RF SOI Foundry Biz Heats Up

Market will boom for a few large players as IoT ramps, but which ones will survive?

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The foundry business is undergoing a new round of acquisition and fab expansion activity. As before, the big foundry vendors are getting bigger, while some may fall by the wayside. And at times, the events cause some uncertainty, if not jitters, in the supply chain.

For example, GlobalFoundriesin October signed a definitive agreement to acquire the chip unit of IBM, which enables GlobalFoundries to expand its leading-edge CMOS process portfolio. The proposed deal also gives GlobalFoundries perhaps the biggest prize of all—IBM’s RF silicon-on-insulator (SOI) process technology.

IBM is the leader in RF SOI in terms of share and technology, but there have been some worrisome signs for customers. For some time, Big Blue has been trying to unload its loss-ridden chip unit. Adding to those concerns is that IBM is currently sold out of RF SOI fab/foundry capacity.

Other foundries and chipmakers are also seeing huge demand for RF SOI, which is used to make select RF chips in smart phones and tablets. All told, as the industry heads into in the holiday season, worldwide RF SOI fab/foundry capacity is tight right now.

So, the big question is whether the proposed GlobalFoundries-IBM deal will cause any blips, or disruptions, in IBM’s RF SOI fab production. And longer term, many are wondering what will eventually happen to IBM’s RF fabs in Essex Junction, Vt.

For now, though, the proposed GlobalFoundries-IBM deal could bring some stability in the RF SOI supply chain. “(Amid) the strong ramp in global LTE smart phones, which requires increasing RF SOI switch content, there is very strong demand, and tight supply, for RF SOI switches,” said Mike Walkley, an analyst at Canaccord Genuity. “(GlobalFoundries’) acquisition of IBM’s foundry business is healthy for the supply chain, as it keeps a leading RF SOI source operational and under the control of a focused acquirer. Longer term, as RF SOI demand increases, foundry capacity should increase with the scaling up by the likes of GlobalFoundries-IBM, TowerJazz, MagnaChip, STMicro and others.”

More RF
RF SOI is a small but growing piece of the overall RF chip market. The overall RF chip market is hot, as OEMs are integrating more RF content in today’s smart phones and tablets. This includes chips that support more LTE bands, carrier aggregation and envelope tracking. For example, the RF front-end content in Apple’s iPhone 6/6 Plus smart phones has increased to about $15.25 to $15.50 per unit, as compared to $11.25 to $11.50 in the previous iPhone 5s/5c models, according to Canaccord Genuity.

Today’s smart phones consist of an RF front-end module, which includes the following components: Power amplifiers (PAs), RF switches, tunable capacitors, and filters. The PA, which amplifies an input signal, is based on gallium arsenide (GaAs). GaAs has a larger energy gap and is faster than silicon, but it’s more expensive to make.

Some smart phones are beginning to integrate CMOS-based PAs. Apple may integrate an RF SOI-based PA in a future smart phone. “Eventually, the PA will move to CMOS in a greater mix, but we still anticipate that GaAs will be around for a long time,” said Canaccord Genuity’s Walkley.

The latest RF front-ends are moving towards multi-mode, multi-band PAs, based on GaAs. This translates into a proliferation of switches on top of the traditional antenna switch, including diversity, power-mode and antenna-swapping switches. An RF switch is a device that routes RF signals through various transmission paths.

Over time, the RF switch has migrated from GaAs to RF SOI. In fact, Apple, Samsung and other OEMs are using an increasing number of RF SOI-based switches and other components in their smart phones. Based on 180nm and 130nm processes, RF SOI combines CMOS with a highly-resistive, thick-film SOI substrate. In some applications, RF SOI provides equivalent insertion loss and noise isolation characteristics as GaAs. “With RF SOI, you also have the ability to integrate various pieces (in the RF front-end),” said Joanne Itow, an analyst with Semico Research.

RF SOI foundry boom
The booming demand for RF SOI has caused a stampede of foundry players looking to enter this market. At one time, there were only three major foundries that offered RF SOI processes–IBM, STMicroelectronics and TowerJazz. More recently, Altis, GlobalFoundries, Grace, MagnaChip, Lapis Semiconductor, Silanna and TSMC have begun to explore or develop RF SOI processes.

