Tuesday, July 31, 2012

Apple Slipping Smartphone Market Share (Samsung Patent Litigation?)

The article below shows that Apple is slipping in smartphone market share. Is this a key reason for Apple lawsuit of Samsung about their patents ( Apple-Samsung Patent Battle Shifts to Trial ) .

iPhone market is a captive market, people who bought iPhone in the past upgrades to new one when a newer model comes out. It would make sense that iPhone sales are slowing down as we get closer to new  model. After the introduction of the new model Apple will catch up to Samsung.

Shortage of 28 nm wafers will not impact Apple.  Apple does not push semiconductor processing leading edge too hard. See for example their usage of 32nm in Samsung fabs for A5 processor.

Issues with 28nm process availability will have impact on Apple vendors such as Qualcomm (see in my June blog Samsung, Qualcomm: New Foundry Business Model .

"It could be that people are holding off from acquiring Apple iPhone's because of rumors the iPhone 5 is going to launch in September. However, if that launch gets pushed back due to a shortage of 28-nm silicon Apple could be left with egg its face"


Samsung eating Apple's smartphone iLunch

Peter Clarke
7/30/2012 4:26 PM EDT

LONDON – Samsung Electronics Co. Ltd. has regained the lead in the smartphone market in 2Q12, six months after losing out to Apple, according to market research firm IHS-iSuppli (El Segundo, Calif.).
Samsung's sales rose 5 percent to 36 million units, up from 34 million in the first quarter. Meanwhile, Apple suffered a 26 percent decline in shipments to 26 million units, down from 35 million in the first quarter, according to the market research firm.

It could be that people are holding off from acquiring Apple iPhone's because of rumors the iPhone 5 is going to launch in September. However, if that launch gets pushed back due to a shortage of 28-nm silicon Apple could be left with egg its face.
While the other smartphone companies disclose exact shipment numbers for overall cellphones and smartphones, Samsung doesn’t provide precise figures, instead offering general guidance. Because of this, IHS estimates the Samsung cellphone and smartphone shipment numbers.
Wayne Lam, senior analyst, wireless communications, for IHS, said that by the end of the second quarter, there were about 3 million iPhones in the sales channel that had not been sold to consumers. He said he expected Apple's sales to bounce back once the iPhone 5 goes on sale.
Smartphone shipments from Nokia declined by 14 percent in 2Q12 to 10 million units, down from 12 million in 1Q12. The fact the Symbian based cell phones are still outselling Windows-based Lumia phones indicates that Nokia is a long way from turning the company around, said Lam.

"With the Galaxy SIII, Samsung launched the Samsung Music Hub featuring its own music streaming and download service in which the consumer has a direct billing relationship with Samsung," said Daniel Gleeson, mobile media analyst for IHS, in a statement. "Samsung is trying to replicate the strong loyalty iPhone users have to Apple's phones, ensuring a solid base for future sales. While almost all Android manufacturers try to provide some user-interface differentiation to add value to their brands, this is one of the first instances of a smartphone manufacturer directly offering consumers a service."

Friday, July 27, 2012

Apple iPhone 2x Profit vs.iPad

The article below compares iPhone vs iPad gross margin based on expert report in Apple patent litigation court filling .

Flash NAND profit are $50 for Google's Nexus (Nexus 7 Tablet Teardown: +4% Mem. Cost Add $50 Profit ).  How big portion of  iPhone and iPad profit margin is flash NAND?

The article assigns the 2x gross margins of  iPhone vs iPad "to the cell phone contract and the subsidies that the networks pay to Apple for each handset"

"Apple Inc earned gross margins of 49 to 58 percent on its U.S. iPhone sales between April 2010 and the end of March 2012. Between October 2010 and the end of March 2012, Apple had gross margins of 23 to 32 percent on its U.S. iPad sales, which generated revenue of more than $13 billion for Apple"


Apple makes twice the profit margins on U.S. iPhone sales as it does iPad

By Chris Oldroyd, Friday, Jul 27, 2012 a 7:34 am
It appears that Apple is making huge profit margins on United States iPhone sales according to figures revealed in a court filing yesterday. Apple never reveals its profit margins on any of its products individually, for obvious reasons, so this revelation spotted by Reuters makes interesting reading.

Apple Inc earned gross margins of 49 to 58 percent on its U.S. iPhone sales between April 2010 and the end of March 2012.

Between October 2010 and the end of March 2012, Apple had gross margins of 23 to 32 percent on its U.S. iPad sales, which generated revenue of more than $13 billion for Apple, the filing said. Apple does not typically disclose profit margins on individual products.

The main difference with the iPhone compared to the iPad is the cell phone contract and the subsidies that the networks pay to Apple for each handset. This obviously must account for a large proportion of the increased profit margin on iPhone models. Or, conversely, Apple is forced to lower margins on the iPad to get it under $500 for the base model, since there's no one subsidizing those sales.

It will be very interesting to see how the alleged iPad mini would fit into the profit margin percentage range. If Apple is willing to accept half the profit margin on current iPads as it does iPhones, how low could they go for a 7-inch iPad? iMore has previously heard $200 is the floor. If Apple is willing to take a short term drop in profit to ensure long term gains in market share, it certainly looks like there's room to blow the competition out of the water all together.

And most importantly, unlike Google with the Nexus 7 and Amazon with the Kindle Fire, which are sold roughly at or below cost, Apple might still make money off the sales.

Love them or hate them, these court cases with Samsung are starting to reveal some really interesting information.

Source: Reuters

Chris Oldroyd

UK editor at iMore, mobile technology lover and air conditioning design engineer.

Thursday, July 26, 2012

TSMC: Single-Customer (Apple? Qualcomm?) Fabs Make Sense

Would Apple, Qualcomm, or Nvidia step up and pay for some of the development and fab processing equipment costs? Apple could... considering their trouble with Samsung.

However, Apple is conservative and does not push process technology edge for their processors (see my May blog Apple's A5 Die Shrink, Improve Battery Life, Cut Cost )


TSMC says single-customer fabs make sense

Peter Clarke

7/25/2012 10:50 AM EDT

LONDON – The world's leading foundry chip maker Taiwan Semiconductor Manufacturing Co. Ltd. is considering operating single-customer wafer fabs, according to chairman and CEO Morris Chang.

Chang, speaking to analysts on a conference call to discuss the company's second quarter financial results, said that the market is tending to produce fewer higher volume customers and some are so large they need their own dedicated fabs. This is despite the fact that, as a foundry TSMC, has risen on its ability to serve many customers from a single line.

"I think that they are going to be larger customers, and now it makes complete sense to dedicate a whole fab to just one customer and hold that – to hold fabs in fact to just one customer," Chang was reported as saying in a Seeking Alpha transcript of the question and answer session in the conference call.

Chang said TSMC would retain the ability to serve many customers but the presence of large customers that are getting bigger means "it makes sense that we dedicate a whole fab or even more than a whole fab to just one customer."

Qualcomm is one such very large customer. It has had problems in recent months getting as much supply of 28-nm CMOS from TSMC as it would like.

Chang did not mention Qualcomm explicitly but said that Taichung, where TSMC has its Fab 15, will be the source of the majority of TSMC's 28-nm CMOS whereas Tainan, home to Fab 14, will be the source of the majority of 20-nm planar CMOS and 16-nm FinFET CMOS.

Wednesday, July 25, 2012

ARM, TSMC Following Intel Lead

The article below details ARM chip designer corp. collaboration with TSMC in an effort to catch up with Intel FinFET technology (a March blog on other 20nm process challenges)

"The move should keep ARM's chip designs competitive with Intel's in the server market. TSMC's FinFET is akin to Intel's 3D 'tri-gate' method of designing processors with greater densities, which should deliver greater power efficiency and better performance from a cost point of view."


20nm and beyond: ARM targets Intel with TSMC collaboration

Summary: The multi-year deal sees ARM tie itself even closer to TSMC, its chip-fabber of choice, as it looks to capitalise on the company's technology to help it maintain a lead over Intel for chip power efficiency


By Jack Clark
July 24, 2012 -- 11:37 GMT (04:37 PDT)

ARM is ramping up its push to get its highly efficient low-power chips into servers by signing a multi-year agreement with Asian silicon manufacturer TSMC.

Under the deal, the Cambridge-based chip designer has agreed to share technical details with TSMC to help the fabricator make better chips with higher yields, ARM said on Monday. TSMC will also share information, so that ARM can create designs better suited to its manufacturing.

