As much as the US sits around hand wringing about manufacturing being outsourced, does anyone have a good perspective on how this has played out in Japan? From our perspective, they're one 'generation' of outsourcing from us, two if you count Taiwan, and we've had at least South Korea and Mainland China since then.
I got a little taste of their recession in the 1990's, but not much information since then. Are they as worried now as we were when Toyota ate everybody's lunch?
I have been thinking about this a lot recently, and I think Canon and Nikon, both of whom produce Deep UV machinery (ie, equipment that uses a laser wavelength about an order of magnitude wider than EUV's 13.5nm), have an opportunity due to demand for legacy foundry processes. They are a tiny part of the photolithography equipment sub-sector, but the present moment is marked by overwhelming demand for semiconductors for automotive applications, and those chips aren't running on leading-edge nodes like TSMC 5nm or Intel 10nm (there's no reason for them to). If I were the CEO of a global automaker, I'd be buying legacy (22nm and older) foundry equipment in order to make chips in-house because the eventual product mix transition (ICE vs EV) means I'm going to need more custom semiconductors than ever before.
The semiconductor industry is so complex that it depends upon companies in many nations, including Japan. No one nation owns the semiconductor lifecycle, but each part of the process is dominated (but not entirely owned) by one nation. Japan dominates wafer production. One company in the Netherlands dominates photolithography equipment. The United States dominates processor design. China dominates device assembly. Korea dominates NAND. Taiwan dominates foundry. Companies in all of these places are laying out a bunch of CapEx so clearly there's an anticipation of a rising tide that lifts all boats, rather than a rejiggering of market share that hurts one economy (forgetting China for a second) while helping another.
> those chips aren't running on leading-edge nodes like TSMC 5nm or Intel 10nm (there's no reason for them to). If I were the CEO of a global automaker, I'd be buying legacy (22nm and older) foundry equipment
You can, but you would be few years late to the party. There are already dozens of n-th tier fab wannabes riding the trend.
Really ancient fab tools are flying off the shelf like hot cookies. People even scoop eighties era equipment off Ebay, and such.
And yet, several multinational automakers have shut down production lines.
Why can't they keep things going temporarily by spinning up those n-th tier fab wannabes? (your words lol)
In my estimation, there are few trustworthy foundries that can facilitate the kind of scale that an automaker would need. If you're in a hotly competitive industry, you're not likely to contact some random fab freelancer to do a few runs of some chip you need, even if you have the design and everything ready to go. They're unlikely to do it at the quantity you need, on the timeline you need, to the degree of quality that you need, and with the secrecy that you need.
I mean, if you're Denso or Bosch, shouldn't you be able to make your own chips? Auto parts have a long life cycle, so you can amortize the cost of the machinery over many years.
> Why can't they keep things going temporarily by spinning up those n-th tier fab wannabes?
Years long lead times. Every 200mm fab around is booked for at least 1y+ despite biggest increases in capacity in decades.
A labs scale manufacturing can be setup within months, but it takes 3-4 years to setup AMHS fit fabs on a commercially profitable scale invariably of the technology level involved.
They operate three, and a fourth in Dresden is expected to begin production this year. Despite this, they haven't been able to make delivery of orders to VW Group, who are reportedly considering seeking damages in the eight- to nine-figure range from Bosch for production downtime due to shortages.
Auto OEM's have strict rules regarding procurement. Therefore it's impossible to make business with them as a unknown startup. Tier 1 suppliers can introduce un certified sub vendors and such.
Very smart comment, and that's the question: is the present spike in semiconductor demand a temporary situation, or a new reality?
If this demand environment is a new reality, then prices will go up and it will take several years of CapEx to get them back down. If it's just a spike, then the pure-play foundries may still invest in those legacy production lines, but there will be less of a long-term presence.
I am personally of the opinion that this is a permanent market shift; WFH is here to stay, so there has been real and lasting demand creation for cars. Plus, the transition to EV is undeniable, and will perhaps see an inflection point in this self-reflective moment where automakers have to shut down production lines and reassess their plans anyway.
There is a glut for crappy mask. Decent ones are still not quite in balance.
>because of a failure of forecasting
It depends on which side of forecasting, was it demand or supply? It is always easy for outsider to say they should have built 10 Fabs 4 years ago and they would have been riding the tide. But even older ones are still CapEx intensive and relatively long ROI. Which means from a business prospective it is better safe than sorry.
And that is especially true with TSMC who are extremely conservative.
