ibm semiconductor success white paper

7/27/2019 IBM Semiconductor Success White Paper

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IBM Global Business Services

Thought Leadership White Paper

Electronics

Semiconductor success How to compete in the industry’s largest market



2 Semiconductor success

Contents

2 Asian semiconductor success

2 A great opportunity

3 How Chinese IC manufacturers can succeed

7 Chinese fabless firms: design for success

8 A blueprint for global IC manufacturer success

11 How IBM can help you succeed

11 For more information

Asian semiconductor successIn one corner of Asia, the semiconductor market continues to

grow impressively—driven by a unique combination of govern-

ment policy, global corporate strategy and domestic capabilities.

Its consumption of semiconductors has reached 50 percent of

the global market.1

It is probably no surprise this market is China—demonstrating

once again the tremendous influence this region has on global

trends. By itself, however, the region’s sheer size does not mean

that success in China comes easily to market competitors.

This is because these firms confront all of the typical challenges

created by working in China, magnified by the intensity of the

high-tech industry. These challenges include:

● Dramatic market shifts● Fierce price competition● Security of intellectual property (IP)● Local versus foreign technology development ● Talent growth and retention

At IBM, we believe that to succeed in the Chinese semiconduc-

tor market, companies need constant diligence and innovation—

and they need to enhance their management capabilities.

Fortunately, there are tools that can help you strengthen

strategic and management oversight while unleashing your

organizational creativity.

A great opportunity While the overall growth of the semiconductor market in

China vastly outpaces the rest of the world, it is not uniform

across industry segments. In particular, China’s domestic chip

production is lagging.



3IBM Global Business Services

Players in China's semiconductor market

Chinese IC fab Chinese fabless companies Foreign-owned IC fab

Ability to:

Shape market Low Medium High

Innovate for cost improvement Low Medium Medium

Innovate for product differentiation Low Medium High

Impact of:

Accelerating design and development costs High High Medium

Rapid commoditization High Medium Medium

Dramatic market shifts High High High

Focus on lowest price High Low Low

Enhanced collaboration ecosystem Medium High Medium

China dominates the global electronics assembly market,

especially for mobile devices and for the export market.

However, the quantity of semiconductors consumed for device

assembly far outnumbers those produced domestically in China.

This means the Chinese integrated circuit (IC) market is heavily

dependent on imports. Depending on how it is measured,

the Chinese IC self-sufficiency ratio is 10 - 20 percent.2

Although domestic Chinese IC production has grown in recent

years, it has yet to close this self-sufficiency gap. As a result,

China’s chip supply is still dominated by global companies

based outside of the country including Intel, Samsung, Texas

Instruments, Toshiba, SK Hynix, and Taiwan Semiconductor Manufacturing Company (TSMC). This is especially true for

chips based on cutting-edge technologies which have the highest

profit margins.3

This self-sufficiency gap has been highlighted as one of the

Chinese government’s priorities in their Twelfth Five Year Plan.

The plan’s stated goal is to improve the semiconductor self-

sufficiency ratio to 27.5 percent by 2015.4

Time will tell if they achieve that goal. But either way, the goal

itself reinforces the government’s financial commitment to

domestic IC production—and that will benefit those domestic

and global companies who can deliver.

How Chinese IC manufacturers can

succeed

China-based fabs face large challenges with their strategy andoperational models. Heavy reliance on foreign technology and

expertise jeopardizes both their current profitability as well as

their future organic growth potential.




Yet leading-edge technology development has become so capital-

intensive that only the largest firms can easily participate.

Average selling prices for components continue to decline, and

global IC OEMs that design and sell finished products capture

the market’s greatest value.

These competing factors have squeezed China’s chip makers into

narrow operating zones characterized by commoditized products

and thin profit margins. For some, survival may require merging with larger market participants. But if China-based fabs want to

compete and survive, focusing on operational efficiencies offers

one of the best alternatives.

Improve yields

Manufacturing yields remain one of the main drivers of fab

profitability, particularly for advanced technology nodes. The

pursuit of higher yields makes sophisticated control systems

and analysis capabilities an absolute requirement.

Further, yield efficiency also directly affects on-time deliveries,

customer satisfaction and corporate reputation, and impacts the

successful achievement of development milestones. Therefore, a

manufacturing control infrastructure based on “bare minimum”

requirements is a poor business strategy, and will ultimately lead

to disappointing results.

