Analyst Warns Of Semiconductor Monopoly - InformationWeek

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Analyst Warns Of Semiconductor Monopoly

Taiwan Semiconductor Manufacturing Co.'s deep pockets and enormous fabs give it a substantial market lead over competitors, says chip market researcher.

Just as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) prepares to build one of the world's largest fabs, a prominent analyst is warning that the company may end up seeming like a monopoly by the end of the decade.

Malcolm Penn, founder of chip market researcher Future Horizons, said the foundry has a better chance of pushing ahead with making chips on larger wafers than its nearest competitors. That would give it a huge cost advantage over rivals and allow it to gain more and more market share. Penn made the comments in an interview with veteran tech industry journalist Mike Magee.

Last week, TSMC broke ground on its latest factory, which it is calling a "giga" fab because it will produce more than 100,000 wafers a month and generate annual revenue of $5 billion when it reaches full capacity. TSMC has two similar fabs that will have a combined capacity of more than 240,000 wafers a month by the end of this year.

TSMC will start moving equipment in during June of 2011 and ramp the fab during the first quarter of 2012 to use 40-nanometer process technology and the more advanced 28-nm technology on 300-mm wafers.

Penn said among all the key foundry competitors, TSMC is likely the only one with pockets deep enough to research and execute the transition to 450-mm wafers. Samsung and Intel are also investigating the change, which may occur closer to 2020.

Moving to larger wafers is key for the integrated circuit industry because it drives substantial cost reductions. A 300-mm wafer holds about 2.4 times as many chips as a 200-mm wafer, but it costs considerably less than 2.4 times as much to produce, so per-unit costs drop. For instance, microprocessors from Intel's 300-mm wafer fabrication plant cost 30% less per chip than chips from 200-mm wafers.

TSMC's competitors, such as Taiwan-based United Microelectronics Corp. (UMC) and Shanghai-based Semiconductor Manufacturing International Co. (SMIC) will have a much harder time making the transition because their current revenue might not be able to support the effort. SMIC, for instance, takes in less revenue than TSMC spends on research & development in a single year.

Penn also criticized trade associations for not doing a proper job in facilitating an industry-wide shift to larger wafers, so more companies would benefit from the larger scale. "It comes to a head at 450 mm, where the semi guys are saying yes, and the equipment guys are saying no way. They're like a couple of school kids. The argument is about who pays. Trade associations are supposed to sort these things out," he said.

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