ARM has signed a multi-year agreement with Asian silicon manufacturer TSMC. Image credit: ARM

"By working closely with TSMC, we are able to leverage TSMC's ability to quickly ramp volume production of highly integrated SoCs [System-on-a-Chip processors] in advanced silicon process technology," Simon Segars, general manager for ARM's processor and physical IP divisions, said in a statement.

"The ongoing deep collaboration with TSMC provides customers earlier access to FinFET technology to bring high-performance, power-efficient products to market," he added.

The move should keep ARM's chip designs competitive with Intel's in the server market. TSMC's FinFET is akin to Intel's 3D 'tri-gate' method of designing processors with greater densities, which should deliver greater power efficiency and better performance from a cost point of view.

By tweaking its chips to TSMC's process, ARM chips should deliver good yields on the silicon, keeping prices low while maintaining the higher power efficiency that comes with a lower process node.

ARM's chips dominate the mobile device market, but unlike Intel, it doesn't have a brand presence on the end devices. Instead, companies license its designs, go to a manufacturer, and rebrand the chips under their own name. You may not have heard of ARM, but the Apple, Qualcomm and Nvidia chips in mobile devices, as well as Calxeda and Marvell's server chips, are all based to some degree on based on ARM's low-power RISC-architecture processors.

64-bit processors

As part of the new deal, ARM is expecting to work with TSMC on 64-bit processors. It stressed how the 20nm process nodes provided by the fabber will make its server-targeted chips more efficient, potentially cutting datacentre electricity bills.

"This collaboration brings two industry leaders together earlier than ever before to optimise our FinFET process with ARM's 64-bit processors and physical IP," Cliff Hou, vice president of research and development for TSMC, said in the statement. "We can successfully achieve targets for high speed, low voltage and low leakage."

"We can successfully achieve targets for high speed, low voltage and low leakage" — Cliff Hou, TSMC

However, ARM only released its 64-bit chips in October, putting these at least a year and a half away from production, as licensees tweak designs to fit their devices. Right now, there are few ARM-based efforts pitched at the enterprise, aside from HP's Redstone Server Development platform and a try-before-you-buy ARM-based cloud for the OpenStack software.

Production processes

AMD, like ARM, does not operate its own chip fabrication facilities and so must depend on the facilities of others. AMD uses GlobalFoundries, while ARM licensees have tended to use TSMC. However, both TSMC and GlobalFoundries are a bit behind Intel in terms of the level of detail — the process node — they can make their chips to.

Right now, TSMC is still qualifying its 20nm process for certification by suppliers, while Intel has been shipping its 22nm Ivy Bridge processors for several months. Intel has claimed a product roadmap down to 14nm via use of its tri-gate 3D transistor technology, while TSMC is only saying in the ARM statement it will go beyond 20nm, without giving specifics.

Even with this partnership, Intel looks set to maintain its lead in advanced silicon manufacturing.

"By the time TSMC gets FinFET into production - earliest 2014, it's only just ramping 28nm [now] - Intel will be will into its 2nd generation FinFET buildout," Malcolm Penn, chief executive of semiconductor analysts Future Horizons, told ZDNet. This puts Intel "at least three years ahead of TSMC. Global Foundries will be even later."

Intel has noticed ARM's rise and has begun producing its own low-power server chips under the Centerton codename. However, these chips consume 6W compared with ARM's 5W.

At the time of writing, neither ARM nor TSMC had responded to requests for further information. Financial terms, if any, were not disclosed.

Smartphone Dark Horse: Huawei

China is a vast market for smartphones. Apple is doing a good job of dominating the high end of the smart phone market there. While at the low end of Androids' phones Huawei is advancing fast.

From the article below:
"This year, the company expects to triple its smartphone sales to 60 million units, in part by taking a bigger chunk of the U.S. market...

Late last year, Huawei was No. 7 in smartphones. Now it may be No. 3—and is pushing hard to sell its inexpensive handsets in the U.S"

I wonder how many flash memory chips do their cell phone use.


The New Smartphone Powerhouse: Huawei

By Peter Burrows on July 19, 2012

Sales of smartphones are booming, though very few phone makers have been rejoicing. Nokia (NOK) and Research In Motion (RIMM) have seen their once-formidable businesses collapse into a mess of red ink and layoffs. HTC’s sales have tumbled. Once-proud Motorola Mobility has been acquired by Google (GOOG). Sony (SNE) and LG Electronics (066570) are confirmed also-rans.

Feasting on this wreckage are, of course, Apple (AAPL) and Samsung Electronics (005930), which between them have 54 percent of the global market. The other big winner: Huawei Technologies. A company many Americans haven’t even heard of may well have passed Nokia last quarter to become the third-largest smartphone maker, according to Horace Dediu, founder of equity research firm Asymco. That’s up from No. 7 at the end of last year. “They’re the guys that don’t get a lot of respect because they’re not big in the U.S.,” says Dediu. “But they’re looking at big numbers.”

After it was founded in 1987 by civil engineer Ren Zhengfei, Huawei quickly became China’s high-tech success story by selling telecom gear to phone companies, routinely beating rivals such as Alcatel-Lucent (ALU), Ericsson (ERIC), and Cisco Systems (CSCO) with good-enough products and great prices. Only in the mid-2000s did it start making cell phones. The Shenzhen-based company’s inexpensive, often unbranded models gained traction in China, the Middle East, and Africa.

Huawei kept this low-cost approach as it got serious about smartphones in 2009. The company didn’t try to build its own software operating system like Apple, Microsoft (MSFT), Nokia, or RIM. It used Android. And unlike Samsung, HTC, or Motorola, it didn’t try to differentiate Google’s mobile software with its own tweaks. “Huawei just slapped Android on some hardware and shipped it,” says ABI Research analyst Michael Morgan.

This year, the company expects to triple its smartphone sales to 60 million units, in part by taking a bigger chunk of the U.S. market. Until now, it’s sold handsets costing less than $200 to carriers such as MetroPCS and Cricket that offer pay-as-you-go plans, mostly to lower-income consumers. Last November it landed a deal with a top-tier U.S. carrier when AT&T (T) started selling Huawei’s Impulse phone for $29. On July 11, T-Mobile announced that Huawei would be building two models in the carrier’s MyTouch line of handsets. “We essentially made the market for affordable smartphones,” says William Plummer, Huawei’s U.S. vice president for external affairs. “We’re in a good position because we’ve established ourselves as a trusted partner to carriers.”

Not completely trusted, however. On Capitol Hill, the House Permanent Select Committee on Intelligence has been investigating whether efforts by Huawei and ZTE, another fast-growing Chinese telecom equipment and phone maker, to sell to U.S. carriers present a security risk, because the companies may have ties to the Chinese government. The Australian government has banned Huawei from bidding on a national broadband project. Congress has asked the State Department to investigate whether Huawei illegally exported embargoed technologies to Iran. For years, industry insiders have believed that Huawei has access to low-interest loans from the government. Huawei spokesman Francis Hopkins says the company is cooperating with the congressional investigation, gets no favorable loans from the Chinese government, and denies wrongdoing in Iran. It definitely has benefited from huge domestic broadband buildouts, says Jeff Heynen, an analyst with consulting firm Infonetics.

Succeeding in smartphones is not optional for Huawei if it wants to remain a fast-growing company. Its $23 billion-a-year telecom equipment business grew only 3.5 percent in 2011, before tumbling due to the slowdown in China’s economy this year, says Heynen. The company reorganized last year to create a separate Huawei Devices unit to drive what executives say is the company’s best growth opportunity. The division also makes laptop modems and other less-sexy gizmos.

Huawei’s growth rate may make it a plausible challenger to Samsung in smartphone sales, says Asymco’s Dediu. He argues that the Korean giant has prospered largely because of vertical integration; it makes many of the chips and screens that go into its devices. Yet he doubts Samsung has built up enough brand loyalty to withstand a much cheaper alternative. “Let’s not forget that Samsung itself was No. 4 or 5 just a few years ago,” says Dediu. “Samsung ought to be looking over its shoulder.”

As smartphones evolve from novelty technology into just another gadget, Huawei will be well positioned to benefit. “Their devices don’t have to have jet packs to do 90 percent of what most people need,” says Morgan of ABI Research. “The market is coming to them.”

The bottom line: Late last year, Huawei was No. 7 in smartphones. Now it may be No. 3—and is pushing hard to sell its inexpensive handsets in the U.S.

