Witnessing paradigm shift in semiconductor technology

FT.com / UK – Moore’s Law hits economic limits.

A leading chip manufacturing company will break ground on a 200-acre site in upstate New York this week, starting construction on a $4.2bn state-of-the-art factory.

But these days, new chip “fabs” are as rare as the April 1965 issue of Electronics Magazine.

Intel paid $10,000 for a single copy of the magazine in 2005. This was the issue which featured an article by the company’s co-founder Gordon Moore, in which he predicted transistor densities on chips would continue to double, about every two years.

In accordance with what we now know as Moore’s Law, we have moved from pieces of silicon with 16 transistors on them in the 1960s to ones with 600m today. More than 1m could fit on the full stop at the end of this sentence.

Globalfoundries’ “Fab 2” in New York will achieve another level of miniaturisation when it begins volume production in 2012, making chips with circuitry just 28 billionths of a metre wide.

But its construction is a rarity because of another aspect of Moore’s Law. We have yet to reach a scientific limit to further miniaturisation, but an economic one is fast approaching, according to some experts.

“The high cost of semiconductor manufacturing equipment is making continued chipmaking advancements too expensive to use for volume production, relegating Moore’s Law to the laboratory and altering the fundamental economics of the industry,” wrote Len Jelinek, chief analyst for semiconductor manufacturing at the iSuppli research firm, last month.

Mr Jelinek predicted that Moore’s Law would no longer drive volume chip production from 2014, sparking intense debate in Silicon Valley.

His reasoning is that circuitry widths will dip to 20nm (nanometres or billionths of a metre) or below by that date. But the tools to make them would be too expensive for companies to recover their costs over the lifetime of production.

The costs and risks involved in building new fabs have already driven many makers of logic chips (processor or controller chips) towards a “fabless” chip model, where they outsource much of their production to chip “foundries” in Asia.

The 14 chipmakers who were in the game at the 90nm level have been reduced to nine at the current 45nm level. Only two of them – Intel and Samsung – have firm plans for 22nm factories.

Intel argues that only companies with about $9bn in annual revenues can afford to be in the business of building new fabs, given the costs of building and operating the factories and earning a decent 50 per cent margin. That leaves just Intel, Samsung, Toshiba, Texas Instruments and STMicroelectronics.

Andy Bryant, Intel’s chief administrative officer, says Gordon Moore’s original article was an economics paper rather than a technical treatise.

“Moore’s Law is really not about the science, it’s about the business model that the science drives,” he says. “What Gordon said was the model is driven by the cost reductions that are allowed – the science takes the technology into more and more devices and the volume will explode because the cost comes down, so it is an economic model.”

So as long as demand can be maintained by consumers and businesses wanting the latest gadgets and features, Moore’s Law, and the huge investments it entails, will continue to make economic sense for fab builders.

“You see a lot of companies, who can no longer afford to be in manufacturing, wanting to declare the end of Moore’s Law, but it’s not in the near future,” he says.

However, with fewer companies to whom they can sell factory equipment and tools, these are tough times for big suppliers such as Applied Materials.

Hans Stork, Applied’s chief technology officer, says there will have to be consolidation among chip equipment suppliers. But he sees opportunities in other segments of a chip market split three ways into logic chips, D-Ram memory and Nand flash storage.

“We still see considerable upside on the storage side, there’s a lot of innovative work being done on solid-state drives to make them mainstream – that could be a big lever for us,” he says.

Those chip companies priced out of the market for the next level of miniaturisation are expected to extend the life of current technology with fresh innovation and marketing ploys.

Intel rival Advanced Micro Devices chose to split the company, with AMD becoming a fabless chipmaker and the new Globalfoundries spun off as a fab owner to make chips for AMD and others. Globalfoundries is working with IBM and has been bankrolled by the Abu Dhabi government. Business alliances and government support are other ways that companies can compete with Intel and Samsung.

“No one company or country is really going to drive this forever, I think it’s going to be collaborative in many forms that we are yet to see,” says Doug Grose, Globalfoundries chief executive