Photo above: Simulation of the future Fab38 in Kiryat Gat, Israel
Israel’s Government and Intel have reached an agreement to expand Intel’s Fab38 in Kiryat Gat, approximately 40 Km from Gaza, where it has an existing chip plant (Fab28). Intel Israel announced an expantion plan of $15 billion in Fab38 planned to be completed within 4-5 years. It will bring the total investment in this fab to $25 billion and enable it to produce advanced semiconductors based on Extreme ultraviolet (EUV) lithography process.
The government of Israel will grant Intel with $3.2 billion worth of incentives. The new fab is expected to create thousands new jobs and to have a major role Intel’s global IDM 2.0 strategy. Intel Israel was founded in 1974 in Haifa, as Intel’s first development center outside the USA, and in 1981 the first factory outside the USA was established in Jerusalem. Today, Intel Israel is the largest private employer in the Israeli hi-tech sector with 11,700 direct employees plus additional 42,000 in indirect employment.
Along with its leading manufacturing facility In Kiryat Gat, Intel operates three development centers in Haifa, Petah Tikva and Jerusalem, focused mainly on the development of new Processors, Connectivity and Networking technologies, Artificial Intelligence and Cyber Security solutions. During 2022 Intel Israel’s export totalled $8.7 billion representing 5.5% of the hi-tech exports from Israel.
In an interview with Fox Business last week, Intel CEO, Pat Gelsinger, talked about Intel’s employees during the current Israel-Hamas war. He said: “Many Intel employees in Israel died on October 7, some are being held hostage still in Gaza, and a great many are on reserve duty. But Israelis are the most resilient people on earth. They have not missed a single commitment despite the conflict. That’s why we believe so deeply in them.”
Photo above: Intel’s Fab 34 in Leixlip, Ireland. $200 million for each EUV Lithography machine
In March 2021, Intel embraced the IDM 2.0 strategy and established Intel Foundry Services as the strategic wing that leads multi-billion dollar in investments throughout Europe and the USA. When this move was first announced, it was seen as a direct threat to TSMC – the world’s largest semiconductor contract manufacturing services provider. This was mainly due to Pat Gelsinger, Intel’s CEO and the shaper of IDM 2.0 strategy, stating multiple times that Intel’s goal is to become the world’s most prominent manufacturing services provider.
The idea seemed unreasonable: why would a genuine semiconductor manufacturer who sells their own processors for high-profit margins shift to another business model – a manufacturing services provider with much lower profit margins? The investors also did not find the idea exciting. In March 2021, Intel’s shares were traded at $64 on NASDAQ. Currently, the shares are worth $35.5 with a market cap of $149 billion.
However, Techtime’s visit to Intel’s new factory in Ireland, Fab 34, reveals that the reason behind the new move is technological rather than merely business. To be more precise, the enormous cost of shifting to advanced manufacturing processes.
€17 billion and five years to set up
Last week, Intel inaugurated Fab 34 in Leixlip, Ireland, which brings Intel 4 technology (equivalent to 7nm) to Europe. It is also the first use of EUV (Extreme Ultraviolet) technology in high-volume manufacturing (HVM) in Europe. The construction of the new fab had began in 2019 and had required €17 billion investments. To provide a point of comparison, Intel operates 3 more fabs in its Leixlip campus that use older technologies, and these factories cost a combined total of €13 billion.
It means that building a fab with the latest technology, such as EUV lithography machines, would be a significant financial undertaking. Industry experts suggest that a factory like this would require 10-20 EUV lithography machines, which are only produced by the Dutch company ASML. Each EUV lithography system costs approximately $200 million.
The construction of the new factory demands using novell chemical materials for the production of RibbonFET transistors, acquiring new and spcialized equipment and process control and measurements, and a significantly larger clean room that meets higher standards. It is improbable that a single company that bears these expenses and only sells its own products would be able to market them at a profitable price. This is why there are only three companies toady active in advanced processes chips: Samsung, TSMC, and Intel. GlobalFoundries was the last independent firm to be involved in this competition, but it withdrew in 2018.
