The tipping point: Virus, supply security and need to transform traditional semicon fab models

2020 began as a year poised for rapid transformation in the global semiconductor industry. Investments in new fab construction were initially expected to leapfrog by US$12 billion to nearly US$50 billion. SEMI’s World Fab Forecast 1 report reveals that China aims to generate additional capacity dedicated to foundries followed by Europe and the Middle East with fab developments valued at over US$11 billion. 


Today, US-listed firms account for 48% of the global market share while China is responsible for approximately 20% of global revenue (2018). The trade war between these two powerhouses prompted a partial decoupling with multinationals shifting production to other countries — particularly, Vietnam.2 


Undeniably, the ongoing challenges from the coronavirus have perhaps become the tipping point, accelerating the need for alternative sources – against the backdrop of evolving geopolitics, increased protectionism and rise of smart cities and niche technologies (beyond
Moore’s law). The new imperative is for fab nations, greenfield or transformation project owners to rethink the traditional approach to fab development, costing an average of US$3 – $5 billion today. Industry players are moving the needle on its focus towards cost-effective,
service-based approaches that stand to gain more certain returns.



Next-gen Smart Fabs shift focus to OpEx efficiencies

The advent of Industry 4.0 and digitalisation gives way for Smart Fabs and mature site optimisation that focuses on capital expenditure (CapEx) to drive continuous improvements in operational expenditure (OpEx). These considerations are the cornerstones to ensuring
supply chain integration through Cost and Revenue programmes.

Beginning with the digitalisation of design and construction processes to asset-based servitisation (spare parts, product repairs, maintenance, overhauls, equipment training, etc), leverages IoT sensors and solutions for real-time data to optimise OpEx efficiencies
(cleanroom control, preventive maintenance capabilities, etc). 


Aside to achieving site reliability, Smart Fabs enable business viability, allowing for product customisation to meet market needs with different technologies and products. This includes the ability to mix CMOS production with emerging technologies such as Silicon Photonics (SiPh), Gallium Nitride (GaN), and Micro-electromechanical system (MEMS).


Servitisation as a Competitive Advantage


Product-based strategies drove efforts in technological innovation, quality improvement and costs reduction. Today, however, servitisation is rapidly gaining traction. Manufacturers are looking to differentiate by transforming their business model from product-dominant to customer- and market-centric. In fabs, it is about integrating service-based verticals principled in smart manufacturing that drive fabrication efficiencies and site sustainability.


The servitisation model in turnkey and greenfield projects provides public and private stakeholders with an opportunity to capitalise on key specialisations to ensure venture’s viability alongside national aspirations. Enabling project owners to effectively meet market demands over the long-term and mitigate industry cyclicality, IGSS’ purpose-designed “BuildOperate-Transfer” (BOT) programme is inherently a servitisation journey.


This begins with value-adding in CapEx (e.g enterprise asset management systems, financial services, tool refurbishment programmes, real estate management, equipment leasing) and subsequently moving to post-commissioning OpEx optimisation that span the site’s lifecycle. Leveraging Industry 4.0 and IoT capabilities, OpEx servitisation is KPI-based, rolled out in various forms such as (a) activity management/outsourcing (a part of an activity is outsourced to a third party), (b) pay-per-service (determined by the level of use e.g design, prototype, MPW) and (c) functional result (agreement in the delivery of results e.g, process control, product quality, uptime, utilisation). Together, servitisation systems and value offering lock in long-term and strategic partnerships, making greenfield projects more feasible.


Business and operation sustainability address underutilisation challenges


As production becomes highly automated, servitisation becomes a high-margin revenue stream and key source of employment particularly in advanced “last mile” development support in pre-fabrication stages. This include consultancy, R&D, design and prototyping, etc. Robots as a Service (RaaS) and Sensor as a Service (S2 aaS), the latter two slowly becoming mainstream in leading strategies around business and operation sustainability.


Injecting life into underutilised silicon fab, disruptive and emerging technology can be introduced and qualified to run concurrently e.g GaN-on-Silicon (GaN-on-Si) and Silicon Photonics (SiPh). By taking business from different sectors that are stronger or weaker during different parts of the economic cycle, further reduce risks and ensures business sustainability — yet another competitive advantage.


The pursuit of operational sustainability goals is a key aspect to consider. Running fabs is a resource-heavy endeavour; the industry is under tremendous pressure to mitigate operation impact. From heavy consumption of energy, ultra-pure water, chemicals and gases, and noble metals – to workforce safety, wastewater discharge and chip-making costs efficiencies, fabs are also expected to decrease greenhouse gas emissions.


Creating a complex balancing act, coupled with demand for increased reporting transparency, industry players are incorporating relevant operational strategies as they align themselves with international movements such as the United Nations Sustainable Development Goals (SDGs).


Tapping into servitisation measures and Big Data from IoT/analytics for programmes from our
BOT strategy for e.g, means using assets longer to create less waste, implement optimised electrical distribution architectures, as well as other physical infrastructure that all capitalises on the promise of Industry 4.0.


Smart Cities and moving ahead thoughtfully


In the wake of a global pandemic, this tipping point amplified the sense of urgency in the marketplace for supply diversity and security, compounded by how our lives are invariably changed with technologies more necessary to support it. Shifting of more remote work, education, and events to on-line or virtual environments, this multiplier effect is likely to benefit many in the electronic value chain. Going beyond smartphones, providers of communications infrastructure, applications, and cloud services are at the cusp of long-term benefits. Spurred by growth of smart cities and demand for technology for good, delivery services (e.g drones or autonomous solutions), remote healthcare, autonomous vehicles, retail, etc only serves to push players towards global diversification of materials sourcing and manufacturing. After all, it’s the unassuming chips that powers technologies.


Forming partnerships that work


One change that we have already seen is closer working relationships and greater visibility through the supply chain to reduce manufacturing disruptions. Countries are keen to capitalise on the demand for niche technologies and to support the rapid adoption of deep tech. Strategic partnerships between the public and private sector will propel competitive advantage and differentiation in one of the world’s most observed industries.

Addressing cost and revenue pressures, the IGSS’ BOT approach is capable of reducing CapEx by approximately 30% and achieving revenue goals within two years. Aspiring semiconductor nations and players looking for a full-suite services provider can create a
collective that is focused on operational and commercial excellence.



About Innovative Global Solutions & Services Pte. Ltd (IGSS Global) 


Headquartered in Singapore, IGSS is a pioneering services provider focused on designing and implementing tailor-made programmes for fab efficiencies and national Build-OperateTransfer (BOT) fab projects. From concept, feasibility study, design, execution, operation, sustainability and closeout, its services are delivered through an ecosystem of global specialist partners, backed by a proprietary Hybrid Business model. Leveraging proven manufacturing know-how in niche semiconductor technologies offered by its sister companies, IGSS Global brings to the marketplace Industry 4.0-inspired solutions to optimise cost and revenue goals. IGSS Global is a subsidiary of IGSS Ventures Pte Ltd, a technology holding company with a portfolio of semiconductor businesses that address cost, supply and time-to-market challenges in niche smart city and urbanisation applications.

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