Not all will succeed in the RF SOI foundry business. Based on the recent trends in the foundry sector, there may be room for only a handful of bigger players in a given market. “Once a company is doing well (in a particular market), others will jump into the arena. They will try and take the market away. And the smaller guys may have to find another niche,” Itow said.

One player with big aspirations is GlobalFoundries, which last year entered the RF SOI foundry business as part of an alliance with Peregrine Semiconductor. Previously, Peregrine made RF chips based on a proprietary and more expensive SOI technology called silicon-on-sapphire (SoS). With GlobalFoundries, Peregrine developed a mainstream, 130nm RF SOI technology.

Now, with the proposed acquisition of IBM’s chip unit, GlobalFoundries will expand its efforts in leading-edge CMOS and RF. “GlobalFoundries sees a lot of potential for RF,” Semico’s Itow said. “RF itself is going to be big, because of markets like the Internet of Things. Everything in IoT will need a radio.”

Still, the integration of GlobalFoundries and IBM’s chip unit is expected to be a major challenge. As part of the proposed and complex deal, GlobalFoundries will acquire IBM’s aging 300mm fab in East Fishkill, N.Y. as well as its 200mm RF fab in Vermont.

At the same time, GlobalFoundries is ramping up its leading-edge 300mm fab in Malta, N.Y. The company also is converting its Singapore fab from a 200mm to a 300mm facility. The Singaporean fab is currently GlobalFoundries’ specialty foundry facility. “GlobalFoundries is developing analog and BCD processes in Singapore,” Itow said. “They are getting some traction there.”

As GlobalFoundries continues to expand its own fabs, some analysts believe it’s only a matter of time before the company closes down IBM’s fabs. GlobalFoundries denied those assertions, at least in the near term. “We have no current plans to shut down either of these two fabs (at IBM),” said Sanjay Jha, chief executive of GlobalFoundries, during a recent conference call. “(But) the fabs have to stay competitive over the long term.”

Still, if there is any disruption in RF SOI fab capacity at GlobalFoundries-IBM, others are willing to take up the slack. “We have available capacity in RF SOI and will welcome the added business should there be any disruption at GF-IBM,” said Marco Racanelli, senior vice president and general manager of the RF/High Performance Analog and Power Business groups at TowerJazz. “We have strong demand for RF SOI, but we also have added capacity. We now have qualified and are producing RF SOI in a second factory. So, we don’t see supply being constrained going forward for our customers. Through the Panasonic deal, we have additional capacity in Japan should we need to expand further.”

In April, TowerJazz formed a fab venture with Panasonic. Under the terms, Panasonic transferred three fabs to the venture in Japan, which will primarily offer specialty processes to customers. “We added three factories with significant capacity, including our first 12-inch factory,” Racanelli said. “(That will) help us and our customers grow.”

It also portends what could be a turbulent period in the business. Some foundries are expanding their capacities by acquiring other companies or forming ventures. But more importantly, the traditional IDMs continue to dump their fabs and move towards the fabless model. IBM, Panasonic and Fujitsu are the latest IDMs to throw in the towel.

In September, Fujitsu spun off its fab operations and formed two separate foundry entities in Japan. One foundry company, based in Aizu-Wakamatsu, will consist of a 150mm and a 200mm fab. Another Fujitsu-backed foundry company, located in Mie, has a 300mm fab.

United Microelectronics Corp. (UMC) is an investor in Fujitsu’s Mie foundry entity. Separately, UMC is in the process of forming its second joint foundry venture in China. UMC already has a 200mm venture in China. The new 300mm foundry venture is located in Xiamen.

What’s next? Now, the industry is keeping a close eye on the GlobalFoundries-IBM deal. Others expect more acquisitions, and divestitures, in the foundry arena. In other words, foundry customers should keep close tabs on the supplier base. Needless to say, a disruption in foundry service, or in the supply chain in general, could be a disastrous event.