Intel follows Samsung’s model
Samsung, who acknowledged this challenge earlier, developed a business model for producing self-designed chips together with providing manufacturing services to its competitors, such as Apple and Qualcomm. There are also other companies that embraced this approach, although they are not taking part in the advanced technology race. French STMicroelectronics, for instance, has also adopted this approach by balancing production costs by providing manufacturing services to clients like Mobileye.
Intel’s recent move leaves TSMC as the only company solely focused on providing manufacturing services. Currently, TSMC is the primary supplier of advanced chips to Intel’s largest competitors, including AMD and Nvidia. The conclusion is that Intel’s business model does not pose a threat to TSMC, and there is no indication that Intel intends to compete with TSMC. In fact, Intel has taken significant measures to mitigate the risks associated with transitioning to advanced manufacturing processes.
This is crucial if Intel wants to maintain its position as a market leader. During the recent inauguration ceremony in Ireland, Dr. Ann Kelleher, Intel’s VP and general manager of Technology Development, announced that the company is currently developing four new processes: Intel 3, Intel A20, Intel A18, and the cutting-edge Intel Next. Kelleher stated that the company’s goal is to achieve one trillion transistors in a chip by 2030.
Chiplets require an Open Production Floor
The financial revolution is being accelerated by the move towards hybrid components that consist of several Chiplets; each produced using a different process. This shift creates a new business model where modern processors no longer rely on a single CPU chip but instead integrate multiple peripheral chips from other manufacturers onto an advanced substrate that connects numerous tiles.
This concept is similar to the IP Model prevalent in the Chip Design industry, where any SoC contains the manufacturer’s own proprietary module, along with multiple intellectual property (IP) modules designed by specialized firms. Adopting multi-tile components expands the IP model to the Hardware Level. But it requires to adjust the nature of production lines. Intel, for instance, utilizes this approach in its new chip, Meteor Lake, where 75% of the surface area of the silicon tiles is manufactured by TSMC, and only 25% by Intel.
This shift necessitates the management of an open production floor that can accommodate tiles produced by other manufacturers while producing their own. It also requires the integration of foreign silicon into Intel’s components and the transfer of Intel’s silicon into other vendors’ components, even if they are direct competitors. To achieve this, Intel appears to have chosen a production model that combines self-development and production, side by side with providing manufacturing services.
The Chinese model travels West
Fab 34 project also reveals the importance role of national governments in the semiconductor industry. The cost of transitioning to advanced processes is so high that even major companies like Intel require government incentives. Similar to the Chinese approach, public funding is used to support production firms and boost local industries that rely on advanced technology to create more jobs.
This is why countries like Ireland and Israel are appealing, and why the CHIPS Act and Science Act drive the build-up of new fabs in the US. Intel is also awaiting now to receive approvals from the EU before it will move to the construction phase of its next European fabs: A wafer fabrication facility in Magdeburg, Germany, and an assembly and test facility in Wrocław, Poland.
Photo above: Intel’s Fab 11X in Rio Rancho, New Mexico. Credit: Intel Inc.
Less than a month after the termination of a planned merger between Intel and Tower Seniconductor, the two companies announced a largescale production agreement: Intel will provide foundry services and 300mm manufacturing capacity to help Tower serve its customers globally. Tower will utilize Intel’s manufacturing facility in Rio Rancho, New Mexico (Fab 11X), and will invest up to $300 million to acquire and own equipment and other fixed assets to be installed in the facility.
The rearranement of the fab will provide production capacity of over 600,000 photo layers per month. Intel will manufacture Tower’s 65-nanometer power management BCD (bipolar-CMOS-DMOS) and radio frequency silicon on insulator (RF SOI) solutions flows. Stuart Pann, Intel senior vice president and general manager of Intel Foundry Services (IFS) explained during Goldman Sachs Communacopia & Technology Conference this week, that intel had unused capacity in Fab 11X, because it is an older factory for older technologies.
