HALF MOON BAY, CA  -- Collaboration through joint development projects will be necessary for the semiconductor industry to economically deliver advanced materials required for next generation devices, according to speakers at the SEMI Strategic Materials Conference.

In the past it has taken from 15 to 20 years from pure research to high volume manufacturing, according to SMC keynoter Ken David, director of the components research group at Intel Corp. "We don't have that kind of time anymore," he said. "In order to realize the potential of new materials, we must shorten the time between discovery and implementation," and that means collaboration between device makers and equipment and materials suppliers, according to David.

Innovation in materials provides a path to extend Moore's Law well into the next decade through what he called "equivalent scaling" -- defined as geometric scaling assisted by innovation.

Every major introduction of a new material into the semiconductor process has been met by significant challenges. For example, the shift from aluminum to copper interconnects forced Intel to change the way it designed wafer fabs to avoid possible copper contamination, said David. A second example, the introduction of low-k dielectrics, was "one of the most surprising and difficult transitions," he said. "There have been a lot of missteps [in low-k]. We all learned the hard way," he said.

During a panel discussion Gene Banucci, chairman of ATMI, said it was essential for a materials company to collaborate when developing new processes otherwise the material was "going down a big dark hole." For its part, ATMI has about 30 joint development projects going on at any one time. "We have to work with other people to get things done," said Banucci.

The sharing of intellectual property arising from collaborative efforts was a hot topic for discussion. Gary Dauser, program director for IBM's intellectual property and licensing organization, said the simplest method was the "yours, mine and ours" approach. "IP that you develop is yours but I'm licensed to it; IP I develop is mine but you're licensed to it; and things we jointly develop...we can do with it what we want," he said. Dauser said the issue becomes more complex when the partners want to extend the IP usage to projects involving companies outside of the original joint development partners.

Jerry Coder, president of IC fabrication materials for DuPont Electronic Technologies, pointed out that the economics of developing materials for advanced semiconductor processes are getting poorer and poorer in terms of the return on investment. As a result, some major chemical companies have withdrawn from the semiconductor industry. "It is a problem for all of us. We need to find a model that is a win-win-win situation for all parties that are involved in that collaboration," he said.

John Poate, chief technology officer for Axcelis Technologies, said the materials used by the industry over the past 40 to 50 years have essentially been "gifts from God", and that it will get a lot harder from here. New materials, such as high-k dielectrics, are only just being explored and their successful use will require a lot more understanding, he said.

"The big IP winners will be the organizations or companies who understand the interplay between circuit design, the processing and these new materials and new structures so you can leverage what you have got," said Poate.

While collaboration is essential, speakers generally agreed it was not feasible to bundle IP developed jointly by equipment and materials companies into a single entity. Richard Faubert, president and CEO of AmberWave Systems, said the business models and infrastructure requirements for materials and equipment companies were so different that it would be nearly impossible to maintain the two under the one roof. "There are very different sets of competencies required to be a premium supplier in both places at the same time," he said.

HALF MOON BAY, CA  -- This year's semiconductor downturn will be short and relatively painless thanks to lessons learned from the past, according to a panel of analysts at a recent SEMI conference.

The consensus is for semiconductor device sales growth to be flat in 2005, while chip equipment sales will be down from 10 to 15 percent, said analysts participating in the ISS press conference. Excess inventory currently in the supply chain will be worked out of the system by the second quarter, and the second half will be better, they said.

Semico Research Corp. forecasts a 4.7% decline in semiconductors this year after 28% growth in 2004. "Although we're calling for a decline, we don't believe it's going to be as steep or as long as what we saw in the previous decline," said Jim Feldhan, president of Semicon. Double digit semiconductor growth will resume in 2006, at 14.6%, he added.

Longer term, Feldan is optimistic over the prospects for capital equipment market growth because of the rapid move towards more advanced semiconductor manufacturing technologies. In 2004, only 3% of wafer demand was for 90-nm technology, whereas the 90-and 65-nm nodes would account for 27% of wafers in 2008, according to Semico.

Moshe Handelsman, president of Advanced Forecasting Inc., said the softness experienced in late 2004 would continue into Q2 this year, after which growth will resume. In terms of wafer shipments, Advanced Forecasting sees a continued decline in shipments in 2005, although the decline will be mild. Handelsman said the industry has learned valuable lessons from the last downturn which will help it weather future periods of slow market growth. The recession of 2001 "frightened all the players," and they are now more lean and mean, he explained.

IC Insights is forecasting a decline of 2% in device sales this year, and 8 to 9% growth next year. "We are actually very encouraged about 2006," said Bill McClean, president of IC Insights. "We think most of the correction in this IC industry cycle will happen in the first half of 2005."

Structural changes in the industry - such as the increasing role of wafer foundries and a lengthening of the period between technology nodes - would lead to more efficient capital spending and decrease the magnitude of overspending in the chip industry, according to McClean.

IC Insights also predicts that in 2005 China will emerge as the world's largest consumer of ICs, surpassing Japan and North America, account for more than 20% of global IC consumption. That's up from 7% in 2001.

The semiconductor materials market will continue to grow over the next several years, from $28 billion in 2004 to an estimated $34 billion in 2007, noted Dan Tracy, senior director, industry research and statistics for SEMI. In 2005, the market for packaging materials will grow 8% to just over $11 billion, while wafer fab materials will grow 6% to almost $17 billion, according to a SEMI forecast.

Double digit growth will be experienced by some materials sectors, including low-k dielectrics, SOI, solder balls, CMP and laminate substrates. In the period from 2004 to 2007, compound annual growth rates for silicon wafers shipments will be 4.5% globally, and 10% in Asia Pacific, according to Tracy.

Gartner Dataquest is forecasting about 5% growth in semiconductor device sales this year, and a drop of 15% for capital equipment. Klaus-Dieter Rinnen, managing vice president, semiconductors, said the downturn in 2005 will be "shallower and shorter" than 2001. "By the end of Q1 we should be moving out of the [current] excess inventory situation," he said.

Rinnen noted that, unlike during the last down cycle, the industry this time has two weapons to defend itself. "Cost control will be its shield protecting companies against market pressures, but innovation will be its sword with which companies can actively defend and stimulate and open new markets," he said.

Wavics was founded in 2000 and is privately held. It employs approximately 55 people,

GUANGDONG PROVINCE, CHINA -- Are wages among factory workers in China about to rise? Reports from several news sources seem to indicate that a massive shortage of manpower coupled with modest inflation of the national currency will lead to higher costs for manufacturers later this year.

Global Sources this week said that inflation is ahead due to anticipated appreciation of the China's currency, the yuan, against the U.S. dollar. The timing is especially bad for the region, which has endured steady price inflation and flat wages. Local companies are facing persistent labor shortages and China has been recording more than 2 million vacancies annually, Global Sources said.

Separately, a report today said the local government is set to raise salaries for workers by 16.7%, to $70 a month.