semi-conductor as an exchange deal for a course requirement and their need to expand
in terms of additional equipment and manpower. So I immersed myself in studying the market of integrated microchips, knowing the demand and supply, the pricing, the suppliers and competitors in Asia.
They have thinnest margin for error
For chipmakers, improving by a hair would be gigantic
Smaller, faster and above all cheaper -- those words will rule San Francisco's Moscone Center this week as the toolmakers of the semiconductor industry gather to show off the industrial wizardry to create the chips of the future.
The annual Semicon West trade show is expected to draw about 1,300 companies and 35,000 people to show off the latest tools and techniques for turning thin slices of silicon into electronic brains inside everything from computers to cell phones.
Making chips is a capital-intensive business. Worldwide sales of semiconductors totaled $227 billion in 2005. The toolmakers whose wares will be on display this week booked sales of $32.9 billion last year.
That works out to roughly 14 cents spent on equipment for every dollar's worth of chips sold. Before the dot-com crash, spending on equipment was higher, ranging from 17 to 20 percent of semiconductor sales, according to Dan Tracy, research director for Semiconductor Equipment and Materials International, the trade association behind the show.
In recent years, however, caution in the aftermath of the crash, coupled with a change in the nature of the electronics marketplace, have lowered the tool-to-chip spending ratio.
Many semiconductors now end up in cars, cameras and music players, rather than in computers. About 46 percent of chips went into computers in 2005, according to the Semiconductor Industry Association, which represents the chipmakers who buy equipment from the tool vendors meeting in San Francisco. The next-biggest chunk, 20.9 percent, went into communications equipment, followed by 17.2 percent for consumer electronics. Automobiles and industrial equipment each consumed roughly 8 percent of the chip market.
This trend has increased the pressure to cap costs throughout the production chain from toolmakers to chipmakers to finished-goods makers.
"A lot of the (electronics) industry is moving toward the consumer and price becomes essential when you're dealing with consumer rather than corporate buyers,'' said Doug Andrey of the Semiconductor Industry Association.
Just as chips are the key component in electronic devices, transistors are the bedrock of each semiconductor. Transistors are switches that turn electricity on or off. When the transistor was invented nearly 60 years ago at Bell Telephone Laboratories, it was about the size of an old-fashioned, metal-case cigarette lighter.
Today, a 4-GB iPod Nano stores music on a flash memory chip that incorporates 32 billion transistors, according to Mark Pinto, chief technical officer at Applied Materials Inc., one of the world's leading semiconductor toolmakers.
"A lot of the things consumers want today are small and mobile,'' said Pinto, articulating the challenge of making tools to mass produce tiny objects that must be flawless and cheap: "Can you make a billion of them and can you sell the (electronic) product for $10?"
On a recent tour of the Applied Materials campus in Santa Clara, company officials showed off the dust-free clean rooms, where technicians in white suits and booties design and test the machines that stamp out chips. Given the number of transistors that must fit into so little space, even minute amounts of airborne dust could foul the process. According to Applied, the air inside clean rooms is about 2 million times more dust-free than what we breathe at home.
About 500 to 700 steps are required make a chip, said Applied spokesman Dave Miller. The process begins with a circular wafer of silicon about the thickness of a credit card. On this silicon base, a variety of techniques -- some borrowed from printing and others from baking -- build up a series of layers that constitute the chip's electronic features.
The working parts of a chip are so small as to be scarcely imaginable. A state-of-the-art chip incorporates millions of transistors, each 65 nanometers wide. How small is that? Well, a human hair is about 80,000 nanometers thick -- which means that 1,230 or so transistors could sit side-by-side in a hair's width.
The ever-shrinking size of these switches was first observed by Intel Corp. co-founder Gordon Moore in 1965, when he predicted that the number of transistors per chip would double roughly every 18 months. During the past four decades tool vendors and chipmakers have continued this doubling feat, making what is now called "Moore's Law" an article of faith in the electronics industry.
At some point, however, Moore's Law may run afoul of the more fundamental laws of physics or chemistry as semiconductor-makers continue this incredible shrinking act.
"The transistor is supposed to be a switch, it's either on or off,'' said Applied's Pinto. "Trouble is, when it gets very, very small it's hard to make it stay off."
Of course, small is relative when it comes to chips. Not content with 65-nanometer transistors, the industry is working on ways to slim these electronic gates to 45 nanometers -- which would allow nearly 1,800 of them to fit in a hair -- all to keep producing the ever-cheaper and more-powerful gadgets to which modern consumers have become accustomed.
"The lever to drive down the cost per transistor is to make it smaller,'' Pinto said.
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