There was another comment about Auto Maker should built their own Fab. I really dont see how this would make any sense. All Auto Maker has to do to guarantee supply was to sign a long term agreement with TSMC, or even ask TSMC to built dedicated Fabs for them. But not a single client ( apart from Apple ) was willing to bet. No one was willing to bet their game for 3-4 years in advance. There is also the conservative nature of traditional business in demand side. If they sign it now at a cost that is 40% higher than their previous median, will they end up like Airliners hedging on Oil Price and ultimately cost them the billions.
So it really is the problem from both side.
And the same is true in ALL other market. Anyone who has ever worked in buy and sell, supply chain should see how similar the conversations are.
Is there a mask glut seems the opposite? The N95s I get are a little bit cheaper but still $4 /per for the nice ones.
And they aren't US market masks. I'm 95% sure they are real. Not the kind with the fancy foil seal but if they're fake I'm sure they have basically the same effect. Lately I wear 3M 1870+ and it has the best fit for a tight seal.
In Austria they made N95(FFP2) masks mandatory in closed public spaces so supermarkets sell them at 0.59$ a piece or give them for free with each purchase. At that price, they're not the best quality ones, but better than cloth or surgical ones and their shape makes it difficult for idiots to wear them underneath their noses.
I like how the Olympic committee has tried to take into account that the buildout of facilities every 4 years follows a similar boom/bust cycle, and they're at least trying to think about how we can satisfy both short-term and long-term goals at the same time.
For instance, a stadium where 30% of the seats are built to last, and the remaining 70% are bolted on, meant to be taken back off and recycled after the closing ceremonies.
I don't know how you build a mask factory so you can use it for something else. I do know of textile factories that have pivoted temporarily. Can you build up a short-lived production line for an integrated circuit and then tear it down but leave all of the infrastructure in place to pivot to something else? What I hear out of Intel is that setting up such a fab is a long and expensive process.
What I also hear is a lot of people challenging Intel's wisdom. So now I don't know what to think.
> Can you build up a short-lived production line for an integrated circuit and then tear it down but leave all of the infrastructure in place to pivot to something else?
Not at those margins.
Most fabs build will be running 24/7 until they crumble to dust.
Out of all these, processor design (what you say is USA-dominated) seems like the one that involves the smallest amount of capital investment. And is therefore the easiest crown to lose, right?
Two crowns are owned by the US: design and verification/design software and hardware tooling (my career is in verification). That's why China is non-export list for all of chip-design tooling and why China is now investing into their own tooling.
It will take them time (maybe 2 decades ?) to catch up on tooling.
> That's why China is non-export list for all of chip-design tooling
And that's, in part, why every IC shop I checked in China ran off decade old warezed Cadence EDAs.
Who could've knew that warez market exists even for such rare, pretty much custom made software for which there are less than <100 licensors in the world.
I did a six month contract for ASML years ago. Their Asian (and especially Chinese) sales people were notorious for giving away gigabytes and terabytes worth of “free” software or DVD images to any customer or potential customer who asked for them.
This caused major problems for the WAN between ASML headquarters in Eindhoven and the remote offices in those Asian countries.
True, and I know that a famous verilog simulator was sold to a chinese company as a _single_ license... lol !
But without support, especially as you go down the rabbit hole of prototyping/emulation, they won't compete. They know it and that's why China is building a complete set of verification and design tool of their own.
It will take a while to catch up though...
Every company that uses Cadence, etc. has somebody on staff who can "handle" the license server "issues", whether in the US or overseas.
The difference is that in the US enough licenses are used to pay for the "average" number of users, while overseas it's zero.
And frankly, if the big EDA tools companies actually fixed and improved their software instead of milking it for decades, legit US clients would care more than they do now.
For those who haven't had the pleasure, most EDA products are like buying a boxed Windows in 2021 and they turn out to actually be Win 3.1 - no exaggeration.
In a world where you don't have protections for IP, yes. That's a major part of the reason that Chinese companies like Huawei and SMIC find themselves on the naughty list -- it's not just about national security and slave labor.
However, companies like Qualcomm and ARM wouldn't be able to exist without a strong global IP law infrastructure, but the former is a juggernaut and the latter is an object of desire.
Think it's more accurate to say the US dominates software ecosystems that keep the processor designs relevant. China and Korea also have competitive processors.
My point in the comment to which you responded is not that entirety of each constituent stage of the semiconductor production cycle belongs entirely to a different country. Rather, I contend that the lion's share of each constituent stage is maintained by a different country.
