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Technology Transitions Shape 2014 Outlook

by David Lammers

Business should be good next year, but 2014 may be best remembered for the manufacturing challenges facing logic and memory vendors. On the financial side, the semiconductor market for 2014 looks better than in recent years, fueled largely by an expected shortage of DRAM and NAND. Shortages equal stable or rising ASPs, and increases in capex budgets.

Objective Insights memory analyst Jim Handy said he expects 2014 to be “a shortage year all year for both NAND and DRAM. That should fuel some pretty solid growth—more than 10%—for semiconductors overall.” Although no one is on allocation just yet, Handy characterizes the current situation as a “budding shortage,” the natural outcome of 2011, when capital investments in memory “just totally shut off.”

Joanne Itow, an industry analyst at Semico Research, said strong prices for memory chips this year and next year are supporting overall growth by the chip industry. After 6–7% growth in revenues this year, Itow said that in 2014 Semico predicts even stronger growth of approximately 10%.

Gartner analyst Dean Freeman said next year is when the major logic foundries will prove their sub-20nm processes with FinFETs as the major differentiator. “Intel never missed a beat. But for the foundries, a slowdown took place at 20nm from a true Moore’s Law perspective,” Freeman said. “The transition from 28nm to a true 20nm device was delayed, and it is taking the foundries an extra year. They should have introduced a FinFET at 20nm, but they stuck with planar, not quite realizing the impact on power and performance.”

Freeman was in Taiwan when I caught up with him by phone. He said the transition to FinFETs at TSMC “is moving forward pretty well, with some decent yields, and shuttle runs for customers with good results. But introducing FinFETs in 2014 is still a manufacturing challenge, so we expect to see the real launch of FinFETs by the foundries in 2015, with significant capital spending in that year.”

Handy said the NAND memory makers face important technology choices next year. Some, including Samsung, are expected to push a fast ramp of vertical 3D NAND, while others have signaled that they will stick for the next year or two with a planar NAND architecture, but with a high-k dielectric. Either approach—3D or planar high-k—presents manufacturing challenges. Handy believes sub-20nm NAND production volumes ramps could be impacted, prolonging the memory shortage. “Companies are adopting NAND flash technology that they don’t yet know how to build.”

Jim Handy

Jim Handy, Memory Analyst at Objective Insights

Joanne Itow

Joanne Itow, Industry Analyst at Semico Research

Dean Freeman

Dean Freeman, Industry Analyst at Gartner

Handy recalled two previous transitions in DRAM technology when companies struggled to ramp volume production. “They were not able to immediately bring up a technology, so an existing shortage became a longer shortage.” But once 3D NAND production gets underway, Handy believes it will carry the industry further than some have predicted. Gartner’s Freeman noted that Samsung will employ a strategy similar to an earlier era, when IBM put its own DRAMs in IBM computers. Samsung will get a fast start on 3D NAND volumes by using them in its Samsungbranded tablets, solid-state drives (SSDs) and PCs.

While individual differences in technology roadmaps are interesting, all manufacturers need to get a good handle on these transitions. Going from planar to FinFET transistors entails daunting lithography and etch challenges, and moving from a planar NAND to stacking 24 or more vertical bit cells appears to be an equally large technology shift.

Itow said the consolidation of the leading-edge chip industry into just a few players means that they cannot afford to fail, and must invest the resources needed to succeed in any important technology transition. She noted that 6–7% revenue growth this year means the industry has about $19 billion more coming in, and 10% growth next year will boost that to more than $30 billion in new revenues.

“Our model would show a higher growth rate, but for the tentativeness of the overall world economy. Ultrabook PCs haven’t gotten a lot of traction, which also has dampened our forecast,” Itow said.

Remember those red brick walls that used to festoon the International Technology Roadmap for Semiconductors (ITRS)? Next year may be notable for companies blasting through the physical limits presented by planar transistors and moving on to volume manufacturing of vertical structures. It won’t be easy, but once accomplished it should position the chip industry well for the rest of the decade.

David Lammers is an Austin-based technology journalist.