Tag: UMC

  • The Opportunity in Lagging Edge Semiconductors

    While much attention is (rightly) focused on the role of TSMC (and its rivals Samsung and Intel) in “leading edge” semiconductor technology, the opportunity at the so-called “lagging edge” — older semiconductor process technologies which continue to be used — is oftentimes completely ignored.

    The reality of the foundry model is that fab capacity is expensive to build and so the bulk of the profit made on a given process technology investment is when it’s years old. This is a natural consequence of three things:

    1. Very few semiconductor designers have the R&D budget or the need to be early adopters of the most advanced technologies. (That is primarily relegated to the sexiest advanced CPUs, FPGAs, and GPUs, but ignores the huge bulk of the rest of the semiconductor market)
    2. Because only a small handful of foundries can supply “leading edge” technologies and because new technologies have a “yield ramp” (where the technology goes from low yield to higher as the foundry gets more experience), new process technologies are meaningfully more expensive.
    3. Some products have extremely long lives and need to be supported for decade-plus (i.e. automotive, industrial, and military immediately come to mind)

    As a result, it was very rational for GlobalFoundries (formerly AMD’s in-house fab) to abandon producing advanced semiconductor technologies in 2018 to focus on building a profitable business at the lagging edge. Foundries like UMC and SMIC have largely made the same choice.

    This means giving up on some opportunities (those that require newer technologies) — as GlobalFoundries is finding recently in areas like communications and data center — but provided you have the service capability and capacity, can still lead to not only a profitable outcome, but one which is still incredibly important to the increasingly strategic semiconductor space.

    When GlobalFoundries abandoned development of its 7 nm-class process technology in 2018 and refocused on specialty process technologies, it ceased pathfinding, research, and development of all technologies related to bleeding-edge sub-10nm nodes. At the time, this was the correct (and arguably only) move for the company, which was bleeding money and trailing behind both TSMC and Samsung in the bleeding-edge node race. But in the competitive fab market, that trade-off for reduced investment was going to eventually have consequences further down the road, and it looks like those consequences are finally starting to impact the company. In a recent earnings call, GlobalFoundries disclosed that some of the company’s clients are leaving for other foundries, as they adopt sub-10nm technologies faster than GlobalFoundries expected.

    GlobalFoundries: Clients Are Migrating to Sub-10nm Faster Than Expected
    Anton Shilov | Anandtech

  • Made in Taiwan

    I’ve been on my current consulting case for about 3 months. It is a strategy case for a technology client. As a result, I’ve been able to do a great deal of work researching various technology markets and trends, ranging from the typical (Internet search) to the more esoteric (grid computing), as I help the client scope out possible expansion opportunities.

    During the course of this research, I have been surprised by many aspects of the technology value chain I did not appreciate before, but what I found most surprising on a personal level was how important Taiwan is to the global technology market.

    This is a particular point of pride for me, for despite Taiwan’s pre-eminence as an economic power and it’s fascinating fusion of Western, Japanese, and Chinese influences, the island is not given the same respect or attention as Hong Kong or Singapore. Despite a vibrant political system, it has no seat on the United Nations, no diplomatic recognition by any major country, and even to the United States which guards the island as if it were its own, it is the black sheep of the US’s circle of friends.

    And yet, the world as you or I know it would not be able to get along without it:

    1. Taiwan is the center of the world’s semiconductor foundry business. Because cutting-edge semiconductor factories (called fabs) are so expensive to manufacture, only the largest semiconductor firms (such as Samsung and Intel) have the annual sales numbers to justify building their own factories. Smaller players are better off outsourcing their production capacity to dedicated semiconductor factories, called foundries. Today, almost all semiconductor manufacturers use the services of a foundry to build most if not all of their semiconductors. The world’s two largest foundries, TSMC (Taiwan Semiconductor) and UMC (United Microelectronics) are located in Taiwan, and together control approximately 60% of the world foundry business (the next largest foundry is only half the size of UMC, which is itself only about one third the size of TSMC!) and exert significant influence in the global semiconductor industry.
    2. Taiwan is the center of the world’s electronics manufacturing services. What many people don’t realize is that companies like Apple and Dell tend to only specialize in marketing and some design, but not in manufacturing (which would involve building a factory, gaining manufacturing expertise and skill, and other expensive and difficult things for a firm trying to stay lean and on the cutting edge). These firms thus outsource their manufacturing to specialized firms called Electronic Manufacturing Services (EMS) firms. The world’s largest EMS company by far is the Foxconn/Hon Hai conglomerate which is responsible for about 20% of the world’s outsourced electronics manufacturing, almost double that of the second largest firm. Never heard of them? You’ve certainly heard of its products: the MacBook Pro, the iPhone, the iPod, the Playstation 3, the Wii, the Xbox 360, graphics cards for AMD/ATI and NVIDIA, … the list goes on.
    3. Taiwan is the world’s original design manufacturing capital. Original design manufacturers (ODMs) go a step further than EMS firms — they actually do provide some of their own design services (which begs the question of what we’re paying Dell and HP and Apple for when they’re outsourcing design to ODMs). This is one reason that many ODMs are also original electronics manufacturers (OEMs) — companies which attach brands to the electronics themselves (think Apple, Lenovo, Dell, etc.) Of the top 10 ODMs in the world in 2006, at least 9 are Taiwanese companies (and that’s because I was too lazy to look up the last one — TPV technology) — those firms alone control nearly 70% of the global ODM market — and they include Windows Mobile phone manufacturer and Open Handset Alliance member HTC and the rapidly growing computer OEM ASUS.
    4. Taiwan is also home to D-Link and Acer. The latter of which recently is trying to resurrect dying brands of eMachines and Gateway.

    Thought this was interesting? Check out some of my other pieces on Tech industry