Thursday, July 19, 2012

Qualcom, Intel, Samsung, TSMC and foundary Business

Due to the competition between Intel, Samsung and Qualcom it is not likely that Qualcom will start to producing wafers in other fabs beside TSMC's.

Even if they try to transfer production to some other foundaries, it will take more than 9 months to design, transfer, and qualify a new mask set at a new vendor. Only after the +9 months they will start going up the learning curve of yield.

From Qualcom CEO interview by Forbes:
"Would you ever consider helping Intel keep their fabs full by building your chips in their factories?

Paul Jacobs: I don’t have illusion about it. It’s a very interesting thing. You have to create a level of trust to do this. I think it’s conceivable that that trust could be created, but it’s hard. As a hypothetical scenario, imagine if we were fabbing with Intel, and they were also trying to compete with us, and this shortage happened. You would immediately jump to the conclusion that it was malicious, not that it was just that things happen and some mistakes were made.
That is a hard thing to figure out. How do you deal with that situation? I guess you say, “OK, well you can manage that contractually.” We think about those kinds of things. It may even be that we need to manage our existing suppliers in a more contractual fashion. I think there are solutions to it, and certainly Intel’s spent a lot of effort on transistor design and manufacturing.
It’s not well known probably, but Intel was our fab in the early days. We actually originally used X86 and they actually built the chips for us. We tried hard in the early days to have that relationship work. It’s a little bit in the mists of time, and I probably won’t remember exactly what happened.
Paul Jacobs: In any case, there were some guys that were making certain decisions on their side, and it just somehow fell apart."

See below full interview of Qualcom CEO by Forbes



Q&A: Qualcomm Chief Executive Paul Jacobs


His father, Qualcomm founder Irwin Jacobs, was an engineer. Paul Jacobs is an engineer.

Qualcomm Chief Executive Paul Jacobs may run one of the world’s most valuable companies, but he’s a thoroughbred geek: he pals around on stage at Qualcomm’s developer conference with Brent Spiner — who played ‘data’ on ‘Star Trek: The Next Generation’ — and he has a Ph.D. in electrical engineering and computer science from UC Berkeley, with an emphasis on robotics.

Interview him and he can expound on everything making the energy grid more efficient to his plan to make people healthier by turning them into smartphones. Below, a transcript of my interview with Jacobs at Qualcomm’s Uplinq annual developer conference for “Qualcomm Is Dialed In,” a look at the wireless chip designer’s position at the intersection of computing and communications for the August 6 edition of FORBES magazine.

FORBES: I won’t ask you whether or not you’ve got parts in the next iPhone. Everyone tells me you do, but feel free to tell me if you don’t.

Paul Jacobs: You’ll get me in trouble. You notice we don’t even mention Apple when we get up there and talk about things at this conference.

FORBES: I did notice that.

Paul Jacobs: They run their own stuff, they do what they want, fine by us.

FORBES: I guess that’s a problem everyone should have, a customer like that. This is kind of a naive question, but it is a little baffling. Who are Qualcomm’s three biggest competitors? It depends on how I want to think about it.

Paul Jacobs: It depends what segment. There isn’t anybody really that competes well across all of it. Ours is a licensing business and not really a competitive situation, but in the chip business, you’ve got guys at the low end, the MediaTeks of the world, and that kind of group down there. You’ve obviously got Intel, who’s not really a competitor yet, but they’re trying to come in on the high end, and we’re trying to go up.

Then you’ve got sort of the guys in the middle. You’ve got Nvidia and Broadcom, STE and those companies that are trying to compete in the middle. It depends where you look. There’s always competitors out there, one way or another.

FORBES: Well, Apple’s designing their own application processor, Samsung is designing and building one. Does that hurt your long term prospects when you have device manufacturers designing their own silicon?

Paul Jacobs: We’ve been through some situations like this in the past where we’ve had customers who were building their own internal solutions. For us, the key thing is we just try and drive the technology as hard and as fast as we can. We have the ability to make the investments. We also have just a wonderful team of engineers who really understand, obviously communications well, computing. We have a team that’s doing our microprocessor designs, been doing microprocessors for a long time. They were the embedded PowerPC group at IBM for a long time. They came over to us.

Graphics was the ATI group. We have really strong people. Then obviously on the conductivity side, the Atheros guys were leaders, too. We’ve both grown organically, and we’ve assembled very strong teams.

That allows us to push the technology really hard in comparison to some of the internal efforts that some of our customers have, in some sense I guess some of them are our competitors, too. It’s very hard for somebody who does it for their own internal use to get traction with other companies, which is why we used to be in the handset business.

I ran that. We got out of that business, and one of the reasons was that our customers felt like we were competing with them. I think it’s just a scale issue. Yeah, if you have a lot of scale, then you can invest, but “Can you invest enough?” is the question.

I would argue that we’re in a strong position. You look at the performance of our various sub-components of the chip, we’re in a very strong position in each one of those areas.

FORBES: Yeah, $4 billion will go a long way in R&D.

Paul Jacobs: It goes a ways.

FORBES: You really outmaneuvered Intel with WiMAX. What do you know about doing wireless that Intel doesn’t? Because they really didn’t get anywhere.

Paul Jacobs: They started to get some traction. They really went out around the world and made a lot of claims about WiMAX that were not in the end true, and we actually knew they weren’t going to be true at the time. I think that made it a brittle ecosystem. Once you could demonstrate that the performance wasn’t there and the ecosystem wasn’t growing the way that they had said, because they were trying to be outsiders coming in also. They made claims about licensing and so forth. Once you could demonstrate those things were not accurate in the end, then it fell apart.

The final thing for us really was they had convinced the government of India to allocate spectrum for WiMAX. If you went to India, it was called the WiMAX Spectrum. People thought that was what was going to roll it out.

We worked at that and we said, “We have LTE TDD, it’s a better technology, it’s more widely supported, and if we can get one…”

There’s two chunks of spectrum that were being allocated. If we could get of the two to go to LTE TDD, the other guy can’t go WiMAX, because he’ll be at a huge competitive disadvantage. All we had to do was get one. In fact, we didn’t even need to get it nationwide, all we had to do was get the big cities.

We got Mumbai and Delhi, we bought those. We said, “We’re going to LTE TDD with this,” and then everybody had to go that way. That was a last straw I think for them. Then you saw people starting to defect and the ecosystem fell apart. Then even big components like Clearwire and Sprint said, “Hey, we’re going to LTE TDD.”

I think we understood the dynamics of it, and we understood the way that the wireless systems worked. We knew early on that some of the claims that they were making just were not going to turn out, they weren’t going to achieve those claims in practice.

FORBES: Interesting contrast with what you did with the CDMA and the GSM market, how you brought that, snuck that into the water supply.

Paul Jacobs: I’ll tell you, the thing there was people claimed that we were not telling the truth. There’s a famous story in the “Wall Street Journal” claiming my father — who is world renowned, he wrote the book on digital communications theory, literally –people were saying [he] was lying about how the system worked. These guys, the people that started Qualcomm had been at a previous company called Linkabit, and they actually bit the first CDMA system at Linkabit. These people knew what they were talking about.

Moore’s Law allowed you to do the computation that used to be so expensive you could only do it for military or space communications. Well, by the [time] Qualcomm came along, the cost had come down enough that you could do it for commercial and consumer applications.

People were saying things like, “Oh, it’s going to take a van full of equipment to build a CDMA device.” Then we show up in a portable phone, and people, their minds were blown.

I’m a Cal grad, so I always like telling this story, that there was a Stanford University professor who [said what Qualcomm was doing] violated that it violated the laws of physics. We just, we went through a lot of stuff. Those wars, they were pretty emotional, and they took a very, very long time to heal.

Even when I took over as CEO in ’05, we were surprised by Flarion, which was an OFDMA company, I was really surprised at the level of traction that they were getting simply because it wasn’t Qualcomm.

Our competitors had positioned us so badly as if we were bad guys somehow for having done all of this innovation. We had to spend a lot of time going around the world explaining to people that yes, we do licensing, but we take that money from the licensing and we put it into R&D. We keep driving the engine forward. By the way, you need us to keep driving the engine forward, because if your business stops innovating, if we stop innovating, you stop innovating. Then everybody gets commoditized. Now, there’s no value for anybody, but maybe a low cost provider or something that isn’t really going to give you new features or functionalities.

Once we went around the world and explained that, we really did a lot of work helping these companies out, get their systems up and running. Then that fixed our problem. Today now, there’s a multiplicity of companies that operators worry about, whether it’s the operating system vendors or some of these very powerful manufacturers.

