Wednesday, February 21, 2007

Just Add Water

Taiwanese chip firms are catching up to their US counterparts through innovative manufacturing technologies
By Jonathan Adams
Newsweek International, October 18, 2004

Back in 2002, engineers charged with making the next generation of computer chips due out in 2010 found themselves staring into the abyss. Corporate strategies were already being mapped out on the assumption that chipmakers would find an affordable way to shrink tiny electronic circuits down to even smaller sizes. But there was a hiccup with a key process called microlithography, whereby a beam of light traces out circuit patterns onto wafers of silicon. Researchers couldn't figure out how to make it work for smaller circuits, and without a solution the manufacturing lines weren't going to move. Then Burn Lin, a top engineer at Taiwan Semiconductor Manufacturing Co., proposed a simple solution: by sending the beam of light through water rather than air, it might be possible to focus it more finely.

Experts from European and Japanese firms in Europe and Japan were skeptical, not least because they were invested in a different technology. "I told them, 'You're throwing your money away'," says Lin. " 'The sooner you switch, the less bleeding you're going to face'." Eventually they took his advice and TSMC joined the likes of IBM and Intel at the forefront of chipmaking.

China may have gotten publicity recently as an emerging chipmaking power, but Taiwan—and TSMC in particular—has staked out a more rarefied position. Taiwan's chip-design industry—the high-tech end of chip manufacturing—is expected to grow 36 percent this year to $7.6 billion, which would put it second only to the United States, according to the market-research firm iSuppli. TSMC was one of the first firms to crank out the current 90-nanometer generation of chips. Says Merrill Lynch analyst Daniel Heyler: "They're effectively driving the frontier."

And making inroads on American turf. The U.S. share of global chip production is expected to fall from 37 percent this year to 34 percent by 2008, while Asia's rises from 20 to 26 percent. The cost of new chip plants—now more than $2 billion—is driving industry consolidation; the Gartner research firm predicts that by 2014, the number of chip vendors will drop by 40 percent from about 550 tallied in 2003. Big Asian contract manufacturers like TSMC should do well at the expense of the smaller U.S. firms because it has big clients and can invest the huge sums required to keep up its edge.

It won't be easy, in the face of cheaper rivals in China and innovative firms in the U.S., which are already working hard to bring Lin's water idea to fruition ahead of TSMC. Lin, for his part, is on to the next thing: using massively parallel electron beams to etch chips. In this industry, nobody can afford to tread water.

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