New fab group chips away at costs by pooling resources
STRENGTH IN NUMBERS: FOA member companies hope to “combine strengths and resources to become more competitive,” says L. T. Guttadauro, the association’s executive director.
PHOTO COURTESY OF MICREL SEMICONDUCTOR
Saving a few bucks on copy paper may seem like small potatoes when you're running a semiconductor fab. But for the members of a new association of fab owners, the recent pooled purchase is a healthy sign for the future of the fledgling organization.
L. T. Guttadauro, executive director of the Fab Owners Association (FOA), admits that saving on copy paper "anywhere from 3 to 25% doesn't sound like a lot." For the members of the FOA, though, the transaction is an important first step in the association's larger goal to seek and find common cause in order to pool resources, save money, and operate as efficiently as possible.
"Basically, we're an international nonprofit, mutual-benefit corporation of semiconductor fab owners and associates who meet regularly to discuss and act on common manufacturing issues," Guttadauro explains. Their aim is to combine "strengths and resources to become more competitive."
For their first commercial purchasing foray, the executive director says that FOA's members wanted to find a common-denominator item they could simply purchase in order to "do a proof-of-concept thing. We went after cleanroom supplies and copy paper. We got together and determined what our internal requirements were, what we could live with, put it into an RFP, and went to currently supplying vendors and asked them to bid." Corporate Express, a business-to-business supplier of office and computer products based in Bloomfield, CO, won the Preferred Supplier Agreement bid.
The baby step enabled some of the FOA members to improve the quality of their copy paper from 84 brightness to 92 brightness and schedule deliveries directly to the copy machine, Guttadauro says. Acting as the go-between for the transaction, the association proved that fab purchasing managers, knowing exactly what they need, could work together.
"It doesn't sound like much," notes Guttadauro, but the deal demonstrated that the members could collaborate. "Now we're looking at things that are more complex."
FOA's members are Cypress Semiconductor, Delphi Electronics, Fairchild Semiconductor, Intersil, Jazz Semiconductor, LSI Logic, Micrel Semiconductor, ON Semiconductor, Spansion, and ZMD AG. The members earn $9.7 billion in combined annual revenues and process more than 600,000 8-in.-wafer-equivalents per month, according to FOA.
Founded in 2004, the association is Guttadauro's brainchild. A semiconductor industry veteran, the executive was working in 1997 as senior director of sales development at Amkor Technology's wafer foundry services group when he began to explore the idea.
He eventually made some cold calls targeting senior manufacturing representatives and invited 12 companies to join. The six who "actually showed up" became founding members, Guttadauro says. Based in Cupertino, CA, the association incorporated in February 2005 with nine members. Spansion, a flash-memory joint venture between AMD and Fujitsu, and Jazz Semiconductor, the association's first pure-play foundry, joined in June 2005.
Motivating Guttadauro in his quest was the notion that "the fab guys, who spend all the money, were underrepresented." He credits SEMI, the trade association for semiconductor equipment manufacturers and service providers, with trying to put together a similar endeavor in the past, but, he notes, "SEMI is for semiconductor equipment vendors. It's not really an association for device makers."
Guttadauro emphasizes that SEMI has helped FOA by providing meeting space at Semicon West earlier this year. He also says that SEMI member companies are among FOA's associate membership of equipment suppliers: "We're very collaborative; SEMI and FOA have reciprocal memberships."
A second motivating factor is that many IDMs continue to operate 200-mm fabs and must find ways of keeping legacy equipment up and running. Not every chipmaker needs to migrate to 300-mm processes, Guttadauro points out.
For Guy Gandenberger, vice president of wafer fab and foundry operations at Micrel Semiconductor in San Jose, the association has been a long time coming. An FOA founding member, Gandenberger says most member firms discovered the organization by word of mouth. The industry, he says, "is very close-knit. There are only so many vice presidents of operations throughout the world. Most of our members have worked for, or with, each other in our pasts."
Fab owners have long bemoaned the lack of an organization such as FOA, Gandenberger says. "This has been somewhat of a complaint of the operating guys for the last 20 years. SEMI has had its own thing. The equipment manufacturers have had their own agency, which they've been nice enough to let us be a part of, but there's never been anything like it for fab owners."
