Semi-Conductor Business for Tomorrow

Introduction


• Today’s Economy
• Applied Materials boom and bust of today’s market
• Product Development from 286 chips to latest processors
• Meeting the changing markets in types of semi-conductors
• Working in engineering for creating new tools for foreign country manufacturing
• Effective Communication with Manufacturing
• Effective Communication with Sales and Marketing
• Helping to coordinate the interface of engineering, marketing, sales and manufacturing
• Keeping in touch with market demand for types of semi-conductors being invented
• Relationships between management and design engineering for R&D development
• Communication between customer requests and consumer demands
• Foreseeing the 18 month cycle in semi-conductor market and anticipate downturns
• Anticipating tomorrow’s needs today for a corporation to remain competitive
• China’s Impact on the world semi-conductor market
• Saudi Arabia’s affect on Applied Materials and Intel

    The changes in today’s economy are happening at such a great pace that it is difficult to keep up on all of them since President Obama has taken office and when Bush and Cheney left office. I am very upset with how the ruling class of Americans has taken many trillions of dollars away from the American people. When Bush was in office, the bailouts went to the Insurance companies because China demanded that they make good on the trillions of dollars we have borrowed from China and India to remain solvent. The aging population in America was going to retire and settle down. Now with the housing market in a free fall and most people losing their 401K retirement plans, Americans have to return to work and find new ways to generate revenue today. This shall have an impact on our youth entering the job market when they graduate college or try to find work in the summer in intern programs. Homes in foreclosure and businesses closing all across the country are a result of our greed from outsourcing to other countries over the last forty years. I worked for a high end semi-conductor manufacturer, Applied Materials that sold most of its products to overseas companies.
Applied Materials in the 1990’s was going full steam in creating new platforms for the avalanche of new devices for everything from computers to components for cars and all types of electronics. After meeting the demand for memory modules in 1996, the prices of SDRAM plummeted from $500 for 16 Megs to $50 for the same memory size. Supply and demand in the international market place was met once all the production tools for memory chips were shipped to the customers. All the companies that made memory chips had flooded the market when all these new memory productions tools hit the market. With the crash of prices, those manufacturers canceled many of their orders due to loss revenue.
Applied Materials had to lay-off 2000 people in a span of a couple weeks. I think if they could have anticipated this they could have kept the people on to work on projects to overcome this change in the market. They had to modify their operations management structure to meet the global market changes.
Applied Materials worked with selling manufacturing tools in the 1980’s and 90’s to Japan and today to South Korea and China to produce the components in today’s electronics. Product development for all types of chips at Intel was forwarded to the process engineers at Applied Materials to develop the type of chemical depositing of materials on silicon wafers for whatever type of chips were in the highest demands. They had to adapt their corporate strategy in the fast paced changing semi-conductor market.
To meet the challenges of the changing market, company strategies at a corporate level had to be closely monitored the potential markets for new products. The types of silicon wafers that are produced can be for memory, video, cpu’s amongst a vast variety of complex chemical deposition process that required PhD’s in various fields of physics, materials engineering, chemical, electrical and mechanical engineering. As new technology was invented there implementation by Applied Materials had to be overseen by all levels of corporate and functional level strategy, goals and structure.
Effective and concrete communication between sales, marketing and engineering was essential at Applied Materials to compete with KLA Tencor, Novelus, LAM Research and other computer chip-making tools companies. Hundreds of Chinese corporations manufacture an ever increasing variety of integrated circuits for all electronics equipment. When you look at www.global sources.com , you will see the various suppliers of electronics components that use tools developed by the above companies. Various senior scientists left Applied Materials to create “spin-off companies such as KLA Tencor, Novelus, LAM Research and Varian.”
There are four major business sectors at Applied Materials: Silicon Systems Group, Display, Energy Environmental Solutions (EES) and Service which are responsible for development in discrete fields for all commercial industries. Their diversification into nanotechnology and flat panel displays, chemical polishing and solar thin film design was essential to their growth and survival in the aggressive and constantly changing global marketplace. “Green Energy Technology certifies Applied Materials SunFab Line for manufacturing Taiwan’s largest solar panels.” They ramped up production for the consumer market.
