The demand for machine tools for semiconductor manufacturing equipment

Semiconductor manufacturing equipment varies greatly due to different processes and functions, and has a large ripple effect on the entire machine tool industry, and the demand for semiconductor manufacturing equipment will become the driving force for the recovery of machine tool orders.

According to World Semiconductor Market Statistics (WSTS), global semiconductor demand has been between $300-340 billion since 2010, rapidly growing to $412.2 billion in 2017 due to accelerated data center construction and advances in NAND flash stacking technology, and continued high growth to $468.8 billion in 2018. The balance between memory supply and demand temporarily eased in the second half of 2018, but due to continued investment in the logic chip sector, demand in 2019 was flat with 2017. Demand began to surge again in the second half of 2020, reaching $440.4 billion. WSTS expects it to reach $553 billion in 2021, with an optimistic forecast of $601.5 billion in 2022, judging from the huge investment that will continue in the future. According to the views of industry insiders in media reports and think tank reports, the consensus is that it will reach $1 trillion by 2030.

1. Moore's Law and silicon cycles

In the semiconductor industry, the "Moore's Law" proposed in 1965, advocating that the number of components carried by each integrated circuit double every year (revised in 1975 to "double every two years"), has been continued to this day, mainly through the fine width of the electrical path to achieve the increase in the number of integrated. Integrating more transistors has been one of the main drivers for device upgrades, improving computing performance, reducing power consumption and reducing costs. By 2021, the practical circuit width has been reduced to 5nm, and the major fabs are developing towards the mass production of 2nm products around 2025. imec, an influential research institute in Belgium, expects 1nm to be put into practical use in 2027 and 0.7nm in 2029, and the industry is also developing at 0.1nm (= angms).

In the 2010s, FinFET structures with vertical channels sandwiched between the gate (three-dimensional) were actually used in advanced semiconductors. Currently, with the goal of commercializing by the mid-2020s, a more complex Nanosheet structure is being developed in which the entire perimeter of the channel is wrapped in a gate. The evolution of CFET structures towards vertically stacked MOS FETs is also under active development.

Until now, the semiconductor industry's business cycle has been based on the basic rhythm of PC and server demand, with advances in miniaturization technology and improved yields caught up in a "silicon cycle" that rotates roughly every four years. Semiconductors require longer capital investment and production lead times than the general inventory cycle model, and large fluctuations in inventory tend to create a gap between supply and demand.

In addition, due to high fixed costs, the general-purpose product segment is characterized by operating rates that are unlikely to decline even if losses are incurred, as long as marginal profits are generated. In the semiconductor field, where technological innovation is significant, existing products and equipment are replaced quickly, and production adjustment is difficult. On the other hand, starting in 2017, demand growth has significantly outpaced previous supply and demand cycles, leading some to speculate that there has been a shift to a "supercycle" based on frontier demand expansion (Figure 1).

  figure 1 Semiconductor memory business cycle

Source: Nomura Securities

2. Background of increasing demand for semiconductors

(1) Digital process

In addition to traditional "digitization" as a means to improve operational efficiency, the maturity of IoT (Internet of Things) technology has enabled various corporate activities to be visualized. The concept of "digitalization" has begun to spread, and its main purpose is to transform business models through information sharing and comprehensive management, data accumulation and utilization. In the second half of the 2010s, digital transformation became the watchword of the business world, and the demand for semiconductors from various machines and devices continued to increase. Especially in the manufacturing sector, the "Industry 4.0" concept advocated by Germany in the first half of the 2010s has had an impact on other countries, and the promotion measures of smart factories have become a further tailwind.

(2) Towards the practical application and popularization of 5G communication

In the practical application of global 5G communication services, mobile phones and other devices are compatible with existing frequency bands and millimeter bands, perform data communication functions with peripheral devices, perform advanced processing of images and videos, control batteries, etc., which require more complex electronic circuits and higher functions than before, triggering the demand for more widgets.

(3) The development of vehicle networking, driving assistance functions, and the progress of vehicle electrification

The automotive industry is in a period of great change, and new trends are collectively referred to as "cases." Connected provides navigation and service information acquisition, remote monitoring, etc. It uses communication functions similar to smartphones and touch screen terminals to understand vehicle conditions and the surrounding environment through various sensors, and the processor appropriately drives Autonomous (autonomous driving) to support or lead Electric (electrification) in the automotive industry. Among them, power semiconductors are widely used in power and voltage control, which require a large number of on-board semiconductors.