I agree that Korea has competitive processor designs. Of course, even Samsung uses many Qualcomm SoCs and licenses many Qualcomm patents. If you remove US-developed design IP entirely from the Samsung portfolio, how many Samsung products would be affected? I think many.
There is absolutely zero chance that Qualcomm could exist without being able to protect its IP in court. The model of their licensing business is to do years of R&D, then spend years selling rights to the work product to pay for the next cycle of R&D. Cost of revenues for the licensing business (R&D) are out of sync with the sales that they later generate. Licensing revenue was 40% of QCOM's total revenue last quarter. How exactly do you suggest they make money by selling IP without a legal environment that protects their contracts and patents?
Same goes for ARM. Their entire business is making and licensing designs internationally. That's what they do. That's how they make money.
> The thing is, just macros, or verilog code alone is near useless without tons of documentation, spoonfeeding by ARM FAEs, and tooling support.
Looking at past cases, I think this is an extremely poor characterization of how infringement actually happens. More likely,
(A) customers (or former customers) use licensed technology for which they underpay (or refuse to pay); or
(B) competitors hiring engineers from customers or former customers to compete with the company.
Applied Materials is a key player in semicom fabrication and it's American. There are also a handful of Japanese companies that hold virtual monopolies over key resources like fluorinated polyimide film, photoresists, and hydrogen fluoride and it became a big international issue when Japan revoked korea's free trade access to those materials.
It seems like there's been a deliberate push, like propaganda, to play up ASML's importance over everyone else in the past year or so. I've been seeing ASML brought up everywhere and often seemingly for no reason.
Agreed that ASML isn't the only important company, but they are clearly very important.
EUV is the core technology for the leading-edge nodes of Intel, Samsung, and TSMC. ASML is the only company in the world that makes those machines. They sold 6 of them this past quarter and delivered 9, despite limitations on their ability to do business with Chinese foundries. They're approximately four-fifths of the lithography market in general, and basically five-fifths of the EUV market. So while their machines are not the only component of a foundry's toolkit, it's quite clear that ASML is a critically important business.
Not sure it's propaganda - i think that on HN at least, it's just the one company like this that everyone has heard of. Could you name these companies in Japan, so we know a few more?
Shin-etsu chemical. You might have heard of them before, they're one of the largest chemical manufacturers in the world. Showa Denko KK, Kanto Denko Kogyo. There are more of course just some examples.
I don't understand enough about chip making but ASML seems to be an important part of the supply chain; it has a 80% market share over the litho machines it produces.
Although your question has merit for this case specifically as ASML is a Dutch company there is very little hand wringing about outsourcing. For the forseeable future the Dutch are going to toe Washington’s line. In fact in some ways it’s desirable to throw middle powers a bone every now and then as it gives Washington an additional geopolitical bargaining chip that can be more easily called.
ASML's EUV light sources are made in San Diego (ex Cymer) and many of their EUV twin scan machines are made in Wilton, CT. So oddly it seems they outsource to the US.
"ASML San Diego is responsible for the R&D and manufacturing of EUV light sources for lithography systems. Cymer focuses on DUV light sources." From ASML's website.
ASML San Diego was part of their joint research before acquisition.
I see a lot of HN chatter about semiconductors, however, nothing along the lines of any startups in semicon from Silicon Valley? Is there anything going on in SV in terms of new ways to do litho, or new fab technology or any new ventures out there trying to improve this critical industry?
Would be curious to run this by PG and a bunch of Y-combinator folks - While your voice might drown in Adtech noise, it would be crucial for the west to maintain semiconductor manufacturing expertise. What does AH think about it?
There are many hardware startups in silicon valley. Tons in VLSI as well. Just google for it.
You'll find most are doing various ip blocks on someone else's process or finding novel process flows on known equipment. Obviously most are fabless because it's just so much less capital intensive. My company has invested many millions into just the equipment in just my lab and I can only measure stuff someone else made. CAD software is very expensive as well.
As for startup specifically related to novel manufacturing techniques. I guess it depends on what a startup is. Is a newly founded company with $50M in funding a startup or just a new company? The bay area has some companies doing interesting things in silicon photonics (in-package optical io is a hot topic as well as quantum computing)
And if you're willing to expand the geographic area outside Silicon Valley there is quite a lot more.
Take a look at the machines required of a modern fab. Just turning the water on, ultra pure water, can easily cost millions. The actual litho machines are beasts the size of school busses and cost hundreds of millions to spec and install. Then there are dozens of little suppliers of the special reagents, each of which comes from its own billion-dollar supply chain. There are only a few places on earth where all of this is availible at reasonable cost, and silicon valley is thousands of miles away from all of them.