Advanced manufacturing execution systems (MES) offer

dynamic and scalable process controls. These controls allow theengineering team to systematically discover and correct yield

detractors wherever they occur—without creating customized,

one-off solutions. Similarly, integrated analysis tools and a com-

prehensive information management strategy enable efficient

yield improvement for both volume production and technology

development.

While these tools are crucial to improving yields, big data

technologies are also becoming increasingly important to yield

optimization. Multivariate modeling and advanced statistical

techniques for understanding complex data interactions offer

the potential for substantially increasing yields.

Participants Areas of focus for improved performance Tools for enablement

Chinese IC manufacturers Costs - yield

Costs - cycle time

Costs - maintenance

Costs - energy

Product and strategy

Analytics, controls

Optimization, analy tics

Analytics, prediction

Monitoring, optimization

IP management

Chinese fabless companies Product and strategy IP management, collaboration ecosystem, digital marketing

Foreign IC manufacturers Multi-site integration Integrated planning, global production view




Increased yields lead directly to bottom-line profits. The

software tools and techniques described here can help dramati-

cally improve yields. Therefore, to maximize profitability in

this intensely competitive industry, every fab should place a

priority on enhanced controls and yield management tools.

Reduce cycle timesReducing fab cycle time presents another opportunity to

improve manufacturing efficiency and thereby enhance profit-

ability. But to successfully decrease cycle times, your team must

solve a series of complex optimization problems that require

advanced mathematical and modeling skills, and this can

challenge even the most technically sophisticated firms. To

develop solutions that really work in manufacturing, fab owners

require an interconnected set of execution, simulation and

analysis tools.

An example of one such solution is a real-time scheduler for

advanced decision management that has been developed by IBM. This solution has enabled 10 - 30 percent cycle time

reductions within individual fab process areas and has decreased

overall production bottlenecks. Solutions like this complement

industry best practices. For example, the SEMATECH global

forum continues to map out new standards and recommenda-

tions such as single wafer processing and load port optimization.

Summaries

Health of Lot Parametric Sensitivity Cluster Analysis

Process Tool Sequence

Data Commonality

Split Lot

Process Change Analysis

Zonal Analysis

Spatial Signature Analysis

Repeater Analysis

Systematic Yield Analysis

Components of Variance, for systematic wafer patterns

Trend Analysis

SPC Analysis

Tool/Date Analysis

Best/Worst Analysis

Process Differences

Parametric Relationships

Differences Between Groups

Spatial Patterns

Figure 1. Integrated yield analysis for the fab




Advanced commercial MES systems incorporate those new

standards and make them available faster than is possible

through internal development by fab owners. When combined

with solutions like the real-time scheduler, these commercial

MES systems can enable dramatic cost savings.

Enhance equipment maintenance

Equipment maintenance represents another opportunity for

cost savings and efficiency gains. In fact, SEMATECH estimatesthat for a 300mm fab, annual process tool maintenance averages

17 percent of the original asset value.5

This recurring annual maintenance cost means even small

improvements can translate quickly into substantial savings.

As an example, one major Asian IC manufacturer implemented

an integrated maintenance solution and reported savings of over

USD1 million in the first year due to redundant inventory

reductions.

The semiconductor industry is also moving from a preventive

maintenance model to a predictive maintenance model. Whilethis offers the opportunity for additional reductions in mainte-

nance costs, it requires advanced analytics capabilities to realize

those benefits. As semiconductor firms become more sophisti-

cated with asset management, they will see equipment mainte-

nance differently. Rather than viewing maintenance as a painful

expense, they will recognize it as an investment that generates

value through improved return on assets and equipment

utilization.

Maximize energy efficiency

Energy consumption is another major expense getting increased

attention from China’s semiconductor firms. Cost savings and

environmental concerns make energy efficiency a top priority for

fab operations throughout the world. Government regulations,

industrial guidelines and potential supply constraints create a

growing need to use a total energy management system (EMS).

An effective EMS takes advantage of integrated analytics and

supports informed decision-making.

A 2011 industry study by the International SEMATECH

Manufacturing Initiative (ISMI) showed that 49 percent of total

fab energy consumption occurs at the production-level process

tools and supporting subsystems.6 Therefore, any strategy to

reduce energy usage must carefully consider wafer production

flow as well as impacts to product quality or yields.

IBM Research has been at the forefront of maximizing fab

energy efficiency. They have developed a dynamic solutionthat includes sensor networks and visualization tools for energy

monitoring. It also includes optimization tools for energy

management, production planning and scheduling.