We have receded from being a concern. I think we’re seen much, much more as a partner and an enabler, which is a much nicer place to be.

FORBES: You had an intriguing critique of the fab business and why you were very reluctant to get into it. Could you maybe tell me a bit more about why?

Paul Jacobs: When you have a fab, the key issue is the amortization of the cost of building that factory. The component cost is not that big. What happens is the pricing gets set by how full you can make the factory, or your costs. Your costs get set by how full you can make the factory. Essentially what happens, when you run a fab is you end up worrying all of the time about, “What am I doing to fill the fab?”

It’s such an overwhelming issue, because the dollars can scale so rapidly that it’s my belief that the management of a company with a fab spends their time overly focused on filling the fab, and less ability to focus on innovation. We really spent all of our time thinking about what the next thing we could do is, as opposed to do we have enough widgets running through the fab?

The other piece that’s important too is that you get the benefit of everybody’s scale in the fabless model. Right now, we’re at the leading edge of the 28 nanometer technology, but there are other companies coming behind that, [S]o if our demand fluctuates up and down, they take advantage of that. You get a statistical balancing, and that actually solves the problem for the fabless guy.

The fabless guy’s definitely obviously worried how many widgets go through their factory, but they don’t have to worry about any one industry. If there’s something that’s unique to an industry, maybe somebody else is going up at the same time somebody else is going down. If you run the fab yourself, you don’t have that benefit. You have you.

I’ve heard people saying, “Intel’s looking at doing some fabless model for other people.” The problem is it’s just a very hard thing to do. When you’re using to running your widgets down the line, it’s hard to go to a model like at TSMC.

If you go see their fab, it’s absolutely fascinating. You feel like you’re in “Star Wars” or something, because all along the ceiling, there’s these little cartridge things that are running around, going from machine to machine, putting a cartridge down, picking it back up after it’s been processed, put it over here.

It’s like this choreography of things just running around and doings lots and lots of different people’s stuff all at the same time. The software to run that and the whole mindset behind running this massively, massively parallel operation, that’s very non trivial to do that well.

FORBES: Does that become tougher when you’re maybe their biggest customer?

Paul Jacobs: No, I think you still have the benefit. They obviously can run one widget easily, it’s just the point is they can also a thousand widgets.

FORBES: Is it difficult though when the number of widgets you’re cranking out is an order of magnitude larger than some of your competitors?

Paul Jacobs: They underestimated how fast we would get the chip ready, because their experience with other companies was that when they went to a new node, they had a longer process to get it up and running. Our guys just really, really nailed this one. They really did a good job. They underestimated that. They underestimated the overall market demand. They really didn’t see that the smartphone market was growing the way that it was growing, and they judged the demand down a little bit. Then it just kept growing even faster than we had anticipated, too. There was stuff on both sides.

When you’re the main person driving that leading edge, yeah, that’s hard, because somebody can make a decision just based off of our demand as opposed to the sum of a whole bunch of other people. You lose a little bit of that statistical averaging that goes on when there’s a lot of people.

We just need to be smarter about that in the future. We made some mistakes in this; they made some mistakes. If you want to point a finger, there’s blame to go around. At the end of the day, that’s not very valuable. We’ve just got to learn from it and do it better next time, and we will. This really was the first time we were on the leading edge.

FORBES: Would you ever consider helping Intel keep their fabs full by building your chips in their factories?

Paul Jacobs: I don’t have illusion about it. It’s a very interesting thing. You have to create a level of trust to do this. I think it’s conceivable that that trust could be created, but it’s hard. As a hypothetical scenario, imagine if we were fabbing with Intel, and they were also trying to compete with us, and this shortage happened. You would immediately jump to the conclusion that it was malicious, not that it was just that things happen and some mistakes were made.

That is a hard thing to figure out. How do you deal with that situation? I guess you say, “OK, well you can manage that contractually.” We think about those kinds of things. It may even be that we need to manage our existing suppliers in a more contractual fashion. I think there are solutions to it, and certainly Intel’s spent a lot of effort on transistor design and manufacturing.

It’s not well known probably, but Intel was our fab in the early days. We actually originally used X86 and they actually built the chips for us. We tried hard in the early days to have that relationship work. It’s a little bit in the mists of time, and I probably won’t remember exactly what happened.


Paul Jacobs: In any case, there were some guys that were making certain decisions on their side, and it just somehow fell apart. I don’t really remember all of the details exactly how it played out. That was unfortunate, I think. I have a ton of respect for those guys. They are an important part of the technology ecosystem in the world. It’s good. We hope that they continue to be able to invest, but we’re going to compete hard with them.

FORBES: How worried would you be if your most profitable product costs $1,000 — as Intel’s does — and you’re looking a potential competitor, in Qualcomm, whose most expensive application processor costs what, $100? Less?

Paul Jacobs: Way less.

FORBES: Would you be a little concerned?

Paul Jacobs: Yeah. We always looked at the margin structure in the PC business. We thought that there was real opportunity for mobile to come in, both from the pricing standpoint and from the power, and the architectural standpoint…. I used to go up to Silicon Valley and give these talks about phones, and how a phone was going to have all of this stuff in it. People were like, “Oh no, you’re wrong. The phone isn’t going to disrupt the PC, WiFi is going to take over and kill cellular.”

We used to have like these battles back and forth. They, actually, in certain times, tried to portray us as like we were anti WiFi, which we never were. I was never anti-computers either. I just said, “Look, the thing’s going to change over time. We’re coming up from below as a disruptor.”

There were definitely companies. You’ve seen companies who made that jump well already. Obviously, Apple is a clear example of somebody who made the transition well.

Google, I’m not even sure they were around at the time we first started talking about this stuff, maybe early days. They’ve obviously made a good transition, pivoting to mobile.

Microsoft’s working on it right now, Intel’s working on it right now. I think Microsoft from my perspective is ahead, because Windows RT, we feel, they did a really nice job on that.

I think it’s what often happens when you get too successful in your own industry. It’s the thing I tell people at Qualcomm, “Don’t get complacent, don’t believe you win just because you show up. We have to work every single day, and people are coming after us from every different direction.”

I think you have to have that fear always. I have the fear even given the position I’m in. People say, “Well, you’re charging, you’re getting extra margin, somebody else will come in underneath you.”

Clearly, at the low end of the market, we’re having to fight it out on price. I think that’s the biggest thing that I worry about just for us is that issue. Do you get complacent? Do you believe that the world should go in your direction and you can almost do anything and still win? That’s not true.

It took a long time really, but when the ramp comes, it goes steeply. That ramp has actually turned, [it was] not that long that this company has gone from being a massive, massive underdog to be the leading fabless company and wireless chipset supplier and that, that transition, that can happen quick.

FORBES: You have wonderful margins, better than your customers, better than most manufacturers. How long can you triangulate above — out of manufacturing either devices or chips? Is that something that can go on indefinitely?

Paul Jacobs: The key is differentiation and not getting commoditized. The fortunate thing for us is that consumer demand for wireless data is so strong. I think it’s not going to end. This isn’t a CB Radio. This is part of people’s lives now. People want more and more and more stuff coming down to their device, and faster and faster. That gives us a ton of opportunity. We have a vision for how to solve this issue. Right now, the networks can’t give people enough data to satisfy their demand. Instead, they price it to get price elasticity so people only take so much versus what they really want, because the network can’t support what they really want.

We have a vision for how we’re going to solve that problem and allow the operator to give people what they really want. That’s going to give us a five to 10-year roadmap of technologies. There are very fundamental things that you have to do to enable this.

It’s stuff that we started working on a decade ago at least. I had a team build us, at the time it was a cell site that was the size of a laptop computer, which at that time was radical. How could you do that? When we tried to deploy that, we realized that it had problems.

If you put these out, they would interfere with each other. We spent the last at least decade working on managing the interference between what we call small cells.

Back then, and in fact until relatively recently, we thought about that just like people have femtocells today. Get me a little bit more coverage in my house, a little more data rate in my house, that kind of stuff.

Then we had DoCoMo come in to us and say, “We want not 10 times more data, we want 1,000 times more data.” Then we sat back and we’re like, “Wow, that’s a pretty big goal. What are we going to do?” We realized that if you thought about this femtocell idea differently, and said that’s the main way that you’re going to deliver bandwidth, and it has a lot of other implications to it, we can do that.

The other key issue is that when you get 1,000 times more data demand, you’re not getting 1,000 times more revenue to cover it. The bits are decreasing in value. Video bits are worth far less than text bits, as an extreme example.

