Some of the world's largest chip makers are exploring a move to bigger pizza-sized silicon wafers to boost efficiency and help them grab market share as demand for gadgets from music players to cameras surges - but only if someone foots the multi-billion dollar price tag.
In the next decade, some optimists say the semiconductor industry could migrate to 18-inch discs from the 12-inch (300 mm) wafer currently used in most mainstream chip production, as the new-generation wafers would yield more chips to meet rising demand for gadget such as Apple Inc's iPod.
The world's No 1 chip maker, Intel Corp has advocated the need to shift to 18-inch (450mm) silicon wafers by around 2012. Taiwan's TSMC the world's largest contract chip maker, is also openly promoting the shift. The industry - from semiconductor makers to the companies which make their equipment - needs to agree on how to proceed. But analysts reckon memory chip makers Samsung, Elpida and Toshiba also support the move.
Cost is a major hurdle. A factory designed to make chips on 18-inch wafers could cost $10 billion or more to build, nearly triple the price of a current 12-inch wafer factory, analysts say.
"Pretty expensive, right?" said iSuppli Corp analyst Nam Hyung Kim. "Silicon guys are capable of making 18-inch wafers. However, fab equipment companies have no interest in pursuing 18-inch wafer tools yet." Only the biggest companies, like US-based Intel, South Korea's Samsung, TSMC and Japan's Toshiba, have the resources to be the first adopters of the new technology, said research company IC Insights.
"Sector leaders, I mean like Samsung in the memory industry and TSMC in the foundry market, will be big winners," said John Jahn, a director at the industrial economics centre of Taiwan's Industrial Technology Research Institute (ITRI). "Their market share will keep increasing."
MOORE'S LAW: The size of a wafer, the silvery disks from which tiny chips are diced, is critical to make production more efficient. A new generation of larger wafers typically comes out each decade or so.
Chip makers have focused attention on trying to shrink the size of transistors to sustain Moore's Law, the industry maxim laid down by Intel co-founder Gordon Moore that the number of transistors on a chip doubles roughly every 18 months. Now they have to focus on making the wafers that hold the chips much larger because making chips smaller becomes more difficult as designers cram more functions onto a single chip for PCs and other popular consumer gadgets and mobile phones.
A decade ago the move to 12-inch from older 8-inch (200 mm) wafers sharply boosted efficiency by more than doubling surface area for etching chips while only raising costs of processing each wafer by about a fifth.
An 18-inch fab could herald a similar leap. "By the end of next year, we will have a better idea of how difficult it is going to be to move to 450mm," said Paolo Gargini, a director of technology strategy at Intel. "By the end of 2009, companies will be able to map out the costs and how long it would take to recover investment."
Taiwan Semiconductor Manufacturing Co Ltd (TSMC), with $9.8 billion in sales last year and a client list that includes Texas Instruments and Qualcomm and other proponents could reap big profits if the gambit pays off. But they could risk harming earnings if the technology does not boost yields as quickly as hoped, analysts say.
Uncertainty surrounding the migration has dampened enthusiasm among major tool suppliers, including Applied Materials Inc, as players hesitate to bear the brunt of development costs, they say.
LEFT BEHIND: Smaller chip makers, such as those in China, are not so keen to take the risk. Across the Taiwan Strait, semiconductor companies - most of which lack the resources of Japanese, Korean and Taiwanese giants - are unlikely to buy into the expensive plan soon.
"I don't hear anyone in the industry here talking about it, and 2012 would be completely unrealistic for firms in China," said a vice president, who declined to be named, at one of China's second-tier foundries, or contract chip makers.
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