Chip makers must shift from fabs to systems

Chip makers must shift from fabs to systems

Fabs "evaporated" as differentiator, says Infineon CEO




Rick Merritt

(01/15/2008 9:42 PM EST)
URL: http://www.eetimes.com/showArticle.jhtml?articleID=205800635

SAN FRANCISCO — Semiconductor companies need to shift their focus from building fabs to building systems, and they must engage with customers at deep technical levels if they are to survive the current wave of consolidation. That's the view of Wolfgang Ziebart, chief executive of Infineon Technologies.

"The major thing giving semiconductor makers a competitive advantage has evaporated," said Ziebart in an interview in the San Francisco offices of EE Times. "Today everyone has access to the same process technology at roughly the same time. This access used to be what differentiated the best from the worst semiconductor companies, but now it has evaporated," he said.

"What's replacing process technology as a differentiator is systems know how, and it must be specific to a market area. Wireless, for instance, is too broad. You must have a focus segment such as Wi-Fi or Bluetooth," said Ziebart.

This shift is coming at a time of consolidation among chip and systems makers, forcing engineers at both companies to work together in close collaborations.

"What used to be markets are now just a few companies. In mobile phones, for example, five players now make up 85 percent of the market," he said.

"This means your approach as a semiconductor maker has to totally change. You don't approach your customers with a marketing department that does studies and finds clusters of demand and establishes product lines to address them. That's old thinking. Today you have to engage with your customers in a much more intimate way," Ziebart said.

Responding to the shift, Ziebart has reorganized Infineon into a set of small relatively free-wheeling business units chartered to engage systems makers on technology problems at the level of R&D in core markets such as cellular. Ziebart spoke with EE Times after attending the Steve Jobs keynote at MacWorld where Jobs unveiled new software features for the iPhone which sports a baseband and RF transceiver from Infineon.

Ziebart would not discuss Infineon's relationship with Apple, but he did describe two aspects of the chip maker's initiative in cellular. Infineon is focusing on the RF modem area where it has a leading position rather than the applications processor which is still relatively fragmented.

"Cellphone makers see a lot of differentiation at the high end, so no platform solution as such has emerged yet. There are various applications processors for different kinds of functions like media processing and number crunching," he said.

Separately, Infineon is working with engineers in China to create a variant of the DVB-Handheld standard that will be used for mobile TV broadcasting in the Beijing Olympics. However, Ziebart cautioned China's developers about the risks of developing their own standards such as China's TD-SCDMA specification which he said may not see wide use outside of the country.

Ziebart pointed to Japan's difficulties trying to establish its own broad of second-generation cellular technology as a cautionary tale. "They were left behind" when much of the rest of the world adopted GSM, he said.

Cellular is just one of a broad set of markets for Infineon that also includes automotive, industrial and wired communications. The fact that the company addresses such diverse areas is not a concern, said the CEO.

"Synergy is priority #2. Priority #1 is for every business we are in to have a sufficient return. As long as that's the case we don't care about too many of the other details of the business. There are no strategic businesses in our company, only profitable and unprofitable ones," Ziebart said.

As it turns up the volume on its systems focus, Infineon is getting out the business of building DRAMs and fabs. Ziebart said in 2009 Infineon will hold less than a 50 percent stake in Qimonda, its former DRAM division.

Infineon currently holds three-quarters of Qimonda's shares. Just how the chip maker will divest those shares has not been determined yet.

The company has also decided it will build no more fabs for 65nm and finer process technologies. However, Infineon has set up a power semiconductor fab in Malaysia, in part because its automotive customers want suppliers to assume full responsibility for such parts.

Infineon was an early partner with IBM in its Common Platform Alliance that has developed 65nm technology. Freescale has joined the group for 45nm technology, and STMicroelectronics has signed on to co-develop 32nm technology.

"A lot of companies [in the alliance] went their own direction at 65nm, and Infineon has its own 65nm libraries," Ziebart said. "But at the 45nm node, we will try to go with a more common library and just add a few specific elements to it as needed," he said.

In contrast, "there are still many Japanese chip makers setting up 300mm fabs and doing their own advanced technology development," Ziebart said. "They have a lot of manufacturing know how, but the systems-level know how is still locked up in their customers such as Denso and Panasonic, [thus] Japan's market share has really declined in the last decade," he added.



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