We had to address the cost side, too. It all came back to this idea of building a cell site that was more built along the lines of a phone, with the architecture of a phone, than it was with a traditional cell site. For us, that means a very, very highly integrated chip and power levels that are similar to a phone. In fact, we actually built it even less than phone, if you can imagine that.

The cost now is like a phone, but it doesn’t have a screen, it doesn’t have a big battery, doesn’t have a ton of memory in it. Actually, the cell site is going to be the cheaper thing than the phone, which is a radical shift.

It used to be cell sites were in the old days they were like a million bucks. Now, all in, they’re in the hundred thousand range when you talk about the hardware plus the real estate, plus the backhaul, plus all the provisioning of stuff. Now, I’m talking about a thing that’s cheaper than a phone,[something that costs] tens of dollars that I plug into the wall. That’s going to create my network.

Not only that, because the device and the network are closer to each other, this thing transmits less power, or it can have much, much higher data rates. I actually can spend some of the capacity that I’m getting for people who are passing by, and offload the bigger macro system. All of this stuff really works incredibly, incredibly well.

One of the things that we were really excited to see was the [U.S. Federal Communications Commission] actually coming out and saying they’re going to allocate spectrum specifically for small cell deployments in the 3.5 GHz band. That’s great. There’s a lot of spectrum out there. People haven’t known how to use it before.

Now, you use it with small cells, all of a sudden boom, now we can give more data to people. People are going to be really happy with that.

That is a long winded answer to how we’re going to keep the margins up, because we have special sauce that we figured out how to do these things. It bolts [together] stuff that’ll end up in the mobile chips and stuff that’ll end on the small cell side. That’s going to help drive the train for years to come.

FORBES: That’s almost the state of the technology industry in a few paragraphs. A few decades ago answer to falling prices and increasing demand was to make everything like a personal computer. Now, you’re saying the answer to every technology problem is to make it like a phone.

Paul Jacobs: Yeah, that’s it.

FORBES: I’ve got to ask about health care. What do you know how to do that Intel, which has been talking about health care for a long time, doesn’t know how to do? How can you solve [some of these health problems] by making things maybe a bit more like a phone?

Paul Jacobs: We have a pretty long history in this. The first product of Qualcomm was this messaging — our big product — for long haul trucks. As part of that, we built a guaranteed message delivery system in the middle of it.

FORBES: Yeah, that’s a fascinating story right there.

Paul Jacobs: Then we had a company CardioNet come to us, and their idea was they were going to do cardiac arrhythmia monitoring when people are out and about walking around. That required guaranteed message delivery, because obviously if somebody has an issue, you want to make sure that the monitoring center gets that. We worked with those guys early on and realized, among other things, that this was a big opportunity. The other thing that happened was I had a friend who works for us now named Don Jones.

He had been at an ambulance company. He then did a little start up way back when where they were doing house calls again, using nurse practitioners and outfitting a van with the mobile technology as it existed back then, which wasn’t very mobile.

We were talking about it, “OK, this is the future.” Then that start up didn’t work, so he came to work to Qualcomm. Back then, we started strategizing together. The stuff you had back then didn’t really work right, and we have this other piece, this guaranteed message delivery stuff, and how do we pull all of this stuff together?

I will tell you, it’s far harder than you expect. We have been at it a long, long time. In fact, the product that we have right now, this 2Net Platform that we have right now, that came from listening very carefully to the medical device manufacturers. Naturally, our first idea is we’re going to turn every medical device into a phone.

The problem is that the medical device manufacturers don’t really know the phone business. You’ve got now FCC clearance and [U.S. Food & Drug Administration] clearance. If anything changes one way or another, then it has to go back and be re certified by one or the other. There’s just this long litany of things that create friction in getting that done.

These medical device manufacturers said to us, “Look, I have some connectivity. I don’t want to change it. Just give me connectivity. I have a local connectivity, give me broad area connectivity.”

We said, “If we build this device which just talks with whatever radio they have, and that they’ve already gotten certified, and then we backhaul it using cellular and we make it pair up so easily that your grandma can take it home, plug it into the wall and it will just work, that solves a lot of the problems.”

When we got the idea and we started talking to the other medical device manufacturers, all of a sudden, boom, everybody came in, and they’re like, “You have solved the problem. This is a huge issue.”

We’re going to see some good stuff out of them. There’s really interesting projects underway that will make, in my mind, a big difference in people’s quality of health care, the cost effectiveness of it, the ability to continually monitor. All of these really good things happen out of just getting the connectivity.

There already is today a study that the [University of Southern California] did on pacemakers where they showed that. It was a relatively large number, I think maybe even 200,000 cases. Some of the people had a pacemaker, which could be remotely interrogated over wireless, and some of the people you had to go into the clinic to get it talked to. There was a 50 percent improvement in mortality rates by just having remote monitoring.


Paul Jacobs: It’s incredible. That’s a huge, huge result. Everybody notices that stuff. I think the reason is because you can catch things quicker, and human beings being who they are, put stuff off. “That’s probably not an issue, I’m not going to go in.” Then something happens. Then you take that idea and you go fast forward a few years from now. We have researchers today that are building a sensor that will sit in your bloodstream and lodge in your wrist, I think is the idea right now. It will monitor. It looks for certain stuff that ends up in your bloodstream when you’re about ready to have a heart attack.

What happens is, as I understand it, the cells die. Some cells start to die and slough off. As they die, they release some chemicals, whether it’s RNA, DNA fragments or things like that into the bloodstream.

If you detect those, you may get as much as a two week notice that you’re going to have a heart attack. Imagine your phone rings and says, “Go to the doctor now, because you need to manage your heart.” That’s unbelievable, those kinds of things.

FORBES: [So] the solution to some of my health care problems might be to make me a little bit more like a mobile phone with the right sensors.

Paul Jacobs: Yeah, you’ll be a mobile phone, too.

FORBES: This all circles back to your degree in robotics.

Paul Jacobs: Exactly. [laughs]

FORBES: What one thing, does everyone know about wireless that’s wrong?

Paul Jacobs: I would say a lot of people in the industry believe that the capacity problem is unsolvable or that we’re always going to be in this scarcity mode. They haven’t started really to think through what it means to have abundance in bandwidth, to use one of our friend George Gilder’s themes of that. I think we, and me personally, fell victim to some of those things. I was always trying to deal with how do I get around this scarcity issue? We built this network media flow where we were going to go around the cellular network and broadcast data to the device. That was how we were going to solve the problem.

In the end, now that we’ve had this shift in our mindset for solving the 1000X problem, I fundamentally believe it’s solvable. Getting massive amounts of video on your phone, that’s going to happen. TV, I think, will fundamentally change.

I watch ESPN on my tablet over the network. When I’m some place where other people are using the network significantly, it doesn’t work that well. But in the future, it’s going to work well because we’re going to be able to deliver that bandwidth.

Move up http://i.forbesimg.com t Move down

No Factories, No Phones, No Fuss: How Qualcomm Grabs Wireless Profits

Brian Caulfield

Forbes Staff

Coming To A Kid Near You: Qualcomm's Science Fictiony New Technology

Brian Caulfield

Forbes Staff

Qualcomm's Next Weird Thing: Smarter Smart Phones

Brian Caulfield

Forbes Staff

What is that? The whole long tail thing is going to be even more than it is today. It’s going to be more mobile and I think it’s going to end up being the fundamental way that people actually have access to news, entertainment and all those things, which is already happening.

Maybe it’s a matter of emphasis that people don’t get. The emphasis is even stronger than they think it is today. We talk about all these other issues, all the places where mobile can be an enabling technology in other industries.

People always doubt that stuff. They always tell us that we’re crazy. How can mobile really impact health care? It takes doctors 18 years to do adopt new technologies. You’ve got all this regulatory burden.

Well, you know what? Tell that to the music industry, because they got massively changed by the advent of mobile technology.

How are you going to change the energy grid? Is it fundamentally going to shift because of smart grid technologies? Is the grid more…?

I went to a thing where I think people were advocating that the energy grid should be more like the Internet, and that information goes with the energy, and there’s storage all over the place. Yeah, maybe, I don’t know. That may be true, too, but the fundamental thing that enables that is communication.

Do people believe that communication, that the bits that will go with the electrons in the grid, that’s how we’re going to save the planet? I don’t know. Maybe it is.

I don’t think people necessarily believe that the communications is the fundamental component of it, which if you have that kind of decentralized generation and storage, it is. Information is as important as the storage of the electric power and the generation of electric power.

