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The Next Materials Race

Why a trade war isn’t all bad for the semiconductor materials market.

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Trade wars are costly on many fronts, and a trade war between the United States and China is bound to cause a variety of problems that no one anticipated. But in some areas, there may be a silver lining. And where there is no silver lining available, other materials may suffice.

For decades, big chipmakers have been squeezing the entire semiconductor supply chain in a race to double the number of transistors every 18 to 24 months. This is what made electronics affordable, and the end of device scaling has prompted a variety of alternatives to continue the scramble for improvements in power, performance and area. But as the industry restructures, the supply chain is shifting direction.

GlobalFoundries’ decision to drop out of the 7nm race is a case in point. The foundry has decided, instead, to stop its scaling efforts at 14nm and instead put renewed effort into planar FD-SOI, which will be its path forward for a number of market segments. Even Samsung has hedged its investments, rolling out 7nm alongside its FD-SOI roadmap.

And all of that is being supplemented by a slew of advanced packaging options, including a continued push toward panel-level fan-out technology, which does for advanced packaging what 450mm would have done for device scaling. These options provide a way forward if any single approach hits a snag.

Materials are a key piece of this puzzle. Until recently, the pressure on materials vendors largely has been about finding the cheapest source and negotiating the best price. But this is changing on multiple levels, and it’s creating some interesting alternatives.

A growing trade war between the United States and China, as well as between the U.S. and certain countries in Europe, has put significant pressure on the supply chain to come up with alternate sources of key materials. Rare earths are one such area. The last rare earths mine in the United States, located in Mountain Pass, California, was shuttered in 2015 due to global pricing pressure. It would take months, if not years, to get that mine operational again, and it’s not clear whether tariffs would be sufficient to offset lower labor costs in places like China coupled with continued pricing pressure to offset those tariffs.

Lithium is potentially heading in a similar direction. Rising demand for lithium for use in lithium-ion batteries for electric vehicles is adding more angst across the tech world, with most of the known lithium supplies coming from South America, Australia and China. There is rumored to be rampant hoarding of these materials around the globe, and pricing may be the weapon of choice as market leaders emerge.

But there also are workarounds in most of these cases. Just as the slowdown in Moore’s Law has created an explosion in architectural innovation, from heterogeneous arrays of processors and memories to silicon-proven packaging options, a crunch in materials has spawned renewed interest in materials science and related businesses.

Two trends are emerging in materials as a result. One involves materials reuse. Vendors of materials that are created for one step in manufacturing are working to extend those materials to other manufacturing steps, as well. So rather than developing materials for each step in the process, materials are being developed for multiple steps.

The second development is that once materials are used in final products, they are being recycled back into the supply chain. Companies are beginning to pop up that repair and remanufacture lithium-ion batteries, for example. As the value of these materials increases, that will help to cap prices due to supply shortages.

Alongside of both of these trends is an overarching push for increasing purity, which has been underway for some time. But as materials are used for multiple manufacturing processes, as well as at advanced nodes, this trend becomes even more critical than in the past.

The semiconductor supply chain is highly attuned to all changes in global supplies of any critical components, and manufacturers are well aware of any potential glitches. What’s clear is they aren’t sitting around waiting for these shortages to cause problems. Materials engineering has always been an important part of the chip world, but its value is growing in ways no one would have predicted several years ago.



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