The communication to the research and development team to meet the challenges that Intel, Infineon, AMD, Samsung, Hitachi, Motorola, Nvidia, and Apple have to interface and tell Applied Materials what they are working on producing and how Applied Tools “Cluster Tools” have to be engineered to be able to produce the highly specialized tools. Wikipedia
In EE Times, there is a great deal of information every week that everyone in the Semi-Conductor field reads to keep abreast on the latest research in the field of nano-technology, battery research, solar research and ultra high capacitor devices.
The new renaissance in Nano-technology opens up infinite applications and business opportunities in the field of electronics, from new wafer deposition techniques to develop all manner of electronics. They can be used in everything from home appliances, solar electricity generation, and multi-core processors to new methods of packaging all manner of electronics.
The corporate level at Applied Materials has to evaluate the viability of this seemingly endless list of potential markets and has to work with sales and engineering to generate a cost, benefit analysis with generating risk assessments on which technology has the fastest returns on capital investments. Each division at Applied Materials has to generate a SWOT analysis to identify which organizations have their appropriate strengths and weaknesses to be assigned the task of developing the various technologies that corporate has designated as potential markets. One division at Applied will create cluster tools for CVD “Chemical Vapor Deposition”, another will be chosen for “Sputter Etching”, which is used for specific types of processors or memory chips. The science and recipes that PhD process engineering uses for each type of component is a closely guarded secret in the wafer fab industry.
Anticipating and formulating corporate-level strategies at Applied Materials and Varian on the East Coast is essential to the growth and survival of the company. Applied Materials has had to buy other companies that had technology essential to their global marketing plan. The largest revenue is the division responsible for all types of chip fabrication processes.
Applied Materials specializes in the following areas (www.amat.com), including atomic layer deposition, chemical vapor deposition (CVD), physical vapor deposition (PVD), electrochemical plating (EP), etching, ion implantation, rapid thermal processing (RTP), chemical mechanical polishing (CMP), CDSEM metrology, wafer inspection and SEM Defect Review.
Applied Materials is the leader due to their business model and the utilization of the five forces model from the power of suppliers who provide the raw materials to the parts manufacturer for the tools; the power of the customers who drive the demands of Applied Materials to produce new equipment based upon their requirements. The potential for entry into an industry is recognized because of their massive diversification in various markets so that when one market is in a slump they can generate revenue from other divisions for research and development. Employee and corporate standards of the highest quality demands higher levels of excellence by their corporate model to be successful in the global market.
Applied Materials modified their strategy with for the need with new charger PVD System. "Packaging facilities need a fast, dependable metallization workhorse to maximize wafer output and minimize the system redundancy burden imposed by slower, less reliable alternatives," said Steve Ghanayem, vice president and general manager of Applied Materials Metal Deposition and Front End Products Business Unit.” (Pro-Quest)
The establishment by Applied Materials of Standards of Business Conduct is essential for effective communications and upholding the highest ethical standards which most companies today instill in their employees. Communication and training at Applied Materials for their employee’s growth and knowledge is essential to their competitiveness in the market place. When there is a recession or shift in the electronics market Applied has had to make changes.
Reorganization in Jan 2008 at Applied Materials with cutting 1,000 jobs and cutting payrolls was necessary to meet the changes in the economy and recession. Applied had to create flexible manufacturing to lower the cost of production due to increasing costs of labor, materials and energy to produce the products in accordance with the president’s green initiative.
President Obama’s plan for a green economy and more solar energy generation is one of many plans this administration has that will allow Applied Materials to shift more resources to capitalize on this growing market. Today a great many companies look at short term gains and lay people off as a trend. If ten companies lay off people, the next one thinks it is a good thing for the stockholders; but they sometimes forget the impact it can have on the community instead of the “bottom dollar.” Corporate strategies are important and have to be given ethical consideration. Is the company lay off people because of lower sales or to increase their stock prices?