I’m not going to go on about that. I could be on that route for a long time.

FORBES: No, I’ve got more time than you do.

Paul Jacobs: OK, so it goes back to I’m on the board of this company A123 Systems also. One of the things that they make are these grid storage batteries, which are there to soak up the variations in load. Today, the way that it works is that you build a generating station and it’s not running at full power. It’s actually running at less so that it can surge up and down with the demand. Instead of doing that now, they say, “Run the power plant at full, and have the battery actually soak up the difference between those things.”

This notion that you can put this flexibility into the system, it actually is happening already. Then you say, “Well, what other places are you going to get the power from?” You get alternative energy sources. Wind, solar, these things are too variable to actually be attached directly to the grid.

Communications is actually going to be the key issue there. What will happen is whether it’s battery storage or actually pairing an alternative energy source with a traditional power plant, communication of, “Who is it that can supply the power at that given time?” is the critical component.

Again, I think communications are going to change. I think the grid probably is going to be, again, more like a phone, to go along this theme that we’ve been talking about. It is going to be smaller, or decentralized, more local computation. Communications is going to be a critical thing to cause the coordination between the different elements of the grid.

The other thing that’s going to have to happen too is the whole grid is just very archaic in its cyber security aspects. While phones are not perfect today for sure, there is a huge amount of R&D going into making them better. They turn over faster.

I think building a network, a power grid that can turn over its components faster and improve rapidly, that’s going to be an important aspect of it, too.

FORBES: You sound a lot like a PC guy 30, 40 years ago.

Paul Jacobs: I probably do.

FORBES: You mentioned you’re constantly scanning the low end for possible threats. Anything you will think that could disrupt Qualcomm in a decade or two?

Paul Jacobs: I think the thing that is happening at the low end that could have been very disruptive had we not seen it coming was this rise of the small manufacturers, for example in China. There’s this whole story, Media Tech, and all these others spread. All these other companies down there that are building almost a complete phone that then some company comes along and makes relatively small modifications to and brings it to market quickly.

That’s the story of how Nokia got hurt in China. It lost a lot of share to those companies.

We were fortunate. We saw that coming because it happened in GSM, which wasn’t our market, so we were ready for it when it came into CDMA. We’re still working on our products, and support and all those things there, but I think we’re doing a pretty good job of managing that.

That was a business model change in a way that you wouldn’t have expected, because the traditional thought pattern was the big guys; you had to be big to win. In fact, in this case, it was the small guys who had some distribution advantage, some brand advantage, some manufacturing, something that they brought to the table that was giving them some advantage in a very small niche.

It’s this “nichefication,” if I can make up a word, of the manufacturing at the low end that is a potentially disruptive force. Now, for us…

FORBES: How did you get your chips in their hands?

Paul Jacobs: We’ve got people all over. A lot of them are in Shenzhen and Guangzhou. They’re not as distributed as you might think, but I think over time they will become more distributed. Then the key is for them to know to come to you. In fact, that’s also happened on the licensing side. Everybody said, “Your licensing business is going to be disrupted by this because these little guys aren’t going to take licensing.”

In fact, they do, because they’re under pressure. They want to export, they want to grow their business, and if they’re outlaws, that’s very tough for them to do. They actually want to be part of the system and be legitimate, and be able to export and grow.

A lot of those people come to us. It’s very fascinating. They know the reputation. The brand is not such a consumer brand, but in the industry, it’s incredibly strong. People know they want to work with Qualcomm.

FORBES: I imagine if you could have made your Windows RT OEM at this point you would have, but sounds like you can’t.

Paul Jacobs: Right, yeah.

FORBES: I just wanted to make sure I didn’t miss that somewhere.

Paul Jacobs: No. Yeah, we can’t say who they are yet. I think you’ll like the products when they come out.

Monday, July 16, 2012

Flash NOR Memory Revival

NOR flash memory is being replaced by NAND in smart phones.  NOR, however, is finding new growth opportunities in tablets, automotive, and industrial computers as the article below discusses.  These new markets will help strengthen NOR's market share but it will not become as big as the NAND market.

Additional info is in my May 2007 article on Long Term Trends in the NOR and NAND Markets .


NOR Flash Makers Find New Growth Areas to Compensate for Slowing Sales in Cellphones, Teardown Results Reveal

July 13, 2012
Ryan Chien

NOR flash memory sales growth may be tapering off in mobile handsets and smartphones, but lucrative embedded applications in the tablet, automotive and industrial markets are picking up the slack, according to the IHS iSuppli Storage Service at information and analytics provider IHS (NYSE: IHS).

Based on a sample of 55 embedded products dissected by the IHS iSuppli Teardown Analysis Services over the course of three quarters, California-based Spansion Inc. led all NOR suppliers in terms of design wins. The company accounted for more than one-third of the NOR chips in the torn-down devices, as shown in the figure below.

Spansion, together with Samsung Electronics Co. Ltd. of South Korea and Micron Technology Inc. from Idaho, offered NOR chips in densities averaging in the hundreds of megabits. The three companies accounted for 53.4 percent of NOR chips in the three subsegments during the period from the third quarter of 2011 to the second quarter this year.

The rest of the market, equivalent to 46.6 percent of the sample, is controlled by companies that produced low-density NOR memory below the 100-megabit level. This group included big players like Taiwan’s Macronix International Co. Ltd. and Winbond Electronics Corp., as well as smaller entities like fellow Taiwanese firms Chingis Technology Corp. and Eon Silicon Solution Inc.

“Used to store small amounts of executable code, NOR flash was traditionally employed in devices like cellphones for fast read operations and random access capabilities,” said Ryan Chien, analyst for memory and storage at IHS. “However, newer implementations of NAND-based Embedded MultiMedia Card (eMMC) solutions that emulate NOR capabilities have resulted in NOR falling out of favor. The percentage of handsets using NOR flash has fallen from 14 percent in 2010 teardowns to less than 7 percent since then, found mostly in Samsung smartphones. However, NOR manufacturers have been proactive in their diversification efforts, borne out by a study of recent teardowns in both wireless and embedded categories.”

Tablets Energize NOR Market

Among the most prominent applications for NOR are tablets. Despite the elimination of NOR in the new iPad from Apple Inc., NOR chips were found in several Android alternatives in the teardowns, including the Eee Slate and Transformer Prime from Asus; the Jetstream and Flyer from HTC; and the Galaxy Tab 10.1 LTE and 7.7 from Samsung. Tablet devices from Samsung tended to incorporate the company’s own brand, higher-density NOR flash in multi-chip packages, while other branded tablets preferred discrete low-density SPI parts.

In the automotive space, NOR flash plays an increasing role to address vehicle safety regulations and manage user-comfort expectations. Head units in vehicles from Ford, General Motors, Nissan and Honda each had more than 230 megabits of NOR flash. NOR suppliers include Microchip and Micron for Honda and Toyota cars; Toshiba Corp. for Nissan vehicles; and Spansion for GM and Ford autos.

The other high-potential market for NOR flash is the industrial space. Network-attached storage systems from QNAP Systems and Buffalo Technology use Micron chips, and routers from Ubee Interactive and Ruckus Wireless each include 128 megabits of NOR.

An emerging industrial segment for NOR is the smart grid space, where devices such as feeder protection relays require high-density NOR to help monitor substation power lines. All of the NOR flash in hardware made by Sweden’s ABB Group is from Spansion, while solutions for U.S.-based Schweitzer Engineering Laboratories make use of Samsung and Spansion NOR parts. Samsung NOR is rare in third-party products, whereas Spansion has been aggressive in addressing this growth segment.

Top Patent Recipients (33% Semiconductor Companies)

Semiconductor companies are a major force in applying, receiving, and prosecuting patents. They have a long history of protecting their market shares through patents (Intel vs AMD in the early 90s) and increasing their revenues with patent royalties ( for many years about 10% of Sandisk revenues is from patent royalties).


6 out of 15 Top Patents in 2011 were Semiconductor Companies


For the first time in history the U.S. Patent and Trademark Office will open offices outside of the Washington, D.C. area. These new offices will be in areas that have a strong semiconductor presence (Dallas, Denver, and Silicon Valley).
It is exciting to see so many new patents being granted for our growing industry. However, the Patent and Trademark Office does have over 600,000 pending patent applications. It can take up to three years for the patents to be fully processed and approved. In our industry this can pose a definite challenge, as innovative ideas need to be implemented quickly for our ever evolving technology world

Friday, July 13, 2012

450-mm Fabs Ramp in 2017

The article below tries to project when the semiconductor industry will start building 450 mm wafer Fabs. A key point in the article is
"Gartner estimates that the total R&D cost of 450-mm tool development will cost about $17 billion cumulatively.... He noted that other estimates for the development cost differ widely, from about $10 billion at the low end to as much as $25 billion to $40 billion at the high end. "

The large size and range of the $10 to $40 billion cost  for tools development indicates that development will be slower than expected.

