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Electronic chemicals: Chip market set for rebound
June 24, 2013 | —Rebecca Coons
Suppliers to the semiconductor sector say the outlook for electronic chemicals is improving following a dip in late 2012. Unprecedented levels of materials development is required to ensure fabricators can produce chips that meet consumer demand for cutting-edge gadgets, creating new opportunities to generate value for customers and gain market share.
Suppliers say the market for electronic chemicals is improving following a semiconductor market correction in the latter half of 2012, and barring any major economic decline, analysts expect healthy growth through 2017. Consumer demand for smaller, faster, and more energy-efficient devices is driving the semiconductor industry to accelerate the development of more advanced nodes.
“Driving forces in the consumer electronics market are demand for mobile devices, [such as] smartphones and tablets, and telecom infrastructure to support the devices,” says David Miller, president of DuPont’s electronics and communications segment. “From a technology perspective, there is huge demand for materials that deliver high speed/high frequency capabilities, better thermal properties, and... smaller, lighter, more flexible form factors.” Lower cost of ownership is always a key driver as well, he adds.
“As consumers, we are demanding that we be connected all the time, everywhere,” says Rick Hemond, global marketing director/electronic materials at Dow Chemical. This is also driving the need for innovations in materials that enable brighter screens, faster and more powerful computer chips, and longer battery life.
Lothar Laupichler, senior v.p. and head of BASF’s electronic materials global business unit, says the electronics industry—especially regarding integrated circuits (IC) and displays—remains one of the fastest-pace, innovation- and technology-driven fields in chemistry. “With engineer July 30 ing solutions driven to limits, chemistry becomes more and more a key enabler for technological advancements.” Development of new, innovative electronic materials is necessary for the ongoing miniaturization of the process nodes and more sophisticated functions of IC chips, Laupichler says. “To achieve the newest IC designs and applications, including new three-dimensional IC architecture, new materials need to be developed and introduced.”
IHS iSuppli expects second-quarter semiconductor sales to rise 3.7% on a consecutive basis and improve another 7.5% in the third quarter, as suppliers boost inventories to meet an expected uptick in electronics demand. Semi, the semiconductor marketing association, projects the semiconductor materials market to increase 4%, to $48.9 billion, in 2013—a new high for materials.
IHS Chemical expects the market for IC process chemicals to grow 5.4% annually through 2017, to $24.7 billion. The global market for printed circuit boards (PCBs) materials is forecast to grow 3.8%/year through 2017, to $18.5 billion.
The improving outlook is welcome news for suppliers, which saw shipments recover from recession in 2010 but remain flat in 2011. Despite a promising start in 2012, activity slowed in the latter half. The global semiconductor market was valued at $303 billion in 2012, down 2.3% from 2011, according to IHS Chemical.
The semiconductor materials market contracted 2% in 2012, to $47.1 billion—marking the first decline for the materials market in 3 years, Semi says. Packaging materials revenues grew 1%, but wafer fab materials contracted 3%. “Wafer fab materials’ contraction was driven in a large part to the severe pricing pressure faced by silicon suppliers, which saw their aggregate average selling price decline 12%, even though the segment shipped a record volume of 300 millimeter wafers that have higher selling prices,” Semi says. Executives say a number of factors, including the consumer preferences that are depressing sales of personal computers and an inventory correction, contributed to the weak market conditions.
“What we saw last year was the industry making significant progress in delivering better productivity at advanced technology nodes and getting more transistors in the chip,” says Wayne Mitchell, v.p. and general manager of Air Products’ electronics division. “Manufacturers already had large chip inventories, expecting seasonality and rebuilding efforts in the wake of natural disasters in Japan and Thailand, resulting in the anticipated demand that ultimately lagged forecasts.”
Executives say the inventory correction is complete and the market is beginning to recover. “Global semiconductor production is slowly but steadily increasing as the inventory correction that started in the second half of the calendar 2012 appears to be nearing its end,” says Neal Butler, president and CEO of KMG Chemicals.