Initial Production in 2025
Pann: “We found a way to do contract manufacturing to take advantage of that extra space. Those older tools that we aren’t using, taking some investment from Tower to finish out the line.” The parties plan to achieve full process flow qualification in 2024, and to begin with full mass production in 2025. Tower CEO Russell Ellwanger said: “We see this collaboration as a first step towards multiple unique synergistic solutions with Intel.”
Tower provides foundry services for Analog semicinductor devices. It offers a broad range of customizable process platforms such as SiGe, BiCMOS, mixed-signal/CMOS, RF CMOS, CMOS image sensor, non-imaging sensors, integrated power management (BCD and 700V), and MEMS. Tower owns two manufacturing facilities in Israel (150mm and 200mm), two in the U.S. (200mm), two facilities in Japan (200mm and 300mm) which it owns through its 51% holdings in TPSCo and is sharing with ST a 300mm manufacturing facility in Italy .
CEVA announced that CEO Gideon Wertheizer has chosen to retire at the end of 2022. The board of directors has unanimously appointed Amir Panush as CEO effective January 1, 2023. Wertheizer will continue to serve as an active member of board of directors and will be employed in an advisory role, to ensure a smooth leadership transition.
Wertheizer had joined CEVA since the company’s inception 20 years ago and served as its CEO for the last 17 years. Amir Panush was selected following an extensive search. He joins CEVA from InvenSense, a TDK group company, where he served as CEO and General Manager of TDK Corporation’s MEMS Sensors Business Group and where he led the company through revenue growth of over 100% since 2020. Previously he had held various leadership positions at TDK, following TDK’s acquisition of InvenSense in 2017.
Prior to InvenSense, Panush held several leadership roles at Qualcomm and led strategic marketing and partnerships at Atheros Communications (acquired by Qualcomm). Panush said: “CEVA is uniquely positioned to leverage its deep portfolio of wireless connectivity and smart sensing IPs at a time when the market opportunity for these technologies has never been greater.”
$15.7 million write-off
CEVA license wireless connectivity and smart sensing technologies such as Digital Signal Processors, AI engines, wireless platforms, cryptography cores and complementary software. Its total revenue for the third quarter of 2022 was $33.7 million, a 3% increase compared to $32.8 million for the third quarter of 2021.
GAAP net loss for the third quarter of 2022 was $22.3 million, as compared to a $0.2 million reported for the same period in 2021. This is primarily attributable to a $15.7 million write-off of deferred tax assets, , (b) a $5.0 impairment charge with respect to an investment in Immervision and $3.5 million of which was recorded in operating expenses.
IC Insights reduced its worldwide IC market growth forecast for 2022 from 11% to 7%. The downgraded expectation is almost entirely due to the collapse of the memory market in the second half of 2022. In a recent report, the company writes: “It was as though someone flipped a switch to the off position for the memory market beginning in June.”
In early September, Kyung Kye-hyun, Samsung’s co-CEO and head of its semiconductor unit said, “The second half of this year looks bad, and as of now, next year doesn’t really seem to show a clear momentum for much improvement.”
Many memory companies have attributed the swift downturn to a massive inventory adjustment currently underway by their customers, and expect this inventory adjustment period to extend into 2023. For example, when Micron’s fiscal 3Q ended in May, the company gave an early warning of the coming developments in the memory market: It presented 4Q (ending in August) sales guidance of -17%, and later revised this figure to at least a 21% drop in sales.
Western Digital, a major NAND flash memory supplier, commented in its 2Q conference call, that the inventory adjustment currently underway is “definitely very, very sharp in the quarter we are in (3Q22).” Western Digital’s outlook is for a company-wide sales decline of 18% this quarter. With hard disk drives (HDDs) making up about half of the company’s sales and expected to show only a modest decline in 3Q, IC Insights believes that its NAND flash business is likely to register a drop of at least 20% this quarter.
