Week In Review: Manufacturing, Test

Chipmakers
Foxconn is in talks to build a fab in Zhuhai, China, according to a report from Nikkei. The fab, to cost $9 billion, would make chips for Foxconn and outside companies, the report said, which says the company will enter the foundry business.

The European Commission has approved funding for 1.75 billion euros ($2 billion) of public investment for projects in the microelectronics sector. Four European countries–France, Germany, Italy and the United Kingdom–will join forces to support research and innovation in the arena. Twenty-nine entities will take part in the project. They include Robert Bosch, Infineon, STMicroelectronics, Osram, Carl Zeiss, GlobalFoundries and Murata, according to a report.

Embedded memory house eMemory has announced that its embedded nonvolatile memory IP has been qualified on GlobalFoundries’ 130nm BCD technology. This is for automotive AEC-Q100 Grade-1 compliant applications.

For some time, Intel has had big plans for its foundry business, dubbed Intel Custom Foundry (ICF). Now, rumors are running rampant that Intel is exiting the foundry business. A spokeswoman for Intel said: “We don’t comment on rumor or speculation.” Samuel Wang, an analyst at Gartner, said: “There has been no official word from Intel that they will exit ICF. They have mentioned that use of outside foundries can be part of their ongoing flexible strategy.”

IBM has announced an agreement with Samsung under which Samsung would manufacture IBM’s 7nm microprocessors. The processors involve IBM Power Systems, IBM Z and LinuxONE high-performance computing systems, and cloud offerings.

Malaysian foundry vendor SilTerra has been selected as a strategic partner by Chinese microelectronics producer, Beijing Yandong Microelectronics (YDME), to set up a 200mm wafer fabrication plant in Beijing.

As expected, Cisco has announced the intent to acquire Luxtera, a supplier of silicon photonics chips. Cisco will pay $660 million in cash and assumed equity awards for the acquisition of Luxtera.

Xilinx has hired Barclays to advise on a bid to buy Mellanox. Now, Microsoft is interested in acquiring Mellanox and has hired Goldman Sachs to negotiate a deal, according to another report.

Velodyne Lidar has announced Nikon is a new strategic investor with an investment of $25 million.

Fab materials
Soitec is in the midst of expanding its FD-SOI wafer capacity. It continues to produce FD-SOI wafers in Bernin, France. “Soitec is currently ramping up production of FD-SOI wafers at Bernin and is finalizing the technology transfer to Singapore to ensure supply from multiple factories, but also to support increased business adoption. Within the last six months, this process transfer in Singapore was completed and qualification samples will ship to customers. Soitec is targeting the qualification of its Singapore facility early next year,” according to Soitec.

Market research
In a recent research note, Christopher Rolland, an analyst with Susquehanna International Group, listed his key semi trends for 2019, including the top takeover targets. Here are the trends or themes for 2019:

Theme #1: Extended lead-times and tariff uncertainty. “(The) data indicates lead-times hit a cycle high 14+ weeks exiting 3Q18. While contracting since September, the rate has been slow and it may take a few quarters for lead times to normalize (<12 weeks historically),” Rolland said.

Theme #2: No handset growth. “We have reduced our 2019 handset estimate to just +1% YOY. While we anticipate a ramp in subsidized 5G handsets in China in 2H19, the unit effect will be modest,” Rolland said.

Theme #3: Automotive headwinds. “Exiting 2018, monthly global auto sales were declining YOY, the worst decline since 2009. While we still expect continued content growth driven by EVs, ADAS, and electronics, the unit decline may cap growth to mid-single digits,” he said.

Theme #4: PC woes and a server slowdown? “In both 2Q18 and 3Q18, Intel CPU sales outpaced PC sell-through by +5%, adding ship-ahead risks to 1H19. We now project relatively flat PC shipments in 2019, but negative CPU shipments. We recognize modest server ship-ahead risks,” he said.

Theme #5: AI rocks. “Despite a subdued semis market, we anticipate ~40% YOY growth in A.I. training and ~150% growth in A.I. inference,” he said.

Theme #6: M&A slows but who are the takeover targets? “Our top takeout candidate for 2019 is Mellanox. While we believe XLNX is the most likely bidder, we note an outside shot of a bidding war (NVDA?) as their high-speed SerDes technology is a unique and valuable asset. We also note that LSCC, CY, and ON make other attractive candidates,” he added.

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As reported, the fab tool business is headed for a downturn. Here’s another piece of data: Total fab equipment spending in 2019 is projected to drop 8%, according to SEMI. Fab investment growth has been revised downward for 2018 to 10% from the 14% predicted in August, according to the trade group.

North America-based manufacturers of semiconductor equipment posted $1.94 billion in billings worldwide in November 2018, according to SEMI. The billings figure is 4.2% lower than the final October 2018 level of $2.03 billion, and is 5.3% lower than the November 2017 billings level of $2.05 billion.