(4) Additional demand for data centers

Due to the popularity of video distribution services and the development of cloud services, various forms of data traffic have increased, resulting in a surge in demand for data servers. Major automakers have also moved to set up their own data centers to enhance driving support. In addition to the development of machine learning and deep learning and the use of artificial intelligence for power saving purposes, there is the replacement of HDDS (hard drives) with SSDS (solid-state drives) to speed up reads.

(5) Changes in work and lifestyle due to COVID-19

　

As the COVID-19 pandemic has spread globally since the beginning of 2020, telecommuting has become a new way of working, increasing the demand for business PCS and routers compatible with the latest standard WiFi-6. Including school education, web conferencing has been widely used to supplement face-to-face communication, and the demand for headphones, speakers, external cameras, and so on has increased rapidly. In addition, demand for gaming devices and health devices with electronic functions is driving the semiconductor market growth.

(6) The popularity of non-contact sensors and readers

With the development of electronic payment systems, smartphone payments using payment apps and QR codes have become popular, and the demand for reading devices has increased. In addition, due to the spread of the novel coronavirus, the demand for non-contact sensors that measure body temperature from a certain distance has increased significantly, and so on.

3. Areas where semiconductor demand is expected to expand in the future

(1) The development and popularization of AI (artificial intelligence)

Artificial intelligence, which makes up for the lack of human knowledge and experience based on a large amount of accumulated data, will be applied in various applications and scenarios of B to B and B to C, and its practicality will be greatly improved and the cost of use will be reduced. In the 2020s, as work using big data gains momentum, the quest for more natural, accurate, and efficient output is expected to make great strides. Obviously, this will require a large number of higher performance semiconductors.

(2) Practical applications of quantum computers

Properties of quantum mechanics such as the "superposition" or "entanglement" of 0 and 1 are computed in parallel, which can be processed tens of millions to 100 million times faster than conventional computers. It is expected to make significant progress in various fields such as finance, healthcare and artificial intelligence. Quantum computers also require advanced logic semiconductors for command and control.

(3) The popularity of AR/VR

Due to the advancement of smart glasses, AR (augmented reality) is gradually being applied to remote maintenance, surgical support, business improvement and other aspects. In addition, VR (virtual reality) applications such as traffic and urban design, medical rehabilitation, and evacuation drills for hypothetical disasters are also on the rise. It is also expected that there will be increasing activity towards conducting communications and business transactions in the "virtual space", and these efforts will lead to a dramatic increase in the demand for data centers and facilitate the development of semiconductors with better processing performance.

(4) Further improvement of communication standards

In terms of high-speed communication standards, 5G is currently being put into practical application. International standards for 6G have not yet been determined, but related companies have proposed concepts that greatly exceed 5G in terms of speed, capacity, power consumption, low latency, etc., and the increase in compatible mobile phones and base stations is expected to stimulate the demand for semiconductors.

(5) The demand for power semiconductors such as next-generation travel systems

Power diodes, power MOSFETs (metal oxide semiconductor field-effect transistors), IGBTs (insulated gate bipolar transistors), etc., are collectively referred to as "power semiconductors". Demand for low-loss, low-heating silicon carbide (SiC) and gallium nitride (GaN) power semiconductors has shifted from the current mainstream silicon (Si) power semiconductors to next-generation mobility devices such as EVs and power generation. Other industrial machinery and railways are also expected to increase.

4. Semiconductor and digital industry strategies by country and region

(1) Japan

In order for Japan to transition to a 5.0 society ahead of the rest of the world, the government recognizes the need to accurately grasp the changing times and improve the competitiveness of the semiconductor and digital industries. In 2021, the "Semiconductor and Digital Industry Strategy Conference" was launched. At the meeting, "Establishing an industrial base as a national enterprise", "Establishing an enterprise operator rooted in Japan and establishing a position in global interdependence", "simultaneous realization of digitalization and greening, and early practical application" were set as three major goals, and related basic ideas were proposed as strategies for semiconductors, digital infrastructure and digital industries.

(2) South Korea

The Korean government said that it will maintain its strength in the memory field, but also strive to become the world's first in the development, design, manufacturing and foundry of system LSI, and compiled a strategy to promote a comprehensive semiconductor power: expand the research and development and facility investment tax credit; Establish a low-interest capital investment fund; 50% support for the power infrastructure maintenance costs of semiconductor operations and a 10-year water supply guarantee; Build the world's largest semiconductor supply chain "K-Belt" by 2030; Supporting the development of next-generation power semiconductors and A semiconductors worth more than 1.5 trillion won; New semiconductor departments at universities are free of tuition fees.