Keeping up with Moore
Over the long term, the semiconductor industry is in a good position, since consumer demand for mobile devices such as smartphones and tablets remains strong, says Jim O’Neill, senior v.p./electronic materials at ATMI. The company focuses on supporting the technology road-map needs of leading chipmakers for 28 nanometer (nm) nodes and beyond. “What we’re seeing now is wafer starts beginning to ramp up among the largest, most advanced customers as they push 28 nm into manufacturing. We have worked to win positions broadly in advanced nodes, and we are beginning to see some benefits from this.”
The optimistic growth outlook is somewhat tempered by the technical and cost challenges of moving to the next wave of nodes. O’Neill says the transition from 28 nm to 20 nm is going to require a “paradigm shift” in lithography, including multiple exposure and multipatterning techniques. “That’s going to add significant cost and complexity to our customers’ process schemes—cost and complexity that will put enormous pressure on operations unless the performance benefits designed into their integration schemes pan out. More efficient use of materials will also be a piece of those cost-saving efforts.”
Because of the high costs and technical challenges associated with building and operating fabs for the smallest technology nodes, the advanced semiconductor industry is experiencing heavy consolidation, O’Neill says. Among ATMI’s customers, including semiconductor manufacturers in both Asia and the United States, this strategy appears to be working. “There are a small number of chip makers successfully producing the most advanced nodes, and there is no indication this will change anytime soon,” he adds.
Industry experts expect that semiconductor technology will continue to increase in functionality and decrease in size according to Moore’s law, the observation that the number of transistors on integrated circuits doubles approximately every two years. Developing enabling materials for each generation is getting costlier and more complex, however, producers say.
“A year ago I would have placed most logic working on 28 nm, with memory at 20–22 nm,” Mitchell says. “Today, industry is working toward 20 nm and below: 14 nm for logic, and memory moving toward 16 nm, with R&D working on 10 nm nodes.”
Upholding Moore’s law going forward will require new strategies and increasing innovation from materials suppliers. “If you look at the evolution of Moore’s law, industry has responded by achieving productivity and delivering more transistors on chips through traditional scaling,” Mitchell says. “More recently, though, to enable the performance and power requirement at the smaller nodes, new device architecture—and new materials to enable them—has become the dominant strategy. From an advanced materials perspective, that means there is increased demand for new materials and opportunities to create value for customers.”
Customer demands require materials and equipment suppliers collaborate more closely, Mitchell says. “The complexity with regards to integrating materials with equipment in the fab is just that much more challenging. There are a lot more materials to handle, and the sophistication required to handle these materials is also significant. Understanding how materials perform within the process, how they interact with other process materials, and how they all integrate into the overall manufacturing process is a significant challenge and opportunity.”
Laupichler says the larger-sized LCD TVs—soon complemented by organic light-emitting diode (OLED) screens—and the integration of new computing and communication devices into TV sets boost the use of new technologies, hence demanding new materials. “These requirements continue to drive a high R&D and capital intensity for the electronic industry as well as for chemical solution providers. Close codevelopment in direct proximity to our customers enables quick and flexible turnaround times in product development as well as in scale-up to mass production—core capabilities of a reliable partner in this industry.”
O’Neill says customers are creating different variations of similar integration schemes, requiring some degree of customization for ATMI. “We have invested in our global High Productivity Development technology centers to enable us to get closer to our customers,” he says. “Those technology centers enable closer collaboration with each customer to develop the materials and solutions that are going to work for their specific needs.” ATMI has microelectronic technical centers in Danbury, CT; Xinchu, Taiwan; and Suwon, South Korea.
Miller says customers want supplier partners that deliver enabling technologies to improve their products’ performances and lower their costs. “They also want a stream of innovation, not just a one-time development.”
Increasing complexity means continued investment in R&D activity. O’Neill says ATMI is able to optimize spending levels because customers are embracing the collaboration model and making resources and data more accessible to their development partners.