Taiwan-based Nanya is a relatively minor player in the global DRAM market, but its monthly sales data provides some insight into how swiftly the DRAM market can shift gears from boom to bust. The company’s August 2022 DRAM sales were 39% of what they were in August 2021 – and down 53% from March 2022 sales – just five months ago!
With the memory market currently in a free-fall, IC Insights expects foundry giant TSMC to surpass Samsung and take over the top spot in the semiconductor company sales ranking in 3Q22: Intel is expected to move to the third position (beneath Samsung) in the ranking, with 3Q22 sales that are 26% less than TSMC’s.
Intel announced that Shlomit Weiss, senior vice president and co-general manager (GM) of the Design Engineering Group (DEG), will replace senior vice president Sunil Shenoy, who will retire at the end of the year. Weiss will lead the company’s design, development, validation and manufacturing support of intellectual properties (IPs) and system-on-chips (SoCs), reporting directly to Intel CEO Pat Gelsinger and joining the company’s executive leadership team.
Weiss has spent 28 years at Intel in engineering and leadership roles, including as leader of cross-site teams responsible for IP and discrete data center products, and general manager of data center group silicon development. She played a major role in the development of some of Intel’s most successful processors, including Sandy Bridge (2006) and Sky Lake (2015). In 2017 she joined Mellanox, now part of Nvidia, as Senior VP for Silicon Engineering.
Last year Shlomit had returned to Intel as co-GM of DEG with Shenoy, specifically leading client product design engineering and the Intel architecture core portfolio used across client, data center and other segments. “The design engineering organization requires a leader with deep technical expertise and passion for engineering excellence, and Shlomit has that in spades,” Gelsinger said.
Nova Ltd. is planning to introduce a growth initiative planned to achieve $1 billion annual sales within a few years. According to Eitan Oppenhaim, President and Chief Executive Officer of Nova, the plan will be introduced during during upcoming Virtual Analyst Day on September 21. “With the company revenues exceeding $500 million in the last four quarters, we mark the realization of our Nova 500 strategic plan. As we aspire to continue our strong momentum in the market, we will announce a new strategic plan, charting a course towards the $1 billion company in annual revenues.”
Nova provides material, optical and chemical metrology solutions for advanced process control in semiconductor manufacturing. The company announced record quarterly revenue of $141.6 million in Q2 2022. Up 45% year over year, and a total of $510 million in revenues during the last 4 consecutive quarters.
Oppenhaim said during the Earnings Conference Call last week that the new growth plan is based on the company’s own backlog levels, and general industry trends: “If we can see the process control growth this year versus process tools, we can see the process control is growing in a higher pace because of the complex transition in the technology nodes. The logic intensity grows at around 80% to 100% from node to node and memory is around 50%. So definitely when customers are moving to new node, we see a growth in intensity.”
US China Trade War Effect
“Regarding the U.S. deliveries and the CHIPS Act programs, I think that we started to see the development lines for those fabs already this year. And we expect that next year we’ll probably see more of those deliveries happening in both Arizona and Austin and maybe later on in the East as well. And definitely, we see also the other CHIPS Act programs that were established in other places like Europe, mainly for the automotive in Germany with some of the new joint venture that’s starting to invest in chip manufacturing, also in Japan, in Korea, Taiwan and definitely in China.
“Regarding the political issue – Nova is an Israeli company. So therefore, we are – continue to ship regularly to China. The only effect that we have is by the XPS tools (X-Ray Photoelectron Spectroscopy) that has been shipped from the U.S. Over there, we are working to get the export license for new products. We got the licenses for services. And if we want to talk about impact, it’s just limited to SMIC in Shanghai, which, in any case, is not large volume of the business for the XPS.”
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