(3) China

For a long time, the development of China's semiconductor industry has been a subject, by clearly putting forward the requirements of improving and improving the self-sufficiency rate, as an internationally competitive advanced industry of the national goal. In August 2020, the Circular on Several Policies to Promote the High-quality Development of the Integrated Circuit and Software Industry in the New Era was issued, which proposed a number of support measures in terms of taxation, investment and financing, research and development, import and export, and human resources, and clarified the policies to accelerate the high-level development of the integrated circuit and software industry. In addition, in the "14th Five-Year Plan" adopted by the National People's Congress in March 2021, integrated circuits have been listed as one of the "major topics in the forefront of science and technology". Specifically: the development of important materials as integrated circuit design tools, key equipment and high-purity targets; Breakthroughs in advanced integrated circuit technology, insulated gate bipolar transistor, MEMS and other special technologies; Advanced storage technology upgrade; Focus on the development of silicon carbide, gallium nitride and other broadband gap semiconductor direction.

(4) The United States

Since the second half of the 2010s, the US government has regarded semiconductors as one of its strategic commodities and developed the domestic industry through fiscal stimulus. The United States has a high global market share in design and final products, but both manufacturing areas are largely outsourced to contract giants in Asia. In June 2021, the U.S. Senate passed the American Innovation and Competition Act, which includes the promotion of semiconductor manufacturing and research and development in the United States (budget: approximately $52 billion).

(5) Europe

In January 2021, the European Union announced a joint declaration to strengthen its design and manufacturing capabilities in the electronics sector with a policy of up to 145 billion euros of investment. Then, in March of the same year, the Digital Compass 2030 was announced, with the goal of achieving a digital transformation by 2030. Increasing the global share of next-generation semiconductor production in the EU region, with a focus on improving digital literacy and developing advanced digital human resources, developing safe, high-performance and sustainable digital infrastructure, leveraging digital technologies in business, and digital public services, from the current level of around 10% to more than 20%, And to increase the use of cloud services in the EU from the current 26% of companies to 75%.

(6) Taiwan, China

At present, Taiwan is the world's largest concentration of semiconductor production. Since the early 1970s, it has systematically promoted the development of the semiconductor and electronics industry as a regional strategy. Although Taiwan is a world leader in semiconductor production, its upstream production equipment and two materials are heavily dependent on imports, so it is imperative that the upstream segment be developed and manufactured in Taiwan to maintain Taiwan's long-term competitiveness in the semiconductor industry.

5. Demand for machine tools for semiconductor manufacturing equipment

The use of machine tools to process semiconductor manufacturing equipment has a wide range of needs, typical machining parts are a variety of chambers, pumps, valves, flanges, wafer transfer equipment, etc. The processing materials are mostly aluminum, and the accuracy requirements are generally stricter. In addition to the high-speed cutting performance of the machine tool, automatic countermeasures and maintenance against chip and filter clogging are also required. In addition, the demand for multi-variety and small-batch parts processing is high, requiring versatile machine tools. The change of processing method is not easy to be accepted by users, and efforts are also needed to reduce costs.

Gas chambers and valves often require high-precision machining, and it is expected that many business contacts will be triggered in the future, whether it is prototype or mass production. In addition to responding to the demand trend for more complexity and larger specifications, manufacturing equipment also needs to be resistant to high pressure and corrosion.

In addition, the use of anodized aluminum, molybdenum, tungsten, SiC (silicon carbide), gallium nitride, aluminum and PZT (lead zirconate titanate) materials is increasing, and there is also a need to find ways to improve the yield. Cooperation with tool manufacturers, the design of high-rigidity machining, the prevention of dust and flying caused by chips, and the countermeasures for the damage of telescopic covers are also factors to be considered when making capital investments in manufacturing equipment.

The practical application of new technologies and changes in standards are often turning points that stimulate capital investment, and machine tool manufacturers need to pay close attention to these trends. For example, at present, 300mm diameter silicon wafers are becoming more and more common, but it is generally believed that 450mm wafers can produce more chips, due to the low yield rate, from the point of view of yield and profitability, will not be pushed forward for the time being. However, if the synchronous development between equipment manufacturers and the timing of manufacturing equipment investment are met, the demand for machine tools is likely to increase significantly with the increase in capital investment in the handling arm and the processing size of each process. In addition, exposure equipment and inspection equipment using extreme ultraviolet light (EUVL) are in the early stages of popularization for the purpose of miniaturization of electrical routes. Here, judging profitability is also the key to full popularization, and in order to win orders, it is necessary to constantly pay attention to the profitability prospects of key technologies.