Analog hype overcrowds market

Industry pundits proclaimed 2008 the year of analog. With the growth of the analog chip market far outpacing that of digital, a slew of foundry vendors jumped into the arena. But now the odds for analog foundries' survival aren't looking good as analog foundry vendors face an IC market downturn, the breakout of a price war and mounting fears about intellectual property theft in China.

Most troubling of all is that—all of a sudden—there are just too many analog foundries.

That means too many vendors are chasing limited analog business, according to Stephen Ohr, an analyst at Gartner Inc. "There will be a shakeout," he predicted.

Many entered the analog foundry market via acquisition. Traditional digital IC foundry vendors have also begun offering analog and mixed-signal services. Among the newcomers to the analog foundry business are CSMC Technologies and SMIC in China, LFoundry in Germany, and ON Semiconductor in the United States. ASMC, austriamicrosystems, BCD Semiconductor, Dongbu HiTek, IBM, MagnaChip Semiconductor, NEC, Tower/Jazz, TSMC, Vanguard, X-Fab Silicon Foundries and others are also expanding their analog services.

Growth expectations
As the digital foundry business matures, analog has emerged as a new battleground for many foundry vendors. Among analog chips, those in the high-voltage segment in particular are registering the fastest growth.

High-voltage processes are enabling the next wave of LEDs and power-management devices. Despite the market downturn, there is still a big spending cycle for LEDs in cars, lighting systems, PCs and other equipment. The total LED market is projected to jump from $3.6 billion in 2006 to $8.4 billion in 2011, according to market researcher Displaybank Co.

Adding credence to the analog foundry hype is the move of some IDMs who have traditionally produced analog chips to start outsourcing production. Some say this is because making high-voltage devices at 0.18?m and beyond will be too tough for the analog IDMs to handle at their own fabs.

Then there is a price war. China and Korea analog foundry providers are slashing prices for their services, claim industry observers, further fueling the turmoil of the analog foundry market. Some charge that semiconductor IP theft is at an all-time high in China, causing many analog IC makers to shy away from China providers.

With so many players springing up in the analog foundry business, it's tough to tell who's for real in the mad dash to capitalize on the analog/mixed-signal foundry business.

Coming slowdown?
Overall, the analog chip business fell by 1 percent in 2007, but the sector is expected to rebound by 8 percent in 2008, according to market research firm Databeans Inc. And yet, analog chipmakers Intersil and Linear Technology—and others—reported disappointing results and are forecasting a slowdown.

For some time, many digital-based IDMs have been outsourcing more production to silicon foundries. In contrast, Ohr said, many large analog IDMs refuse to go down the outsourcing path, saying they want to protect their IP and keep processes in-house.

To some degree, the shakeout has already begun. X-Fab has acquired fabs from TI, Zarlink and ZMD. In 2006, X-Fab acquired Malaysia foundry 1st Silicon Sdn Bhd.

Late last year, ON Semiconductor acquired AMI Semiconductor, which also provides analog/mixed-signal foundry services. And recently, Israel-based Tower Semiconductor acquired Jazz Semiconductor, a specialty foundry vendor.

Analog is a huge but fragmented market consisting of four basic areas: catalog components; high-power; high-voltage and RF. Catalog components include comparators and data converters. High-power consists of fiber-optic devices and related products, while RF is usually associated with wireless.

Analog providers are moving up the ranks.

Spotlight on power
The current industry buzz focuses on high-voltage, which encompasses several processes, such as high-voltage CMOS and BCD (bipolar-CMOS-double-diffused MOS (DMOS)). The attraction of BCD comes from integrating analog circuits (bipolar), logic circuits (CMOS) and high-voltage circuits (DMOS) on the same chip.

The "sweet spot" for the high-voltage market is devices that range from 5V to 40V, according to Marco Racanelli, VP of technology and engineering of Jazz Semiconductor. "The bulk of power-management devices are made at these voltages," he said.

Power management includes battery management ICs, DC/DC converters, LED drivers and regulators. Meanwhile, 60V to 80V parts tend to go into automotive applications, while 120V to 150V devices are geared for power supplies, Racanelli said.

