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10 Semiconductors
Pages 245-286

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From page 245...
... The authors are solely responsible for any errors or omissions. 2Market share data presented in this paper represent the dollar amount of billings as reported by member semiconductor firms to World Semiconductor Trade Statistics (WSTS)
From page 246...
... U.S. firms steadily lost market share to Japanese firms in memory components during the 1980s, and Intel, now among the most profitable semiconductor manufacturers in the world, nearly collapsed in the 1984-1985 industry recession.
From page 247...
... 5Merchant semiconductor firms sell most of their production on the open market, in contrast to captive semiconductor firms who produce semiconductor devices principally for internal "parent" systems divisions. 6The SEmiconductor MAnufacturing TECHnology (SEMATECH)
From page 248...
... A short summary and concluding comments are presented in Section V INDUSTRY PERFORMANCE, 1980-1997 Our discussion of industry performance begins with a summary of the development of the global semiconductor industry, highlighting trends in the market shares of U.S.
From page 249...
... In contrast, the Japanese and Western European semiconductor industries were and continue to be dominated by subsidiaries of large, diversified firms in the electrical equipment industries. 60% 40% ~ 80% Ct s o o ~o%X ~ ~ ~ ~ ~ ~ ~ ~ ~ 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 Year FIGURE 2 Worldwide IC production market share, 1970-1980.
From page 250...
... , and Japanese producers of semiconductor devices and manufacturing equipment launched several research programs to improve the semiconductor manufacturing capabilities of domestic firms. These initiatives included the well-known VLSI Program overseen by MITI and a parallel program for its semiconductor suppliers sponsored by NTT.
From page 251...
... merchant semiconductor producers lost considerable market share during this period (see Figure 5~. From a leading share of almost 62 percent in 1980, U.S.
From page 252...
... Indeed, the trends in Japanese firms' share of overall capital spending and Japanese semiconductor equipment market share parallel one another closely, since many Japanese semiconductor firms purchased most of their manufacturing equipment from domestic suppliers. Japanese firms held less than 50 percent of the equipment market in Japan in 1980, but their share increased to 84 percent by 1991 and remains near 75 percent in 1997 (VLSI Research, 1998~.
From page 253...
... New Competition in DRAMS, 1992-1997 The post-l990 decline in Japanese firms' global market share reflected the revival of U.S. firms in new, more profitable product lines, as well as entry by South Korean and Taiwanese firms into the DRAM market.
From page 254...
... Moreover, more intense price competition has reduced the profitability of DRAMs. Their loss of market share therefore understates the financial damage to Japanese semiconductor firms from their focus on DRAMs.
From page 255...
... semiconductor firms averaged 780 PPM for the same devices (Finan, 1993~. Their skills in managing the development and introduction of new process technologies also enabled Japanese semiconductor manufacturers to "ramp" output of new products more rapidly than their U.S.
From page 256...
... Some U.S. semiconductor firms devoted considerable effort to learning from Japanese firms; and those with operations in Japan, particularly TI and Motorola, were among the first to apply Japanese quality management techniques.
From page 257...
... A key measure of semiconductor manufacturing performance is die yield, the number of usable die per silicon wafer that emerge from the manufacturing process. Die yield is a measure of "process quality" that differs in at least one important respect from the product defect data discussed earlier.
From page 258...
... The level of technical sophistication of semiconductor manufacturing processes typically is defined as the size of the smallest feature on a chip that is manufactured with the technology. "State-of-the-art" manufacturing processes now can produce chips with linewidths as small as 0.18 microns But this technological frontier is continually moving, and comparing manufacturing performance over even a brief length of time requires a choice of a single linewidth category that has been in use within the U.S.
From page 259...
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From page 260...
... Although U.S. semiconductor firms have narrowed the gap with Japanese firms in die yield for some devices, they continue to lag in other areas, such as direct labor productivity.
From page 261...
... SEMICONDUCTORS of ~He ~ to ,( of, ~ ~ -)
From page 262...
... These facilities support the development and debugging of new process technologies and equipment in an environment that is insulated from the demands of high-volume manufacturing yet is designed to reproduce as many characteristics of that environment as possible. Intel's integrated process development facility in northwest Oregon doubled manufacturing yields from the 1980s to the mid-199Os and accelerated the "ramping" of production of new device designs (Cole, 1998~.
From page 263...
... U.S. semiconductor firms' total ASIC market share declined from 1988 to 1991 but has rebounded.
From page 264...
... Source: ICE Status: A Report on the Integrated Circuit Industry, 1982-1998. >< Bl POLAR ANALOG LOG IC MEMORY In both Western Europe and Japan, the much slower growth of end-user markets has hampered European and Japanese semiconductor firms' entry into DSPs and related products.
From page 265...