Look at the number of successful hardware vs software startups in VC funding and then look at the ratio of hardware to software billion dollar startups the last ten years.
Anything with effectively zero incremental costs will seem a better investment in the short term
Cerebras is an example of a hardware startup in Los Altos that basically is taking a wafer and using that to do acceleration based tasks for AI. They are or were in stealth mode but made an announcement at hot chips [1] [2].
And they don’t make real money, compared to the Apples, Facebooks and Googles of the world. https://en.wikipedia.org/wiki/ASML_Holding says they had about 10 billion in revenues, 2½ billion in net income for about 18 billion in assets, for about 14% return on investment.
That looks good, but they’re in a highly cyclical market; every recession, their sales more or less completely dry up, and those figures are for a good year.
That’s why I can understand why investors aren’t lining up to invest in that kind of company.
A lot of other equipment goes into making semiconductors beyond lithography. Applied Materials and Lam Research are two major manufacturers of semiconductor manufacturing equipment that are located in SV. There are many smaller ones also.
I think you need crazy money and a lot of expertise to get into this game. Intel and others would love to master this and absorb this part of the market. But so far no one has with any expertise is willing to get into the ring so...
> ASML Holding of the Netherlands dominates the market for the equipment. Major semiconductor makers began full use of it in 2019 and ASML is the sole company capable of mass-producing it.
They supply the whole industry, from Samsung to TSMC to Intel.
ASML made a technological step after a decade-and-a-half of R&D. They invented and commercialized a new type of laser, which allows the EUV production process.
ASML is the reason the chips of the past two years have been making such performance gains, after multiple years of marginal improvements.
Which is why it is so odd that the differences between them are as large as they are. If they all buy the same ingredients, why is TSMC's secret sauce so much better?
I hear ASML works like an extremely high-tech consultancy. The tech developed for contract a is not available for contract b, so you can't just call ASML and ask for the same machine they sold to TSMC. That's what I've heard, anyway.
ASML only provides part of the chain to produce a chip, mostly focussed on the lithography step. There are a dozen steps in the production chain around it.
I apologize for my ignorance here. I know pretty much nothing about chip fabrication.
My question is: How long is it expected that ASML will be the sole provider _on the planet_ for these lithography machines? Is their secret sauce literally impossible to replicate?
It’s fascinating how one of the most important pieces of tech regarding the future is held by one entity.
Canon, and Nikon definitely have money to catch up.
What I believe made them to start to fall behind around the time of first immersion tools is unwillingness to work with academia, and general closednes.
Too much NIH in other words.
Latest litho equipment is a multidomain know how which is not humanly possible to internalise inside a single company these days.
Japanese were fine when they were able to just ride on their superior optics expertise alone, and just put more, and more monstrous optics on the tool to achieve higher resolution.
But that model definitely broke when optics alone became insufficient to achieve a shrink. Now, a node shrink is an industry-wide effort no company alone can sell as a single package.
EUV is not only about a light source:
Godly level of mechanical engineering to articulate wafer stages, and the reticle.
Work with deep vacuum systems, and materials.
New lithography chemistry, photoresists in particular.
Thom Hogan for a few decades reports on Nikon product strategy & financials. From most recent article with comment on Nikons financial situation:
> That said, if I were one of those financial rating companies, I'd be downgrading Nikon's rating at the moment. You know, from something like A to BBB (using Standard & Poor's rating board). (Nikon publishes their Japan Credit Rating Agency value, which is currently A+/Negative for long-term debt. That would be the third highest rating, or "a high level of certainty to honor the financial obligations," though the outlook [Negative] is that the rating might be lowered.)
There was an interview with the ASML CEO recently in Dutch newspapers and what he said was that the succes of ASML is that it created a very tight knit ecosystem of companies that are all very important for ASML's success. Copying the success of ASML is so difficult, because it's not just one company you need to copy, but a whole ecosystem of highly specialised companies.
Will it be possible for the Japanese EUV equipment makers to export to China?
(The US has effectively prevented European exporters of chip making equipment to sell EUV equipment to Chinese companies as the equipment contains "American IP". Getting around this would be a massive oppurtunity for a Japanese (or an European) equipment maker.)
I wonder whether it's possible to make an EUV equipment without American IP. If Japanese companies can do that, the most advanced ASML can do that too, then there will be no market opportunity to Japanese at all.
I got a little taste of their recession in the 1990's, but not much information since then. Are they as worried now as we were when Toyota ate everybody's lunch?