“They have a lot to bring to the table in terms of wafers, data, and equipment. This allows us to share some responsibilities and further manage the costs for development work we are doing together,” O’Neill says. “It helps us continue to push advanced research efforts without having to incur the overhead required by pursuing development efforts alone.”
Hemond says chip makers are increasingly looking to advanced packaging solutions to meet consumer demands for smaller, thinner electronics with more functionality and durability. “To stack chips, you have to package them with certain materials to take away the heat because they’re going to get too hot,” he says. “The packaging also has to allow the chips to talk to each other and talk to the board.” Dow’s Intervia metallization chemistries also offer increased durability and shock resistance for the computer chip—making it less likely that a dropped smartphone will result in disrupted connections between chips and PCBs.
Joel Zazyczny, executive v.p./silanes, silicones, and metal organics at Gelest (Morrisville, PA) says new product development efforts to reduce power consumption, reduce heat dissipation, improve processing, and create efficient lighting solutions are driving the positive near-term outlook for Gelest’s silicon and metal organic precursors—including volatile carbosilane and volatile higher silane precursors for silicon carbide films and buffer layers.
Customers are looking for formulations they can integrate quickly, O’Neill says. “In addition, the detection, elimination and control of particles at 40 nm dimensions will become an increasing challenge for material suppliers. The challenge is that defectivity affects yield for our customers, and what used to be handled in the fab is now being pushed down to the materials suppliers. There is a big push from our customers for defect road maps, including manufacturing data demonstrating our ability to deliver increasingly high-purity, high-quality materials—beyond where the industry has operated in the past.” This scenario is driving some increased collaborations with customers working at the most aggressive nodes, where such issues will be first observed, O’Neill says.
In a market as complex as electronic materials, innovation and customer intimacy are mandatory. Companies attribute leadership positions to aggressive portfolio management, materials science know-how, emerging technology acquisitions, broad product offerings, and market focus.
Air Products’ electronics division is a $1.6-billion business supplying on-site and bulk gases, delivery systems, process, and advanced materials. After a business review 15 months ago, Air Products decided to focus its electronics business on semiconductors and advanced displays and limit its participation in the light-emitting diode (LED) and photovoltaic (PV) markets to competitively advantaged products, which leveraged its existing semiconductor expertise.
“We recognized that there were structural changes in the PV market, and the growth opportunities were not what was originally expected,” Mitchell says. “So we decided to focus on the markets where there is significant alignment between our capabilities and where we can create much greater value,” he adds. Gases, materials, and equipment for semiconductor production already account for 80% of the division’s $1.6 billion in annual sales.
Air Products recently made two recent acquisitions in support of its planarization platform. Last year, Air Products bought DuPont out of their 50-50 chemical mechanical planarization (CMP) slurry joint venture, DA NanoMaterials, for an undisclosed sum. The deal gave it full ownership of applications and formulation laboratories at Tempe, AZ; and Xinchu and DA NanoMaterials’ portfolio of colloidal silica–based products for copper and barrier CMP, tungsten CMP, and wafer polishing applications. In 2011, Air Products acquired Poly-Flow Engineering (PFE; Albuquerque, NM) from Ktech (Albuquerque). PFE supplies chemical delivery and precision cleaning equipment for semiconductor manufacturers.
“We now have slurries, post-CMP cleaning chemicals, and the delivery systems to offer a fully integrated CMP offering,” Mitchell says. Air Products is a market leader in CMP consumables, he adds.
Air Product’s advanced materials push also includes its surface preparation and cleaning product lines—parts of a $300-million acquisition of Ashland’s electronic chemicals business in 2004—and its advanced deposition offerings, where the company is the market leader in advanced organosilanes.
