- 19 October 2005 -

Yawning R&D funding gap

If current technology and economic trends continue, the funding gap for R&D
in semiconductor manufacturing productivity and technological progress could exceed $9bn by 2010, according to a White Paper from Infrastructure Advisors commissioned by SEMI.

"The semiconductor industry is at a crossroad. The development of the IC has contributed to remarkable improvements in the electronics sector, resulting in enormous economic and social benefits. However, without significant attention to the R&D gap, the semiconductor equipment and materials industry will not be able to afford to keep up with Moore's Law," says president and CEO of SEMI. Stanley Myers.

The white paper estimates that the semiconductor equipment and materials industry will be able to afford a projected annual R&D budget of $10.4bn by 2010. However, the estimated R&D funding required for the continued scaling of CMOS technology in accordance with Moore's Law will be $16.2bn.

And if the industry proceeds with development of the next wafer substrate size, annual R&D funding requirements could rise to $19.7bn in the same timeframe, leaving a gap of more than $9 billion.

A slowdown in industry growth, combined with slower R&D investment rates and continued heavy pricing pressures, could produce an even larger gap, the report warns.

The White Paper identifies several contributory challenges to the R&D funding gap over the next decade. These include new materials; process integration; next-gen litho and progression to a 450mm wafer size.

The report estimates that the equipment and materials industry collectively
spent about $12bn for the transition to 300mm wafers, spread over the 1996-2003 timeframe.

A 450mm program could take as long as eight years to bring to market and is likely to cost the equipment and materials industries well over $20bn, the report estimates.

The report also highlights the risk of "blind alleys", where substantial R&D investments are incurred on new technologies that do not yield returns. One example 157nm lithography where equipment, materials and sub-system suppliers invested hundreds of million of dollars in R&D before the project was shut down in favor of 193nm immersion lithography.

The White Paper suggests a more conservative approach would be to invest some collaborative pre-competitive resources to assess the most feasible and likely solutions, and then apply any competitive advantage to develop products for the market.

Further, total R&D spending has escalated as technology starts to converge on barriers created by the basic laws of physics. Many of these barriers can be overcome with new structures, processes and materials - but at a cost and in a timeframe that is not feasible from a business management standpoint, says the report.

The White Paper suggests five potential solutions to close the R&D funding gap. These are:
• stronger business models to maintain R&D spending in cyclic downturns;
• reduction of R&D costs; sharing or partnering; external funding;
• government funding/investments.

"In reality, it will take a combination of these to ensure the future of this industry, which is vitally important to the global economy. A sixth alternative is to let the pace of progress slow down to meet the affordable funding level," said Ron Leckie, president of Infrastructure Advisors.

The White Paper is an independent investigation commissioned by SEMI. Input was received from device, equipment and materials companies from around the world. In-depth interviews were conducted with 60 executives from 45 companies in Europe, Japan and the US. The scope of the report includes wafer processing, IC packaging and test, and semiconductor materials.