The global electronics business continues to grow and evolve, driven by consumer demand, digitisation and Industry 4.0, and the wider Internet of Things (Iot) movement.
The traditional home to this evolution has been San Francisco’s Silicon Valley, a renowned hub for microelectronics innovation since the term was coined in the early 1970s and, technically, long before then. The roots of Silicon Valley could be traced far further back, to the development of the silicon transistor and computer networking midway through the 20th century.
But what of its future?
With the rapid emergence of the Tiger Economies in South East Asia and the many advantages these developing markets offer, the traditional home of electronics on the US West Coast is being challenged by a new wave of Silicon Valleys – at a time when the market is poised for strong growth.
Data from authorities like SEMI, the global industry association serving the manufacturing supply chain for the micro and nano-electronics industries, suggests the electronics sector is very much in the midst of an upward curve, with consistently strong book-to-bill figures and strong market growth.
When I caught up recently with Wayne Twardokus, Director of investment bank and M&A experts League Park, he agreed with this positive outlook for the electronics business and pointed to solid volume potential built largely upon smart devices and the relatively short product lifecycle of consumer electronic devices.
With Taiwan boasting one of the largest foundry semiconductor manufacturing capacities in the world, the Asia-Pacific region has long been at the forefront of the global microelectronics business. Likewise, Japan has been a prominent player in this market for decades now.
But with countries like Malaysia and Vietnam increasingly coming to the fore in semiconductor manufacture, can we reasonably expect to see new ‘Silicon Valleys’ emerge in South East Asia?
“I think so,” said Twardokus. “In 2015, the leading sources of imports for the US semiconductor market were Malaysia, accounting for 30% of imports, China (13%), Taiwan (11%), Japan (7.5%), South Korea (6.8%), and Vietnam (6.4%). “
“The cost of building new semiconductor manufacturing facilities has been increasing drastically. As a result, many semiconductor companies are unable to build and equip a leading-edge manufacturing facility, and instead adopt a ‘fabless’ model in which they contract out the manufacturing of their semiconductors to a third party.”
He explained that many US fabless semiconductor design companies contract with foundries in Taiwan to manufacture semiconductors. “Leading suppliers of semiconductors to the US, such as Intel and Micron, operate fabs in the US where they manufacture wafers that are then shipped to assembly and test facilities, many of which are located in Malaysia and China, for the completion of the manufacturing process. Intel operates assembly facilities in Chengdu, China; Penang and Kulim, Malaysia; and Ho-Chi Min City, Vietnam.”
“Leading suppliers of semiconductors to the US operate fabs in the US where they manufacture wafers that are then shipped to assembly and test facilities, many of which are located in Malaysia and China, for the completion of the manufacturing process”
Perhaps a challenge to the rise of these new Silicon Valleys will be the cusp of next generation technology development that the industry sits on. It’s widely recognised that the increasing rate of technological development will continue to be a major challenge and opportunity for the electronics market; new electronics production technologies include extreme ultraviolet (EUV) lithography and nanomaterials (materials measuring 1-100 nm in one dimension). Fabs in the region will need to ensure they are equipped to meet the demands of these new technology frontiers.
Or will they? Conversely, there is data from SEMI to suggest that the 200mm wafer ‘of old’ is making a remarkable comeback, driven by mobile devices and the IoT.
All the talk in the electronics community in recent years has been about the introduction of 450mm wafers, while 300mm wafers are considered the current state-of-the-art. But SEMI’s 200mm Fab Outlook report of October 2016 charts the bounce-back in 200mm fabs. While the highest level of 200mm capacity was recorded in 2007, this slumped to its lowest level in 2009 at the hands of the 2008/2009 global financial crisis and the closure of many facilities. Since then, installed 200mm fab capacity has continued to increase and by 2020 capacity is expected to reach 5.5 million wafers per month (wpm), almost as high as its 2006 level.
Significantly for those budding Silicon Valleys in South East Asia, the greatest increases in 200mm fab capacity are set to be seen in China, South East Asia, the Americas, and Taiwan, potentially circumventing – for now – some of those technology frontiers that might otherwise have challenged expected growth.