Smarter ManufacturingOperation Center

Manufacturing

Building

Energy

Utilities

Equipment

EnergySupply

Figure 2. Smarter manufacturing operations center




In addition, IBM has been working closely with semiconductor

equipment providers to develop industry standards and solutions

that manage equipment “green mode” throughout the fab pro-

cess. The result is an integrated energy management approach

which can be implemented without major customization or a

long learning curve.

Optimize business strategy

Fab efficiencies are critical to profitability. But without a success-ful long-term strategy as a foundation, those efficiencies alone

will not lead to growth. The complex challenges faced by

most Chinese semiconductor firms have made it increasingly

difficult to develop solid product strategies.

Today, leading-edge technology development requires massive

financial capital which is beyond the capacity of most manufac-

turers. The strength and dominance of TSMC in the foundry

market has pushed Chinese competitors to cut prices or find

niche markets. An overemphasis on low prices, however, clearly

limits a company’s ability to reinvest and develop more profitable

products.

It is also critical that Chinese companies respond quickly to

changing markets. Doing so will help them avoid the fate of

some mature Taiwanese and Japanese DRAM makers that did

not anticipate or adjust to the dramatic shift to mobile devices.

These competing forces drive a greater need for strategic man-

agement tools. Chinese IC manufacturers need such tools to

enable a flexible product strategy, as well as identify the most

profitable opportunities for their current and future capabilities.

Manage intellectual property

A key enabler here is intellectual property analytics. They allow

management to understand the competitive landscape and navi-

gate a path that is profitable, sustainable and secure.

Semiconductor firms must manage their IP portfolios for both

protection and partnering globally. This requires worldwide sup-

port for patent docketing and legal defense. As a result, IP man-

agement systems are essential to maximize efficiency, especially

for smaller Chinese firms that are less mature in this area.

Leading manufacturers have also moved IP management beyond

the boundaries of the legal department. They implement tools

and processes that allow all employees to participate in inven-tion, collaboration and recognition.

Taken together, these systems form a platform for efficient man-

agement of the entire IP lifecycle—from creation to commer-

cialization. And that helps foster a culture of innovation that can

be lacking in Chinese firms today.

Chinese fabless firms: design for success With a projected CAGR exceeding 20 percent through at least

2015,7 China’s fabless design sector has been the fastest growing

semiconductor segment in recent years. The potential profits for

design firms are tremendous, but success will require innovation

and integration. These companies must maximize the power of

their intellectual property and their business relationships.

Intellectual property management

Similar to chip manufacturers, China’s fabless companies must

be able to survey their competitive position and identify new

opportunities for their IP portfolio. This requires effective tools

to search external sources such as patents and publications.

These tools then tag the search results and map them to the

company’s internal capabilities, as well as its strategic plans.




In addition, fabless companies must be prepared to take offensive

and defensive actions in the competitive IP market. This can

introduce a wide variety of requirements such as:

● Maximizing opportunities for licensing revenue● Improving their negotiating strength with potential partners● Identifying gaps within their current portfolios

Comprehensive IP management systems provide the toolsnecessary to successfully meet these requirements as well as

manage a global IP portfolio. Once they are securely established

and used effectively, these tools can drive increased profitability

for fabless design firms.

Business-to-business relationships

In addition to IP management, successful fabless companies

must provide a platform for open business-to-business (B2B)

collaboration. This will be an essential requirement to succeed in

the advanced technology nodes below 65nm, where only a small

portion of China’s design companies currently compete.

Industry forums continue to highlight such close collaboration

between fabless firms and their foundries as an essential area

for improvement.8 This becomes more important each year

due to increasing technology complexity and design-process

interactions. China’s design firms require a comprehensive

data security solution, to enable secure collaboration within

a multi-company ecosystem.

Like most companies, China’s fabless firms also need to

maximize the effectiveness of their marketing. B2B buyers are

increasingly using electronic channels to research solutions and

narrow their selections. Therefore, fabless companies must

engage those potential customers in a compelling dialog across

multiple channels. IBM has developed tools for customer,

marketing and sales analytics, which provide deeper insight

into these client interactions. With these advanced capabilities,

fabless companies can implement an effective B2B marketing

strategy.

Lastly, these fabless design firms need to move “up-market” and

get closer to their customer’s customers. This will enable them

to anticipate future requirements and create competitive

advantage through differentiated products.

A blueprint for global IC manufacturer

successFor leading global semiconductor manufacturers, the potential

financial rewards of Chinese operations demand attention.

The financial possibilities make China a likely target for any new

fabs outside the traditional strongholds of Japan, the US, Taiwan

and Korea.