The fab executive believes interest in collaborative efforts is spurred in great part by competition, first from Japan and now from China. "This China thing is starting to get more serious. We're focused on how to be more competitive and how to keep best-known practices here in the United States."
Gandenberger believes that FOA membership benefits Micrel because "we're always looking for methods and practices that potentially can be better than ours. That's because making continuous improvements is what truly makes a fab world class." FOA's culture allows members to talk openly about matters such as die yields and other process concerns, the executive points out. Micrel manufactures ICs for the analog, Ethernet, and high-bandwidth markets.
"It's one thing to get a number; it's another to interview the person who has the world's best number and find out how he does it," Gandenberger explains. "The gold nugget is not in the number; the gold is the process for how you get to that number."
FOA determines its members' needs through a combination of blind surveys and quarterly meetings. The association hosted its sixth quarterly meeting at a Cypress Semiconductor fab in Bloomington, MN, at the end of October, and a series of four surveys were completed in September.
The surveys are designed to create a peer-to-peer database that will allow members to compare themselves statistically with one another, according to Guttadauro. The latest surveys compare member technology and manufacturing capabilities and offer a sortable database of manufacturing tools in each fab. The questionnaires also delve into fab indices and metrics as well as data on potential purchases of consumables and services for each member firm. He says that the association "goes to extreme lengths to maintain the confidentiality of each member's data."
Guttadauro says the surveys "try to stay away from the competitive aspects and from intellectual property or unique process know-how" to focus on the search for manufacturing efficiencies. Survey 1A, for instance, is an introductory questionnaire that, among other issues, asks how many internal and external fabs an IDM has and how many wafers those factories produce each month. Additional data include type of technologies used, such as BiCMOS and MOSFET, and utilization rates.
"From that perspective, a fab manager can look at commonalities between his operation and other operations," notes Guttadauro. That feature can lead to an ability to trade excess capacity. "Some people are excited to know what their counterparts have."
To maintain confidentiality, a fab manager interested in Company D can contact Guttadauro, who will relay the message that Company B would like to talk. So far, the association has a sortable database of approximately 24 fabs. Fab managers can view equipment lists and sort by 4-, 5-, 6-, and 8-in. process lines.
The information also can be sorted by major process area, by equipment manufacturer's name and model numbers. "A fab manager can look at this and say, 'I have x of these, and he has y of those.' How is he supporting those?" In some cases, the equipment may be older and out of warranty, Guttadauro points out, and the information can help managers maintain the operational efficiency of their installed tool base.
The survey on indices and metrics, assembled by two member firms, covers topics such as masking layers per day and dollars spent on raw materials. Guttadauro says that FOA is working with Jennifer Robinson, COO of FabTime, to determine the industry metrics with the goal of normalizing data such as engineering lot cycle time per layer.
"In dollars per layer, in many cases there's a wide variance," the association executive director says. FOA would like to convert the data so that they're normalized for 8-in. wafers in order to ensure that apples are apples and oranges are oranges.
Survey 3 deals with yield and defect densities in all of their manifestations: yield-learning, average mechanical line yield, average defect density at processes lower and higher than 1 µm, for example. Other data cover gate thicknesses, cycle time per layer, and average WIP times, Guttadauro explains. "It does take time to digest."
Examining the data may lead to indigestion for the fab manager who realizes the "friendly competition" is getting 1.2 defects per square centimeter "and mine's at 1.5," Guttadauro says. The survey "establishes a benchmark, and they can talk about it."
Asked whether the exchange of information raised any proprietary concerns for Micrel, Gandenberger replies, "We're trusting up to a point. If I'm going to hand out the gold nugget, I want something in return. When I see someone who has a number better than mine, I'm of course going to want to know how they do it."
As for the association's goal of helping its members improve their manufacturing efficiencies and ultimately their yields, Gandenberger repeats his contention that seeing another fab's numbers is one thing, but determining how the company reached that performance level "is a whole different thing."