... U.S. firms have signifi ~75% s (A ~ 50% 4 o o AL ~25% 0% ~ _ _ _` l l l l l l l l 1 988 1 989 1 990 1991 1992 1993 1 994 1 995 1 996 1 997 Year _US JAPAN EUROPE Row FIGURE 12 Worldwide microcomponent production market share, 1988-1997.
From page 266...
... These investment trends have contributed to a revival of the U.S. semiconductor manufacturing equipment industry, which increased its global market share from roughly 45 percent in 1990 to more than 50 percent in 1997, while Japanese equipment firms have lost market share (see Figure 6~.
From page 267...
... Drawing on their experience in operating "foundry" production facilities, other Taiwanese firms now are able to switch from memory to advanced logic components, depending on market conditions. The flexibility gives them an advantage over South Korean and Japanese semiconductor firms and may foreshadow the development of a formidable competitor in the years to come.
From page 268...
... The declining opportunities for entry into semiconductor manufacturing, however, created other possibilities and financing for specialized design firms. These so-called "fabless" semiconductor firms design semiconductor components but rely on specialized "foundries" for the production of their designs.
From page 269...
... Although the manufacturing capabilities of most advanced foundnes lag behind those of merchant semiconductor firms, this gap is expected to close in 1998 (see Figure 13~. Fabless firms serve a variety of fast-growing industnes, especially personal computers and telecommunications, and seek to dominate their markets by offering more innovative designs and shorter delivery times than merchant firms.
From page 270...
... Although U.S. semiconductor firms have not significantly expanded their foreign R&D operations, alliances among U.S.
From page 271...
... semiconductor firms' commercialdevice manufacturing capabilities.24 SEMATECH was formed in 1987 by 14 U.S. semiconductor manufacturing firms that together accounted for more than 80 percent of U.S.
From page 272...
... In the case of semiconductor manufacturing equipment, for example, a significant portion of the improved market share of U.S. suppliers reflects the decline in Japanese manufacturing firms' capital investments, which has depressed the growth of equipment demand in a market that was long dominated by Japanese equipment firms.
From page 273...
... Fabless semiconductor firms also are pursuing collaborative R&D in two consortia sponsored by FSA. The first is a 0.35-micron wafer level reliability project that seeks to standardize test structures and test methodologies and evaluate their usefulness.
From page 274...
... Although the leading U.S. merchant semiconductor firms, such as Intel, TI, Micron, and AMD, spend 10-15 percent of revenues on R&D, the bulk of these expenditures focus on new product development.
From page 275...
... semiconductor industry has emphasized technological factors, such as the improvements in U.S. firms' manufacturing performance and renewed emphasis on product innovation.
From page 276...
... . VC funds have supported the foundation of literally hundreds of semiconductor firms since this industry's inception four decades ago.
From page 277...
... semiconductor firms. Nevertheless, given the competitive realities of this industry, especially the short product cycles and high costs of R&D for maintaining near-term competitiveness, the risk-adjusted cost of capital would have to be very low indeed to produce higher levels of such investment.
From page 278...
... The market-share provisions of the 1986 and 1991 agreements, however, were eventually followed by a significant increase in U.S. semiconductor manufacturers' market share in Japan, and the agreement is viewed as a key factor in expanded Japanese imports of foreign components.
From page 279...
... semiconductor equipment market represented by SEMATECH member firms means that this consortium's vertical relationships deserve continued monitoring. Indeed, collaboration may provide one mechanism for combining the benefits of the U.S.
From page 280...
... Copies of a device design and mask work are necessary but by no means sufficient to enable large-scale production of infringing products (Kasch, 1993~. As a result, semiconductor firms during the 1980s and 1990s continue to rely on trade secrets and patents, the value of which has increased as a result of the policy shifts noted above.34 3iMask works represent the three-dimensional pattern of the layers (the topography)
From page 281...
... Certainly, the increased litigiousness of established U.S. semiconductor firms has attracted criticism from other U.S.
From page 282...
... semiconductor firms undertook corrective actions on several fronts. They exited from product lines in which their historic skills at product innovation provided limited competitive advantage and their foreign competitors' superior access to capital made long-term competition difficult.
From page 283...
... But the unexpected nature of this revival, its rather complex causes, the contributions to it of cyclical factors, and the fragility of its foundation all suggest that competitive strength in this industry cannot be taken for granted. Indeed, some foreign producers, notably Taiwanese semiconductor firms, now are entering markets traditionally dominated by U.S.
From page 284...
... semiconductor firms must maintain their strategic agility and strength in product innovation while avoiding significant erosion in their manufacturing capabilities in order to maintain their strength. This task will require imagination and collaboration among government, industry, and academia.
From page 285...
... . "Status: A Report on the Integrated Circuit Industry," Integrated Circuit Engineering.


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