Applied Materials was getting in trouble with its vendors because it paid them in a net 120 day, without consideration that many of these small companies need the revenue within 30 days of receipt to pay their overhead expenses. Communication at the corporate level to the buyers and those paying the bills could have been improved. If a company can’t get parts to build products, then there is a corporate and division level problem in priorities and its impact on production. The needs of engineering and productions are essential to a healthy company environment. When corporations don’t upgrade their engineering tools and computers even though they have the money in the bank to do so, it can impact the delivery dates of engineering prototypes for production. I worked on some of these research and development projects to produce process to reduce the scale of integrated circuits for Intel. We were given the freedom of creativity to produce competitive prototypes to meet the demands of the changing semi-conductor market place.
Taking care of the employees financial and mental health has contributed to a great many of the problems in corporations today. When a corporation had no respect for the employees they employ, morale and productivity decrease. Cutting employee benefits may look good on paper for corporate profits which are the people that make the company, but it is not a good thing to the whole of the company culture.
To have an efficiently run company that is profitable, it is not only the matter of coming up with new technologies and inventions, but to have the employees motivated in their creativity. If their medical and dental benefits are cut and their wages don’t keep up with inflation, the corporation will stagnate. Applied Materials has an excellent communication and tuition reimbursement programs. Qualities, innovation, efficiency all improve if the core employee is given the respect and pay they deserve. Out sourcing to foreign countries has lowered costs in many areas but impacted the morale of those employees still in the United States. Employees do not like to have their jobs shipped overseas to make the stock holders happy with increased dividends.
An East Coast company, Varian Semi-Conductor, located in Gloucester, MA who is Applied Materials competitor, was making record profits in 2006-2007 decided to outsource some of their engineering and manufacturing to India. I worked on a project for Samsung to create a new vapor deposition system, incorporating ideas from Samsung into a new platform. I evaluated the one-quarter cost of having the parts manufactured in South Korea as opposed to having the mechanical parts made locally. We received the parts from South Korea that had a lot of errors to not incorporating design changes I had sent them. I had to have them modified in our local machine shops which raised the cost to approximately the same as having the parts made locally. When we outsourced some the design drawings to India, we found many of the drafters professed knowledge with Pro/Engineer, but they didn’t have to capture the job contract. Business ethics and efficiency in India and China are differently perceived than in the United States. Chinese and South Korean vendors substituted materials we specified for their own, without prior approval, from manufacturing. As Varian tried to cut costs in 2007 by giving more design work to India sub-contractors to bolster Varian’s reserve, from $500 million to $1 billion, a great many full time employees were upset by the lack of respect for the manufacturing, engineering and marketing employees that help make Varian a pleasant company to work by sending “their” work overseas.
There was animosity amongst the direct employees; morale was low as a result. The human factor of having employees that are treated with dignity and respect is very important to the psychological health of any company. Many contractors and employees won’t return to that company due to its reputation. They were competing on a global level without any thought as to the impact on the Varian sub-culture.
We are in a world economy, companies like Applied Materials, want to make a profit. What sacrifices are prudent to make the stockholders happy with increased dividends, at the expensive of the employees, companies, like Applied Materials, still remain profitable
New corporate management models, like Pixar and Google, have redefined the work place. Corporations like Applied Materials and Varian will have to adjust their business model to meet with the changing corporate philosophy. The employee should be treated correctly and be allowed to contribute to the corporation’s structure. Creativity in business is essential and must be allowed to flourish. There is sometimes a conservative attitude at companies to be overly rigid in its business strategy and efficiency. They forget the human factor that creativity needs an environment that encourages creative thinking and innovation. If people are oppressed and given so many restrictions and rules to follow then creativity is squashed. Employees desire to be creative and contribute to the companies’ growth.