These possible financial benefits are bolstered by local political

support. For example, the Chinese central government will

invest USD30 billion in semiconductor design and manufactur-

ing through 2020, while local governments are expected to

invest another USD25 - 30 billion.9

Even with this level of financial commitment, global IC manu-facturers have been slow to invest in China. As of 2013, only five

global companies have opened a wholly-owned fab in China, and

only two of these five—owned by Intel and SK Hynix—are

300mm fabs.

IP concerns and technology export regulations have certainly

been major factors slowing the influx of global manufacturers

into China. But the regulatory hurdles have eased in recent

years, particularly as relations with Taiwan have improved.10

For example, the new Samsung fab in XiAn represents the first

time a global firm has placed its leading-edge technology

node in China. It is only natural to expect an increased focus oninformation security and access controls around such fabs. But

even if all of the IP concerns are addressed, further capabilities

are needed to maximize the economic potential of new fabs

in China.




Modify your business approach

As global semiconductor firms expand their footprint in Asia,

it may be tempting to follow the old paradigm of a replicated,

multinational corporation. In today’s competitive market,

however, this no longer makes sense. Instead, the traditional

business model should be replaced by the globally integrated

enterprise that taps into skills and expertise wherever they exist.

This provides horizontal integration worldwide, no matter

where the stakeholders reside or functions are performed.

The reason is simple. Global IC manufacturers cannot afford

the inefficiencies that result from independently-managed and

disconnected processes. This includes core functions such as

production scheduling, product delivery, inventory management

and quality assurance.

While global integration starts at the corporate policy and

procedure level, it also requires specific systems and integration

capabilities. To compete successfully, these companies needcomprehensive solutions for planning, scheduling and execution.

These systems must also provide increased visibility of the entire

supply chain through a single, integrated view.

Global supply chain network (physical)

Worldwide visibility

Assembly

China

Organization Parameters

Customer

Demand

Product

Assembly

Product

Assembly

Product

Assembly

Product

Assembly

Capacity

Capacity

Capacity

WIP

Processing

WIP

Processing

WIP

Processing

Parts

Purchase

Parts

Purchase

Parts

Purchase

Parts

Purchase

Demand Demand Demand Demand

Distribution

Assembly plant

Frontend plant

Demand priority

Distribution lead time

Logistics lead time

Logistics lead time

Supply capacity

Manufacturing lead

time and yield

Manufacturing lead

time and yield

Suppliers

Suppliers:

Korea

India

Argentina

Philippines

US

Japan

Germany

Enables Available To Promise to the customer based on the plan and capacity of e ach production site.

Global supply chain model (logical) Consistent production planning by using a global model can reduce unnecessary adjustments between sites

Figure 3. Global semiconductor supply chain




Gain insight into your global operations

To effectively manage the complete production of distributed

manufacturing lines, global chip manufacturers need the insights

provided by enhanced analytics. This begins with tools for

planning and scheduling, and the solutions used today are

often inadequate.

Traditional planning systems used in the semiconductor industry

are a compromise between speed and accuracy—they are eitherfast but simplistic, or detailed but slow. Often, this tradeoff

leads to a static plan that precludes effective global operations

planning. The outcome is less timely and less accurate schedul-

ing, along with elevated risk to both supply commitment and

inventory levels.

Fortunately, dynamic planning tools exist that allow both

detailed analysis and speed. IBM has helped companies through-

out Asia implement improved solutions for Sales and Operation

Planning. This adaptive system enables high-speed collaborative

simulation to reduce planning cycles, and provides the capability

of modeling multiple what-if scenarios.

These solutions use a modular approach that is designed and

built for scalability, and can truly support the end-to-end

requirements of a global semiconductor supply chain. They

also produce consistent production planning and eliminate

unnecessary manual adjustments between manufacturing sites.

Execute across the enterprise

In addition to company-wide planning, large semiconductor

manufacturers require a single view of production across multi-

ple fabs. Even companies possessing rigorous controls within

their individual fabs often struggle to manage a disconnected

supply chain. This can lead to poor wip management and

inefficient production control across the enterprise.

By contrast, an enterprise-level MES provides true globalproduct visibility and traceability. The MES accomplishes this

by creating a “virtual single factory” that can extend to business

partners and outsourced operations. More than simply a data

conversion hub, the enterprise MES synchronizes business

events within a standard data model. It can integrate multiple

heterogeneous manufacturing systems to operate as one—and in

near-real-time. Related functions can enable centralized control

of fab assets, recipes, parameters and business rules.