Unlike the digital foundry world, there is no clear-cut leader in the analog foundry sector. But foundry giants IBM and TSMC have recently expanded their analog efforts—a move that could stimulate a market shakeup.

For years, TSMC has offered RF, high-voltage and related processes. Last year, TSMC and Power Analog Microelectronics co-developed a BCD process. TSMC also joined the Interoperable PDK Libraries industry alliance, a group pushing for a standard analog foundry process design kit.

Some believe TSMC presents only a minor threat. TSMC disagrees. "We're doing full-bore analog designs," said Chuck Byers, the company's director of brand management.

Like TSMC, IBM's Microelectronics Group is also making waves. In October, austriamicrosystems rolled out its 0.18?m, high-voltage CMOS process. The process, co-developed with IBM, enables the development of power-management, MEMS interface and medical products, according to the companies.

China factor
The other wild card is China, where ASMC and BCD Semiconductor have been offering analog/mixed-signal foundry services for some time. Now, two more Chinese players are entering the fray: CSMC Technologies and SMIC.

China companies have gained some share of the analog market by cutting prices, analysts said. China has also gained a nefarious reputation for semiconductor IP theft, according to several analysts. For this reason, many analog IC makers "are afraid of handing over their IP in China," said one observer.

Others take a slightly different view. "Protection of IP for analog and mixed-signal is a totally different kettle of fish from digital," said Danny Lam, an analyst with The Fairview Group. "Analog is still extremely difficult to replicate, even if you grind down the chip and copy it. Analog and mixed-signal devices, unlike their digital cousins, cannot be cloned in this fashion."

For some time, SMIC has offered mixed-signal processes, based mainly on proprietary technology for use by a single customer. At a recent event, SMIC rolled out its mixed-signal/analog/RF foundry service for the general market.

By year's end, SMIC claims it will offer a 0.35?m, BCD-based process with a 40V specification. In early 2009, it will roll out a similar silicon-on-insulator offering.

Another China player, CSMC, was focused on the digital consumer market, but found that the "cash cow is in analog," said Carolina Ng, CSMC marketing director. In addition, the company rolled out a 0.5?m BCD process.

EE Times analysts have come up with odds for success of analog fabs.

Process leaders
China trails rivals in analog, especially in high-voltage technology. Outside China, many vendors are rolling out their 0.18?m, high-voltage CMOS and BCD processes. The shift to 0.18?m technology in high-voltage marks a turning point, according to Aabid Husain, VP of sales and marketing at Dongbu HiTek, a South Korean specialty foundry. Analog IDMs "can't do it" in their own fabs, Husain said.

The big analog IDMs do not necessarily agree with that assertion, but the foundries may have caught up in high-voltage. Dongbu, for instance, surprised the market by rolling out what it claimed was the industry's first 0.18?m BCD process. The new process supports a wide range of voltages, from 12V to 60V.

"High-voltage is the buzz," Husain said. "LED drivers are a big market for us. We think applications like PoE are also coming online."

Dongbu's archrival, Germany-based X-Fab Silicon Foundries, recently rolled out its 0.18?m, high-voltage process that also makes use of an embedded silicon-oxide-nitride-oxide-silicon (SONOS)-based non-volatile memory. The process is tailored to automotive applications, said Thomas Hartung, VP of sales and marketing at X-Fab. The company is working on another 0.18?m version for power-management applications, he added.

And now, there's another vendor: Japan's Renesas Technology sold its German subsidiary wafer fab, Renesas Semiconductor Europe. The buyer was Silicon Foundry Holding, founded by two former Renesas managers. The company will operate under the name LFoundry, and specialize in analog and mixed-signal production aimed at the European foundry market.

"While the established players in this segment all work in Europe with 6-inch wafers and geometries of 0.35?m or larger, we can offer 8-inch wafers and geometries of 0.25?m, 0.18?m and even 0.15?m. Thus, our overall productivity is significantly better," claimed Michael Lehnert, CEO of Silicon Foundry.

- Mark LaPedus
EE Times