS panel, “and there are many more technical options. So, the problems are getting more difficult.”

For example, 3D NAND requires new and more complex etch and deposition steps. In addition, the industry wants new tool types, many of which are still in R&D.

To help fund and develop future tools, the industry can no longer go the same old route. “We can’t rely on the traditional research infrastructure from maybe 15 or 20 years ago. Government (funding), depending on where you are at, has changed. The focus is not necessarily equipment based,” Hemker said.

Today, R&D involves a complex web of entities. “For example, we work with Imec to prove out some concepts. Then, we need to develop a piece of hardware and a process. There, we have to get our supply chain involved. And obviously, we are trying to collaborate with our customers,” he added.

The ATE industry, meanwhile, faces another set of challenges. “If you look at the market from 2005 to 2009, capital equipment for semiconductors was about $33 billion per year. And test equipment was $3.6 billion of that. So, that is 11% of the total for all semiconductor capital equipment,” said Greg Smith, vice president of SOC marketing at Teradyne, in a recent and separate interview. “Now, from 2009 to 2013, the semiconductor capital equipment market grew from $33 billion to $34 billion. But the portion of that market in terms of test equipment actually shrunk from 11% to 7% of the total. So, the capital intensity for the test of semiconductor devices has decreased significantly over the last 10 years.”

And over the years, tester prices have dropped and the hardware has become more efficient. “Customers have been able to reap the benefits,” Smith said. “But that has also turned into one of the biggest challenges in the ATE industry. It has driven the consolidation between companies in the industry. And it is putting a ton of pressure on the ATE vendors to try to maintain the level of R&D investment that we need to keep innovating. Our ability to develop efficient testers has actually limited the money flowing into the market. That’s our biggest economic challenge.”

If that’s not enough, the ATE industry faces some daunting technical challenges. “For example, the mobile market is able to adopt new standards very quickly. It can create test functionality gaps. Right now, a reasonably high-end smartphone uses a screen standard called HD-720, which is essentially 720 rows of pixels. The data rate you need inside the phone to support that is about 800-megabits-per-second across a particular interface. The industry is talking about getting to 4K HD into phone form factors. And that’s going to drive the adoption of much higher-speed serial interfaces,” he said.

“The timeline to develop test equipment for those kinds of standards is on the same order as the amount of time that the mobile phone manufacturers are taking to design them. So it’s a constant race to keep up with new technologies,” he said.

The trends are also clear as the industry moves towards more complex devices. “Most likely, you will see longer test times. Higher test costs? That’s not for sure. This depends whether customers elect to go to newer test equipment, and a higher number of devices tested in parallel. It also depends whether they adopt new DFT or BIST techniques to manage the complexity,” he added.

Today, the fab tool industry is far different than before. In the 1980s, there were five to ten strong vendors in every product segment. Now, there are two, maybe three, viable vendors in every segment. And in some cases, there is only one supplier.

Many wonder what the fab tool and materials industry will look like in 2015 and beyond. Time will tell, but clearly, the industry is in for more tough times.