Working together, these capabilities provide corporate managers

with the global visibility they require, while bringing greater

efficiency and improved decision-making throughout the organi-

zation. The advanced insights delivered by these systems create a

powerful blueprint for success.




How IBM can help you succeed With a 50 percent share of global consumption, China’s

IC industry has become the center of the semiconductor market.

Succeeding in the global semiconductor industry increasingly

requires success in China—and that demands greater capabilities

in both corporate strategy and operations management.

IBM provides a unique perspective within the semiconductor

industry as a manufacturer, consumer, research leader, softwaresolutions provider and consultant. From experiences in these

roles, IBM has identified a common theme—an increased need

for analytics and optimization tools.

Domestic firms can avoid the tendency to compete on price

only, while at the same time creating deeper, more effective

relationships with their customers. They can use these tools to

differentiate, innovate and collaborate, even as they remove cost

from their operations. Global manufacturers can improve the

efficiency and integration of distributed factories, and thereby

truly see the benefit of investments in China.

The true market potential of China’s semiconductor industry is

not yet fully realized, but IBM can help you get there. IBM has

a successful track record of delivering these tools and resources

to the world’s leading electronics firms. With the recognition

of being one of the largest information technology companies

in the world11, over 400,000 worldwide IBM employees stand

ready to help you succeed in China’s semiconductor market.

For more information To learn more about semiconductor fab solutions, please contact

your IBM marketing representative or IBM Business Partner, or

visit the following website: ibm.com /electronics

Additionally, IBM Global Financing can help you acquire the

IT solutions that your business needs in the most cost-effective

and strategic way possible. We’ll partner with credit-qualified

clients to customize an IT financing solution to suit your busi-ness goals, enable effective cash management, and improve your

total cost of ownership. IBM Global Financing is your smartest

choice to fund critical IT investments and propel your business

forward. For more information, visit: ibm.com /financing

About the author Andrew Vogel is a member of the electronics industry team

within IBM Global Business Services. He has over 20 years of

experience working with microelectronics factories, and focuses

on solutions for the semiconductor market. With deep knowl-

edge of analytics requirements for the industry, he has helped tooptimize and reduce cost in the end-to-end supply chain—from

chip fabs through electronic packaging, assembly and testing,

and system build. Andy is based in Shanghai, China and can

be reached at [email protected].

Contributors

John Constantopoulos, Senior Managing Consultant,


Cristene Gonzalez-Wertz, Associate Partner,


Matthieu van Bilsen, Electronics Industry Leader

http://www.ibm.com/electronics


http://www.ibm.com/financing


mailto:%[email protected]


mailto:%[email protected]





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2 IC Insights Research Bulletin, China’s IC Market Growth Continues toOutpace Its IC Manufacturing, January 28, 2013

3 Sri Kaza, Rajat Mishra, Nick Santhanam, and Sid Tandon, The challengeof China, McKinsey & Company, August 2011, accessed July 25, 2013,http://www.mckinsey.com/client_service/semiconductors/latest_thinking/

the_challenge_of_china

4 PwC Technology Institute, China’s impact on the semiconductor industry:2012 update, February 2013

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6 SEMATECH News, ISMI Energy Study Reveals Significant Opportunities to Reduce Consumption, Emissions and Costs in Semiconductor Manufacturing ,[press release], June 4, 2012, accessed July 26, 2013,http://www.sematech.org/corporate/news/releases/20120604.htm


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the-fabless-foundry-gap.html?cmpid=ENLConfabJune62012

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2615&languageid=1


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2AB7EC3D77C7.html#!4DB2E798-A4A6-45DA-B5BE-2AB7EC3D77C7

Please Recycle

ELW03006-USEN-00

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http://www.shanghaidaily.com/Business/it/China-semiconductors-hold-50-globally/shdaily.shtml


http://www.mckinsey.com/client_service/semiconductors/latest_thinking/the_challenge_of_china


http://www.sematech.org/corporate/news/releases/20071105.htm




http://www.electroiq.com/articles/sst/2012/05/the-confab-2012-bridging-the-fabless-foundry-gap.html?cmpid=ENLConfabJune62012


http://www.knowledgeatwharton.com.cn/index.cfm?fa=viewArticle&articleID=2615&languageid=1


http://money.cnn.com/magazines/fortune/fortune500/2012/performers/companies/biggest/


http://live.wsj.com/video/what-tech-company-holds-the-most-patents/4DB2E798-A4A6-45DA-B5BE-2AB7EC3D77C7.html#!4DB2E798-A4A6-45DA-B5BE-2AB7EC3D77C7





















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