Today’s attitudes on businesses have changed a great deal in the last year. The American people have seen 40 million jobs outsourced in the last ten years. It has decreased production costs a great deal with little change in consumer prices. The profit margins of many consumer based products increased from 15-20% to 400-500% due to outsourcing, price markups from production costs to retail prices. Many corporations today have been using “slave” labor. In countries first with China, at an average wage of $1.60/hr, to lower the wages of 50 cents an hour in the Philippines and Lebanon have taken the idea of reducing productions costs to an extreme. NAFTA and other international treaties have made it almost impossible to compete with other countries for manufacturing rights. “Made in America” is a becoming a thing of the past. Countries are becoming specialized in their functions of producing specific functionality to provide specific goods for the world. We are all inter-connected in with our now interdependency. United States experienced a decrease in employment, Gross National Product output, and consumption of consumer goods decreased. The impact of less foreign imports into the United States closed two-thousand factories in China and put over twelve million Chinese out of work. Our balance of national debt became so large that foreign countries lost faith in our currency. Corporations have had to reevaluate their global marketing and corporation model to adjust for these lean times as the world market copes with change.
Globalization, technology and a changing workforce are interconnected but they are also interdependent on each other. When you outsource so many products to other countries, unless you have effective communication, quality control and ethics in place with your supplier, you will get inferior goods. China has been our main manufacturing outsource partner for many years.
Cultural difficulties in communications between our two countries have been an obstacle at times with manufacturers. China expands by building more industries; they use 25% of the world’s concrete and steel, and use more cranes than Abu-Dabii. They have 1.4 billion people to draw from , that they have become a super power to recon. The workforce is amongst the largest in the world. However, with our recession, the need for production of goods for us has closed 2,000 factories and 12 million Chinese are out of work. The discovery channel had a great program on how the Chinese cultural has enabled them to become a world power.
Because of the high usage of coal, we are now they are dealing with the highest levels of air pollution in the world. The technology needs to quickly catch up with the growth and consumption of worlds resources. The challenges are for us to help all developing countries to be more efficient in what resources they use for energy production, because of its global impact. As there industries expand to supply the world's needs so does their consumption of all the world's resources.
If they were to embrace the use of solar energy it would greatly reduce the world pollutions and lower the prices of energy production resources. As a developed country their desire for globalization has taken billion of GNP from other countries due to their lower wages of $1.60/hr, a national minimum wage instituted in 1996.
They were quite smart at increasing the minimum wage 50% to improve the quality of living for their people. Their cost of living has increased like the rest of the world. Higher energy production costs affect all manufacturing sectors. Now Applied Materials has to consider selling China semi-conductor equipment, along with Saudi Arabia.
Saudi Arabia is spending billions of dollars building plants to make various processors and equipment. They intend to compete directly with Intel and China in the computer industry. Someday there may a “Sauditell” or “Chinatell” processor in computers of tomorrow.
With this global competition it will greatly impact again our competition in the world market. Global reorganization of various divisions of Applied and similar companies will be necessary to deal with this global shift in suppliers and competitive manufacturers.
In a world community, everything affects everything else. If more managers and CEO's of corporations had a greater scientific and technology background, they would be better prepared to deal with the world challenges of tomorrow. We must better educate all Americans to compete with the third-world countries like China, India and Saudi Arabia. They are sending thousands of students to American universities to get degrees in engineering. China, India and Saudi Arabian countries are graduating an average of over 100,000 degreed engineers every year while are output of scientists, doctors and engineers have steadily decreased.
Education of the world's population is essential to our growth and survival. I was told by a wise man, "Give a man a basket of corn he will ask you for corn the next day, Teach him how to grow corn and he has a skill for life and can feed himself and sell the excess to others.”












References
1. Jones, G. R., & George, J. M. (2007). Essentials of contemporary management (2nd Ed.). Boston: McGraw-Hill Learning Solutions.
2. E.E Times (various articles about the semi-conductor industry over 10 years)
3. Wikipedia, Applied Materials
4. Anonymous. Technology & Business Journal. Atlanta: Jun 16, 2009. p. 609
Applied Materials, Inc.; Applied Materials Redefines Chip Packaging Productivity with New Charger PVD System

5. Business Wire, Anonymous. Business Wire. New York: Apr 16, 2009
6. Moming Zhou, MarketWatch, China Outsourcing industry expands… US-China strategy?
7. http://www.eetasia.com/ART_8800575714_499488_NT_8b07c556.HTM Motorola Boosts Wi-Max services in Saudi Arabia,