"Up until three years ago, the semiconductor industry was not concerned with the cost of spare parts," says John Festa. "It was primarily interested in keeping the machines up and running." How long ago that seems now.

COST CUTTER: Spare parts management at Agilent's B-4 fab in Ft. Collins, CO (shown here), was farmed out to Bruckner Supply two years ago. PHOTO COURTESY OF AGILENT

The full-speed-ahead attitude changed as chipmakers realized it's just as important to monitor the cost and inventory levels of pumps and motors as it is to keep a close eye on wafer yields, Festa maintains. The adjustment in thinking has certainly boosted the spare-parts management business for Philips Service Industries (PSI) of Livonia, MI, where Festa is the director of business development. Other such service firms also have benefited.

The executive cites several reasons that chipmakers are paying more attention to solutions for lowering parts costs. The industry slump is the primary one, of course. Other causes include a drop in device ASPs and foreign competition for U.S. chipmakers. "Labor costs are lower overseas, so [saving money] on spares is one way of reducing production costs," says Festa. The 23-year industry veteran is a former PerkinElmer executive and the founder of Beta Squared, which specializes in plasma etch and wafer cleaning.

The issue holds enough importance for SEMI to take notice. The trade association hosted a presentation by PSI at the Fab Managers Forum during Semicon West 2003. Jeff Blackledge, the company's vice president of sales, pointed out that with profit per wafer on the decrease, reducing manufacturing costs has taken on more significance.

Spare components "are the single highest cost driver in the cost-of-
ownership model during the life of a tool," Blackledge said, adding that OEM markups on spares run as high as 300–400%. Breakthroughs in copper processing also drive a greater need for tracking spares because of contamination concerns.

As for tracking the whereabouts of spares, the sales executive told the forum audience that a technician spends as much as 20% of the workday "sourcing spare parts." Spending time locating that vacuum pump can add to equipment downtime that can cost a fab as much as $300,000 per hour, Blackledge warned.

There are several critical requirements for finding an outsourcing partner to oversee inventory logistics, according to Blackledge. The checklist can expand the number of repairable spares, setting accurate levels for the minimum and maximum number of spares, and cross-referencing inventoried parts. Bar coding and a centralized database can provide a detailed picture that shows module, tool, section, fab, and related information that the outsourcing firm's on-site coordinators can use to pinpoint a repairable spare at a specific location.

PSI works with a fairly extensive network of repair companies, Festa points out. The network enables service firms such as his to keep repair costs down "because they can shop around for the best deal." He adds that even motors, PCBs, and other items considered "consumables" could be rescued from the scrap heap.

Established in 1967, PSI has administered its parts management services through the company's repairable asset control (RAC) program for 12 years, Festa says. Approximately 100 companies "from all industrial sectors" have used the RAC program. Some 350 of the company's 500 employees work in the RAC program. Festa notes that PSI has garnered business from chipmakers only within the last few years. Infineon Technologies and Agere Systems are fairly recent additions to the list of clients.

In an e-mail interview, Lonnie Bell, senior manager of maintenance operations for Agere's fab in Orlando, FL, says it's too early in the fab's partnership with PSI "to gauge effectively the complete cost-reduction statistics."

Asked why Agere decided to partner with PSI, Bell says the chipmaker needed "to consolidate its parts repair activity, add a level of traceability to the process, and in the long term reduce the cost of parts repair." He notes that Agere decided to use just one vendor for parts "except for the most critical repairs, where a specific vendor must be used."

Bar coding in particular has proved to offer major benefits, the maintenance manager points out. "The vendor uses a bar coding system which will allow us accurate information regarding the quality of repair, usage, and reliability. This is a very desirable feature that will greatly impact the repair activities of our technicians and vendors."

Good management of spare parts can improve tool performance and, by extension, yields and defect reduction, Bell insists. "Processing equipment is as good as the quality of the maintenance provided. Reliability of parts or spare-parts management is a major contributor to performance. If you have a spare-parts management system, it should help in reducing downtime, improve availability, and enhance throughput."

Some advanced processes in particular can benefit by keeping an airtight grip on parts inventory. This is especially the case in copper-based production, Festa emphasizes. "As contamination of individual parts and the potential of cross-contamination with copper processes become a larger concern, it's becoming a necessity to individually track each part and each transaction, vendor, and process that the part is exposed to."

Taking these steps will also enable the end-user to track each vendor's performance and "identify and resolve quality issues sooner." The practice also makes it possible to track the life of specific parts.

Agilent Technologies began to farm out its parts management of a Colorado fab to Bruckner Supply of Port Washington, NY, approximately two years ago, says David Leto, procurement manager for Agilent's semiconductor products group in Ft. Collins, CO. Downsizing of the procurement group "and some good information of how we can reduce costs" led to the decision to use Bruckner. The benefits include lower spares costs, reduced staffing, and smaller supply chain, Leto says.

And the drawbacks? Leto believes the biggest drawback has been adapting to the change within the company. Giving up some control has also taken some adjustments. A backup service is available around the clock to provide hard-to-find parts, he notes.

Both Leto and Festa say that parts from the major OEMs are often the hardest to procure at lower costs. "Anything from a Nikon or an Applied Materials [is hard], because there's very little competition when they're the sole source." Bruckner's service does include second-source suppliers found on Internet sites such as eBay, Leto points out.

PSI's Festa believes that the semiconductor industry can benefit from the experience that a firm such as his has acquired working with old-line industries over several decades. The automotive, paper, and primary metals industries "have over the past two decades been forced to reduce their cost of manufacturing while maintaining high-quality products. The semiconductor industry is making the transition to a business model that will parallel many of these industries."—JC