Dow’s electronic materials business posted revenues just over $2 billion in 2012, of which approximately 80% was generated in Asia. Hemond attributes Dow’s leading market share to the company’s technology, continued investment, and collaborative relationships with customers. Reliability is also a factor, particularly for certain customers whose complex, integrated operations face millions of dollars in losses from just minutes of downtime, he adds.
Hemond adds that Dow has among the most extensive product offerings in the electronic materials space. “There are other companies that serve pieces of the market, but none across the range that we do. We’re a photochemical company, we’re a metallization company, we’re a CMP company, and much more, and we apply these technologies into the different markets.”
Dow is the market leader in CMP pads and slurries and holds the number-two market position in photoresists and antireflectants, Hemond says. The company’s interconnected technologies unit manufactures chemicals and materials for PCBs and also serves the electronic and industrial finishing markets. Dow has the leading position in metalization chemistries, which is delivering technology for high-density interconnects for smaller, high-end circuit boards that enable miniaturization, he adds.
Dow’s display technologies business is a market leader in OLED emissive materials and is well positioned to capture growth in large format displays, Hemond says. The company has been expanding its OLED manufacturing capabilities in South Korea since 2009 and expects demand growth for OLED products to accelerate as the price of large-format OLED televisions falls, he adds.
Dow Electronic Materials has grown from a $200-million business 15 years ago to over $2 billion today via organic growth and acquisitions, including Dow’s 2009 purchase of Rohm & Haas, Hemond says. “That has been our history: acquiring technology ahead of the market need and then growing it.” The latest deal was last year’s acquisition of LightScape Materials, a producer of phosphors used in LEDs. Hemond says, “Phosphors are critical to the acceptance of LEDs in residential and commercial lighting. Today’s LEDs give off a bluish cast, but consumers want a warm light with red and green tones. Dow’s phosphor materials are used to convert blue LED light to red, green, and other colors to make warmer white light suitable for general lighting applications. Dow’s materials have better thermal stability than phosphors that have been traditionally used, which equates to better reliability in high-power lighting applications.
O’Neill believes a company like ATMI is well positioned among materials firms that operate in the electronics market. “ATMI is a global technology company focused on the leading edge of the semiconductor market. In contrast to companies that have a commodity business with a limited product offering in specialty materials, we are only in the specialty materials business. That allows us to be nimble and work closely with customers to resolve their problems quickly.” ATMI is also focused on the leading edge of the innovation pipeline. “Once a material starts to become a commodity, it is time for us to move onto the next challenge,” O’Neill says.
ATMI’s microelectronics business tracks wafer starts, which O’Neill forecasts should grow 3–5%/year over the next several years. As the company extends into new nodes it has the ability to achieve higher growth rates. “Many of our products are highly penetrative, and we have leading market share in many of the segments where we compete,” he says. “ATMI’s goal is to stay ahead of wafer start growth, reflecting our ability to increase market share and increase penetration as our customers introduce and ramp new nodes.”
KMG acquired OMG’s ultrapure chemicals business on 1 June for $63.3 million in cash. The purchase marks KMG’s third acquisition in the electronic chemicals market since it bought Air Products’ high-purity process chemicals business in 2008, Butler says. The addition of OMG’s ultrapure chemicals business, which generated 2012 sales of $93.8 million, makes KMG the world’s leading supplier of high-purity process chemicals to semiconductor makers. “While the product portfolio acquired matches extremely well with our existing product offering, the acquisition did provide certain interesting new product extensions, expand our customer and geographic base, and increase our technical and production capabilities,” Butler says.
The acquisition also expands KMG’s product portfolio in Europe, giving it new opportunities and the capability to supply key chemicals such as ammonium hydroxide, ammonium fluoride, sulfuric acid, hydrochloric acid, and nitric acid. The business acquired from OMG also maintains a strong presence in Singapore, serving major semiconductor customers from two distribution centers. “Although we had previously sold a limited amount of material into Asia, a new physical presence in Singapore significantly increases our exposure to this fast-growing market for semiconductor manufacturing,” Butler adds.