It will be interesting to see how Intel will use it to increase its lead in process technology (see Intel, ASML: Higher Performance/ Lower Cost Edge )

The high cost range for 450 mm tools development further confirms my points in the March blogs Moore's Law Slowwwing , and  Moore's Law End? (Next semiconductors gen. cost $10 billion)

Some interesting comments and summary of  IEEE Semiconductor Wafer Test Workshop 2012  by Ira Feldman

" By increasing the diameter of the wafer by 50% from 300 to 450 mm, the area will increase by 2.25x. And if the incremental cost for processing the larger wafer can be held to 12.5%, which may be achievable, the cost per area for the 450 mm wafer will be half that of the 300 mm. " ....

"The “elephant in the room” is how the semiconductor equipment manufacturers will recover their investment to develop the new equipment required to move to 450 mm. At this year’s SEMI Industry Strategy Symposium (ISS), Mike Splinter chairman and CEO of Applied Materials pointed out that the 300 mm wafer equipment had a total industry investment of $12 B which took fourteen years to recover. The current estimate is $15 to 20 B for the development of 450 mm equipment with an unknown time to recover. Obviously a topic of much “discussion” and “negotiation” between equipment suppliers and semiconductor fab operators – integrated device manufacturers (IDMs) and foundries alike."


First 450-mm fabs to ramp in 2017, says analyst

Dylan McGrath

7/10/2012 12:59 AM EDT

SAN FRANCISCO—The first production semiconductor fabs to use 450-mm wafers are projected to commence operation in 2017, according to Christian Dieseldorff, a senior analyst with the fab tool vendor trade group SEMI's industry research and statistics group.

In a presentation at the Semicon West tradeshow here Monday (July 9), Dieseldorff predicted that three 450-mm fabs would commence operation in 2017. By that time, the total number of IC production fabs will have declined to 441, down from 464 this year, according to Dieseldorf.

Number of fabs beginning operation or in production in 2007 and estimates for 2017.

Several industry development projects are now focused on developing tools for 450-mm wafers, which leading edge chip makers want to transition to in order to increase the number of die per wafer, and thus profitability. Among these projects is the Global 450 Consortium, a $4.8 billion collaboration housed at the Albany NanoTech complex in New York and backed by semiconductor industry heavyweights Intel Corp., IBM Corp., Globalfoundries Inc., Samsung Electronics Co. Ltd. and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).

Although the leading chip makers seem bent on moving to 450-mm wafers as quickly as possible, uncertainty remains about when development work will be completed and how many other chip vendors will follow their lead to larger wafers.

At the same event where Dieseldorff spoke Monday, Bob Johnson, research vice president for semiconductor manufacturing at Gartner Inc., said widespread adoption of 450-mm wafers would not occur until 2018 at the earliest, but more likely in 2019 or 2020.

Johnson predicted that the first alpha 450-mm development tools would be available late this year or early next year, with the first production tools not expected until 2016 or 2017. Johnson said there are a lot of predictions within the semiconductor industry about how difficult or easy the transition to 450-mm wafers will be, but that until people begin using 450-mm tools to process wafers, it is not possible to accurately predict how the larger wafers will react to the rigors of semiconductor manufacturing or how smoothly the transition will occur.

"You just don't know these things until you try them," Johnson said.

Johnson said that if the transition to 300-mm wafers in the early 2000s is any guide, chip makers would first construct large 450-mm fab shells but equip them sparsely while they "debugged" the process.

R&D investment estimates vary

Gartner estimates that the total R&D cost of 450-mm tool development will cost about $17 billion cumulatively, about $2 billion of which is being spent this year, Johnson said. He noted that other estimates for the development cost differ widely, from about $10 billion at the low end to as much as $25 billion to $40 billion at the high end.

"We aren't going to know what the [real] numbers are until we start getting some of these tools together and start putting them in production," Johnson said.

Johnson added that he believes the transition to 450-mm wafers is inevitable and predicted that the top 10 wafer fab equipment suppliers would contribute 80 percent of the R&D required to support the transition.

On Monday, Intel Corp. announced it planned to purchase a roughly 15 percent stake in leading lithography tool vendor ASML Holding NV as part of a $4.1 billion equity and R&D funding investment intended to accelerate the development of 450-mm capable tools and extreme ultraviolet (EUV) lithography. Also Monday, the Flemish Minister of Innovation, Ingrid Lieten, announced a commitment to invest in the building of clean room facilities for 450-mm diameter wafer processing at the IMEC research institute's pilot wafer fab in Leuven, Belgium.

Dieseldorff said SEMI estimates that total spending on front end chip fabs in 2012—including both fab construction and cost of equipment—will be between $59 billion and $60 billion, roughly flat with 2011. SEMI expects spending on front end fabs to grow 2 percent to 5 percent in 2013 to between $61 billion and $63 billion, he said.

SEMI estimates that total fab equipment spending, including discrete IC fabs, will total about $38.9 billion in 2012, roughly flat with 2011, Dieseldorff said. The trade group estimates that fab equipment spending will increase 20 percent in 2013 to $46.8 billion, he said.

Meanwhile, the estimated amount of spending on fab construction is expected to be slightly more than $6 billion in both 2012 and 2013, down from about $6.25 billion in 2011, Dieseldorff said. He added that the expectations for fab construction investment have increased in recent months with new projects announced by the likes of TSMC, Samsung, United Microelectronics Corp. (UMC), Semiconductor Manufacturing International Corp. (SMIC) and others. "The outlook for construction spending has improved dramatically" from previous estimates of double-digit declines, he said.

Despite pressure on the Japanese semiconductor industry in recent years, Japan continues to have more chip fabs than any other region, Dieseldorff said. By 2017, the total number of chips fabs in Japan is projected to decline to 105, down from 152 in 2007, Dieseldorff said. The number of fabs located in the Americas, which has the second highest number of fabs of all regions, is forecast to fall to 95 in 2017, down from 123 in 2007, he said.

NAND Flash +DRAM Improves Memory Sys

Fusion io's blog discusses their collaboration with computer scientists at Princeton University

"  Volatile DRAM is faster—but much more expensive at high densities—than flash. NAND flash has much greater density than DRAM, and requires substantially less power to do its job. The Extended Memory library transparently tiers data between available DRAM in the system and the persistent NAND flash tier, making it much more affordable for organizations to greatly expand the size of their in-memory data sets without re-writing their applications."

See more about this partnership below:

Intel's approach regarding  PC memory organization is discussed in How SSDs conquered mobile devices and modern OSes

Other approaches for internal PC memory organizations were covered in a May blog -

Apple NAND Storage in Upcoming MacBook Pros

"There is a room for an overall personal computer hierarchy reorganization. Maybe Apple could lead here.
Currently in PC/ Mac we have a microprocessor (with some fast DRAM memory) connected to long term storage in flash SSD or HDD.
There would be many benefits to adding a small flash NAND between the microprocessor and the long term storage. Such computer hierarchy would benefit from the faster operation of the small flash NAND storage and its long term non volatile storage. It will also reduce power consumption.
The NAND memory could support the microprocessor operations or be used for storage of the operating system."


Princeton Scientists Partner On DRAM Innovation

By Adrian Bridgwater, July 11, 2012

Fusion-io technology now extends memory from DRAM to NAND flash

A collaboration between computer scientists at Princeton University and Fusion-io has led to the development of a new Extended Memory subsystem to be made available as part of the firm's own brand SDK.

The Extended Memory subsystem works to extend system memory from DRAM onto flash, providing what has been described as "much more high-performance memory capacity" than currently possible with DRAM alone.

The firm's message to software programmers is that this is an extended memory option for developers who chose to customize applications to leverage ioMemory technology. Applications can then extend their in-memory data from DRAM onto ioMemory, which — generally speaking — should also save money as DRAM is argued to be cost-prohibitive, not persistent, and limited in capacity.

Will this garner interest from developers attracted to the benefits of storing all data in-memory, especially to meet the needs of web-scale, cloud, and big data computing? It is an attractive sounding option for sure, but success here will be based on whether this Extended Memory's ability to intelligently tier data between available DRAM in the system and the persistent NAND flash tier works as well as described.

