As an increasing number of semiconductor companiesenter the solar market through various means, the outsourcing trend ofmicrochips for these U.S.-based companies may be a sign for the future solar cell market.
U.S.-based fabless companies continue to dominate the sales forsemiconductors, as 17 of the top 25 and nine out of the top 10 areheadquartered in the United States. Only one Japanese company,MegaChips, is even in the ranking, as the fabless/foundry outsourcingbusiness model has not been readily adopted by Japanese and other Asiancompanies, for that matter. IC Insights Inc. has recently reported thatnine fabless IC companies had sales of $1B or more in 2009, led byQualcomm Inc., based in San Diego, CA, and Advanced Micro Devices Inc.,based in Sunnyvale, CA, which shifted to a fabless business model in2009.
However, this trend has taken its toll on the U.S. job market and willworsen conditions in the next decade. U.S. semiconductor and otherelectronic component makers will lose 146,000 jobs between 2008 and2018, according to a report published by the U.S. Bureau of LaborStatistics (BLS) in December. The report ranks the chip industry secondhighest in terms of estimated job losses over the next decade, onlybehind retail department stores. The Phoenix, AZ area, formerly known as the Silicon Desert, has been affected by this trend, losing over 25,000 microchip jobs in the last 10 years.
Previously, from 1998 to 2008, 217,000 semiconductor jobs wereeliminated in the U.S. In specific, the semiconductor subcategory jobtotals fell dramatically from a peak of 292,000 jobs in 2001 to about185,000 in 2009, nearly a 40 percent reduction. Moreover, the BLSfigures project that U.S. semiconductor manufacturing employment willhave dropped from an annual high of 676,000 in 2000 to 287,000 by 2018,equivalent to approximately two-thirds of the workforce. Many of thesesame companies produce solar cells as well. Seventy percent of U.S. gross domestic product is associated with consumer spending; thus, a reduction in manufacturing will increase that alarming factor; in addition, consumers will have even less choice in terms of retail options.
The world’s largest semiconductor foundry, Taiwan SemiconductorManufacturing Co. Ltd. (TSMC), headquartered in Taiwan, which hassubsequently developed a solar cell process line, recently announcednet income rose 163 percent for Q4 vs. last year and plans to addseveral thousand new workers this year to its labor force ofapproximately 23,000 globally. As more U.S. companies such as AMD andQualcomm rely more heavily on an outsourcing foundry model for theremicrochips, TSMC is planning to recruit more than 3,000 employees thisyear to support capacity expansion and aggressive technologydevelopment. Primarily engineers in semiconductor manufacturing andresearch and development will be hired, but the company is also addingpersonnel in solar, solid state lighting, information technology, marketing and sales, and management.
Thus, the semiconductor industry is undergoing a fundamental change instructure that will leave only a few companies producing devices at theleading edge, as more of them utilize common, shared foundry processesdue to the exorbitant cost of maintaining or building newstart-of-the-art fabrication facilities, which require multi-billiondollar investments. Bob Johnson, VP of research at the Gartner analystfirm, predicts that by 2014 there will be only 10 companies operatingat the leading edge: 1-2 non-memory device manufacturers, 4-5 memorychip companies, and 3 foundries. Similarly, Handel Jones, CEO ofInternational Business Strategies, predicts "significant changes" overthe next 5-10 years, both in terms of the structure of the industry andits budget framework. He has stated that once the 22nm node sizegeneration is in production by 2012, that there will be only threedevice manufacturers: Intel, Samsung and STMicroelectronics, along withfoundries: TSMC and Global Foundries. However, the semiconductorindustry has overcome daunting expectations before regarding devicesize shrinkage.
In any case, this is an alarming prediction for the semiconductorindustry. A follow-up article will be published by this author soon todiscuss the possibility of this trend emerging for the solar industryas well.