Using TechInsights Semiconductor Manufacturing Economics to minimize capex investment risk and ensure profitability

The Challenge

IDMs must strategically allocate capital expenditures 2-3 years before new semiconductor manufacturing capacity is realized. Orders for OEM tools, especially leading-edge lithography systems, often have lead times over a year. IDMs typically invest over $1 billion annually in capex, and miscalculations can have serious financial consequences: over-investment can lead to losses from depreciated, unused capex, while under-investment risks market share loss to competitors. Given the rapidly changing international landscape and technological advancements, the multi-billion-dollar investment in new fabrication lines carries risks of obsolescence and significant write-offs. Thus, accurately calibrating capex investments at the right technology node is essential for minimizing risks and ensuring profitability.

The Solution

Cost and Price Models are available for all device types that accurately simulate semiconductor manufacturing. Simulation accuracy is ensured by detailed "bottom-up" modeling engines for equipment, materials, labor, and facility costs from wafer fabrication to assembly and final testing. Prices are based on supplier gross margins and the volume of devices sourced.

Requiring minimal user inputs, the models can rapidly simulate manufacturing processes. Each wafer fabrication model includes hundreds of pre-set process flows that are easily adjustable.

Primarily developed for IDMs and foundries, the Strategic Cost and Price Model simulates 300mm wafer fabrication for past, present, and future technology nodes. Engineers and strategists can modify presets, create new flows, and adjust equipment and materials assumptions to conduct "A-B" comparisons of non-existent fabs.

The Results

Minimized risk when investing billions in semiconductor manufacturing capital expenditures is crucial. Accurate simulations of wafer fabrication enable IDMs to project capacities that will come online over time based on selected technology nodes.

These simulations allow IDMs to align future wafer fab capacity investments with market demands, optimizing long-term profitability. Additionally, technology investments can be analyzed for both the IDM and its competitors, offering valuable insights into the costs associated with anticipated future products.