"Again, it's got to be seen. A number is one thing, going in getting their defect densities isn't enough," he emphasizes. "I actually need to see the practices…in real life to believe the number." Having visited several fabs over the years, Gandenberger says he's adapted practices from many of them. Micrel's production practices are a conglomerate of "all my experiences in the past 25 years of best practices from 30 different fabs" that he claims as his own.
Suppliers, as associate members, play a significant role in FOA's mission, according to Guttadauro. "For most of these companies, 300 mm isn't the whole world. Yes, a lot of the new materials and equipment are being sold to 300-mm fabs, but there are a lot of 200-mm fabs in this world."
Equipment suppliers have the opportunity "to go back and maintain healthy relationships with those old buyers by doing a couple of things." "One is reengaging with them at an executive level, which we provide. The second thing is making sure there is an updatable path for some of the equipment they bought earlier, whatever the product-line life cycle happened to be."
By doing a good job on the existing equipment base, "vendors can go back and recapture new dollars based on old equipment sales," Guttadauro says. "A lot of guys don't need to go to 300-mm."
The association has nine associate members from the supplier community, with big names such as Applied Materials and ASML among those on board. Lam Research, KLA-Tencor, Strategic Marketing Associates, and the Luther Forest Technology Campus are the latest to join.
Jon Geniesse of KLA-Tencor recently returned from the sixth annual quarterly meeting after addressing the association's members on the topic of refurbished equipment. Geniesse is the vice president and general manager of K-T Certified, a unit of KLA-Tencor. The benefits of FOA participation for both his business and the association's members are in plain view, he says.
"As part of this year's strategic plan, K-T has reorganized its entire sales channel to provide a better focus on the customers that fall into the 200-mm and smaller wafer sizes, with design rules that are trailing the leading edge," the executive notes. "FOA contains representatives of this group of customers, which matches our efforts in this space quite well."
At the recent quarterly meeting, Geniesse told the fab membership that K-T Certified is "actively extending the life of our legacy products through continued investment in software and parts." He also stressed that, as an OEM, the unit offered a greater value proposition than "working with uncertified third parties." In addition, "we reviewed some 200-mm investment scenarios that showed more than a two-times cost savings over the life of a fab if the proper investment decisions were made when expanding 200-mm capacity."
Geniesse foresees a trend toward extending the useful life of 200-mm fabs, with many customers "continuing their drive down Moore's Law, going as far as 65 nm on 200-mm substrates." He would like to see a larger role for the associate members to sustain FOA's momentum, with greater access to the survey's skein of rich data.
Guttadauro says all members are concerned about maintaining the manufacturing proficiency of U.S. chipmakers over the next five years. "Guys who are in niche areas like specialty analog or other specialty process areas, it seems like they're going to be okay in five years. The deep-CMOS guys are going to be in deep [trouble]." Facing the cost pressures of staying on the industry's technology roadmap, IDMs will be "dropping out at 65 nm, maybe 45 nm, but beyond that it ain't going to happen." In 10 years "there's going to be five big guys doing all this stuff."
Micrel's Gandenberger has several concerns about the industry's near-term future. "It's all going to be about costs. I see a lot of the technologies merging below 0.35 µm and 0.18 µm. As an example, analog and CMOS are going to merge at 0.18 µm and below. I also see China having an overabundance of capacity, and to survive you're going to have to be extremely cost conscious. The last thing I worry about is IP, especially in China, because they don't have their controls in place yet."
Eventually, Gandenberger would like to see FOA members actually trade capacity. "As an example, if, let's say, Intersil runs out of capacity, then instead of going over to China, we'd built up a relationship through FOA so that they'll send their wafers over to Micrel to make them so we can use our excess capacity to support fabs in the United States.
"That's what I'm hoping for. Right now, we're building relationships through all the different operations guys. There are certain companies that are head-on competitors and others in different fields, but a piece of silicon is a piece of silicon."
A good deal on copy paper is just the start then. Gandenberger gives FOA good marks so far, though. Having sat on many semiconductor industry boards over the years, he says the new association has done more in its first year and a half of operations than other well-meaning organizations with which he's worked in the past five years.—JC