"The Fusion ioMemory architecture is uniquely suited to innovation like the Extended Memory subsystem," said Chris Mason, Fusion-io director of kernel engineering and principal author of the Btrfs filesystem for Linux. "Since Fusion ioMemory has moved beyond legacy disk-era protocols, we can integrate new features like the Extended Memory subsystem to truly advance application performance for enterprise computing in ways that are simply not possible with traditional SSDs."

The Extended Memory subsystem dynamically moves frequently accessed data pages into memory on-demand while migrating rarely accessed data pages from DRAM into ioMemory. This says Fusion-io allows developers to simplify application design by assuming that entire datasets are in-memory, without the costs associated with DRAM purchase and operation.

Application developers are able to further tune performance through software development kit tools that lock selected pages into DRAM, giving access to NAND flash as memory, instead of treating it as an extension of disk storage. This allows legacy applications to scale up with flash memory, instead of scaling out, boosting performance and reducing total cost of ownership.

Thursday, July 12, 2012

Intel, ASML: Higher Performance/ Lower Cost Edge

Intel's investment in ASML will increase Intel's process technology leads. Intel will have stronger ties to leading-edge lithography processes and to the next generation of 450mm wafer tools.

Some key points in the article are below:

" Intel can now force the game forward and even Apple will now have to consider how wise it is to hang back in older processes. Some amount of their processors will need to step up to the leading edge for cost and performance reasons. "

"every survivor going vertical, however now we are looking at two separate vertical models. There is the device vertical model with LCD screens, NAND Flash, enclosures etc.. that Apple and Samsung are very adept at. In last weeks blog I mentioned how Intel was funding Taiwanese panel makers to guarantee supply for ultrabook manufacturers (likely at the expense of AMD and nVidia). Now we have Intel letting the world know that being a MAN in the semiconductor industry requires owning more than just fabs. Real Men must now invest in the semiconductor R&D tool chain."


Intel Opens a New Front with ASML


by Ed McKernan
Published on 07-10-2012 02:00 PM

Behind great humor often lies irony. In the midst of a struggle by the European Union to extract $1.3B from Intel in an ages old Anti-Trust case, the latter makes a strategic move to embolden the Dutch firm ASML to accelerate the development of 450mm and EUV and thus save a continental jewel. What now say EU? When disfunction and bankruptcy abound, beware the need of sovereigns to extract not pints but gallons of blood. Intel sees an end game at hand, not today but in just a couple of years and it plays into its plans to win all of mobile: including Apple and Samsung. They parry the EU assault with a massive $4B investment and prepare to watch the poker players ante up or fold.

Intel Always Fights a Multi-front war knowing that it eventually wears down the enemy. Please, please we don’t speak of enemies unless we are in the realm of politics! However, one should be aware that without TSMC there is no Qualcomm, nVidia, AMD, Broadcom, Marvell and the rest of the ARM camp (especially ARM). And what of Apple and Samsung, the two leaders of the mobile Tsunami who will have 80%+ of the Smartphone and Tablet market by the New Year? They will have a choice to make in which the first one who blinks will have the opportunity to be years ahead of the other.

It is simple mathematics. Assume, conservatively that Intel is two years ahead of TSMC. Now presume Intel, conservatively launches 450mm two years ahead of TSMC, then it is like a 4 year lead in process technology. Now input your die sizes and run the cost models. It is daunting having to stare up at the Matterhorn before the climb begins.

We have learned in the past 6 months that Smartphones and Tablets are demanding leading edge process technology (Qualcomm sold out this year on 28nm 4G LTE chips). This was the one doubt that I had as to whether Qualcomm, nvidia and the rest of the ARM camp were safe in the foundries at an n-1 node while Intel played catch up with a true low power processor and baseband functionality. Intel can now force the game forward and even Apple will now have to consider how wise it is to hang back in older processes. Some amount of their processors will need to step up to the leading edge for cost and performance reasons.

The news articles from yesterday stated that ASML was open to additional investments from other foundries (i.e. TSMC and Samsung). I can see Samsung stepping up. TSMC is an extension of Qualcomm, Broadcom, nVidia and others. They will likely have to devise new long-term agreements from their partners that requires them to pony up dollars for the ASML investment. Or alternatively does Qualcomm write a check to ASML?Does Apple?

The maneuvers lately point to every survivor going vertical, however now we are looking at two separate vertical models. There is the device vertical model with LCD screens, NAND Flash, enclosures etc.. that Apple and Samsung are very adept at. In last weeks blog I mentioned how Intel was funding Taiwanese panel makers to guarantee supply for ultrabook manufacturers (likely at the expense of AMD and nVidia). Now we have Intel letting the world know that being a MAN in the semiconductor industry requires owning more than just fabs. Real Men must now invest in the semiconductor R&D tool chain. The Question that Wall St. should ask is the following: What is the total value that will derive 4-5 years down the line from an investment in ASML’s R&D?


Wednesday, July 11, 2012

Nexus 7 Tablet Teardown: +4% Mem. Cost Add $50 Profit

The article below shows the impact of adding flash NAND memory to the profit margin of Google's Nexus 7.

"Andrew Rassweiler, who leads the teardown team at IHS iSuppli, reckons that Google will break even on the 8GB model but turn a tidy profit on the 16GB model. “Like Apple, Google realizes it can boost its profit margin by offering more memory at a stair-step price point. It’s getting $50 more at retail for only $7.50 more in hardware cost, which sends $42.50 per unit straight to the bottom line.”


Google’s Nexus 7 Costs $152 to Make, IHS iSuppli Teardown Finds

July 11, 2012 at 5:15 am PT

Google’s Nexus 7 tablet may be all about an attempt to compete with Apple’s incredibly popular iPad, but when you crack it open it sure looks an awful lot like Amazon’s Kindle Fire inside. (Read Walt Mossberg’s review of the Nexus 7 here.)

That’s the impression that analysts at the research house IHS iSuppli got when they did just that: They took a Nexus 7 apart in order to see what components are inside and to estimate what each of them costs. The early verdict, shared exclusively with AllThingsD, is that the low-end eight gigabyte model of the Nexus 7, which sells for $199, costs $151.75 to build.

The higher-end 16GB model, which sells for $249, costs $159.25, the difference being the cost of memory chips inside.

Andrew Rassweiler, who leads the teardown team at IHS iSuppli, reckons that Google will break even on the 8GB model but turn a tidy profit on the 16GB model. “Like Apple, Google realizes it can boost its profit margin by offering more memory at a stair-step price point. It’s getting $50 more at retail for only $7.50 more in hardware cost, which sends $42.50 per unit straight to the bottom line.”

The IHS iSuppli cost estimate is about $30 lower from an early estimate put out last month by another research firm, UBM Techinsights. However UBM’s estimate was made without having first obtained the hardware for analysis.

The Nexus 7 is similar to Amazon’s Kindle Fire tablet in many respects, but in others it has better features. For one thing, the Nexus has an as its main computing engine the Nvidia-made Tegra 3 processor. It’s a four-core chip, meaning it has four main processing brains. The Kindle Fire has a two-core OMAP 4430 processor from Texas Instruments. TI however supplied two chips for the Nexus 7, one a power-management chip, the other a low-voltage transmitter.

But the Nexus 7, manufactured by Asus for Google, also has a better display with a resolution of 1,280 pixels high by 800 pixels wide versus 1,024 by 600 for the Kindle Fire. Rassweiler said the display uses a technology known as in-plane switching, and added $38 to the hardware cost of the Nexus 7, versus $35 for the display in the Kindle Fire, Rassweiler said.

The Nexus also has a camera that added $2.50 in cost to the Nexus, and which the Kindle Fire lacks. The Nexus also has a chip from NXP that supports near field communications (NFC) a close-range wireless technology that’s intended for wireless commerce transactions. Broadcom supplied GPS receiver chips to support mapping functions.

One other part caught Rassweiler’s attention: A gyroscope and accelerometer from Invensense. While it’s common to see Invensense gyroscopes, it’s rare to see it combined with into the same chip with the accelerometer. Both are used to determine position and movement of the device. The only other combined gyro-accelerometer seen before, Rassweiler said, was seen in Samsung’s Galaxy SIII smart phone and was made by the European chipmaker STMicroelectronics.

All told, IHS iSuppli figures the Nexus 7 costs about $18 more to make than the Kindle Fire. But that’s likely to change soon. A New Kindle Fire with a better display this fall.