SEMATECH
1987--1997
A Final Report
to
the Department
of
Defense
February 21, 1997
Executive Summary
In
1987 the Defense Science Board Task Force
on
Semiconductor Dependency
stated
in
its report that,
"U.S.
leadership
in
semiconductor manufacturing
is
rapidly eroding." The Board recognized that
U.S.
military forces depend heavily
on
technological superiority
to
win
and
that loss of technological leadership
and
consequent dependence
on
foreign sources of supply for state-of-the-art
semiconductor devices was
an
"unacceptable situation." The "principal
and
most
crucial recommendation of the Task Force" was the creation of
an
industry-
government consortium to "develop, demonstrate and advance the technology
base for efficient, high yield manufacture of advanced semiconductor devices."
Congress voted
to
match industry contributions to conduct precompetitive
research
in
a non-profit consortium
and
SEMATECH was born. Following the
direction of the Defense Science Board
and
its Board of Directors, SEMATECH
focused
on
the infrastructure of the integrated circuit manufacturers-- the capital
equipment, methods and processes used
to
fabricate semiconductor devices.
SEMATECH's Board believed that focusing
on
precompetitive challenges such
as
manufacturing capability and productivity improvement would free resources
which SEMATECH member companies could then direct toward product design,
quality
and
innovation. This strategy was intended
to
facilitate SEMATECH
members
in
regaining a position of world leadership
in
semiconductor
manufacturing
by
leveraging the historical strength of the U.S. industry
--
innovative product development.
By 1992 the
U.S.
industry had indeed regained worldwide leadership
in
semiconductor manufacturing.
In
July of 1994, with the U.S. industry
in
full
rebound, the SEMATECH Board voted
to
proceed
in
a new direction without
federal funding for the consortium. The $50 million included
in
a supplemental
Department of Defense spending bill late
in
fiscal year 1996 marked the final
appropriation for SEMATECH. Beginning
as
a bold experiment
in
industry-
government cooperation, SEMATECH
is
moving toward a business model that
will rely entirely
on
private funding
--
the partnership has come full circle.
Without the foresight and commitment of three Presidential Administrations
and
four Congresses, SEMATECH could never have achieved a degree of success
which
has
been called dramatic and unprecedented. The willingness of the
U.S.
government to eschew partisanship and undertake a bold experiment
--
an
experiment based
on
cooperation
as
opposed to traditional procurement,
and
with accountability standards rooted
in
trust instead of elaborate regulations
--
has
led
the
U.S.
to a position of preeminence
in
an
industry which is vital to our
nation's security
and
economic well-being.
2
This transition report will provide a systematic review of SEMATECH's
operations from 1988
--
1996 and detail the consortium's compliance with
statutory requirements. The future relationship between SEMATECH and the
United States government will
be
discussed as well.
Operational Overview
Mission
SEMATECH was incorporated
in
1987 as a Delaware not-for-profit membership
corporation. It
is
exempt from federal income taxes under §
501
(c)(6) of the
Internal Revenue Code. While the overarching objective of SEMATECH has
been to facilitate its members
in
regaining a position of global manufacturing
leadership, the firm's mission statement has evolved over time. The evolution of
SEMATECH's mission statements can
be
considered a barometer of response
to the dynamism of the semiconductor industry. Two such statements from
early
in
SEMATECH's history are: ·
To
provide the
U.S.
semiconductor industry the domestic capability for
world leadership in manufacturing
SEMA TECH Board
of
Directors, August 1987
Create fundamental change
in
manufacturing technology and the
domestic infrastructure
to
provide
U.S.
semiconductor companies the
continuing capability
to
be world-class suppliers.
SEMATECH Board
of
Directors, August
1991
These early statements reflect the severe challenge which the U.S.
semicondu·ctor industry faced
in
the late 1980's and early 1990's. SEMATECH
responded with a broad, multifaceted program aimed at shoring up the domestic
infrastructure of the semiconductor industry. Major initiatives
in
critical
processing technologies such as lithography, furnace and implant, and plasma
etch and deposition equipment were launched. SEMATECH members believed
that access to world-class manufacturing equipment and methods was the key to
recovering a position of leadership
in
the global market. The strategy was a
resounding success. .
In
1992 the U.S. chip manufacturers, of which the
SEMATECH members represented about 75% (on a revenue basis), overtook
the Japanese manufacturers
in
terms of worldwide market share.
In
a period of
3
less than five years, SEMATECH, working with its members and the
U.S.
government,
had
achieved a comeback that many said would never happen.
With the U.S. industry back
in
a leadership position SEMATECH might have
declared victory and ceased operations; however, the SEMATECH members
and government participants firmly believed that
in
order to sustain and secure
the U.S. position, SEMATECH should continue operations so long
as
it
continued to provide value
to
its members. The Board of Directors asserted
their continued support for the consortium and asked SEMATECH to take
on
a
broader set of technical challenges, including the areas of design, test, materials,
and
assembly and packaging technologies. The emphasis was turning from
recovery to one of maintaining the leadership position which had been attained.
The broadening of SEMATECH's charter
is
reflected
in
the evolution of the
mission statement:
Solve the technical challenges required
to
keep the
U.S.
number one
in
the global semiconductor industry.
SEMA TECH Board
of
Directors, February 1993
By 1996 the U.S. leadership position seemed secure; however, it
was
becoming apparent that the challenges the industry would face
in
the future
would
be
increasingly complex and unremitting. With the threat of industry
demise behind them, the Board would expect SEMATECH to offer increased
competitive advantage and tangible return to its membership.
Without question, many of the developments SEMATECH has delivered have
-----r-estJited
in
coiflcidental and -significant benefits to non-SEMATECH member
companies. Because SEMATECH has historically emphasized the development
and improvement of process equipment and methodologies, much of the fruit of
the consortium's labor was contained
in
the actual hardware or software being
offered for sale by U.S. equipment suppliers. Inasmuch as this equipment was
available to non-members
on
an
equal basis with SEMATECH members, non-
members have received considerable benefits from the program. SEMATECH
has always been committed to contributing to the advancement of the U.S.
industry and never objected
to
this peripheral effect. However, as SEMATECH
completes its transition to a wholly private enterprise, emphasis must
be
placed
on
providing competitive advantage to the consortium membership. This
reasoning underlies the current mission statement:
SEMA
TECH
members will create shared competitive advantage
by
working together
to
achieve and strengthen manufacturing technology
leadership.
SEMA
TECH Board
of
Directors, February 1996
Few industries compare to that of semiconductors with respect to the magnitude
and pace with which change occurs. Over time, SEMATECH's mission
statement has evolved
in
response to the changing business environment and
the needs of its members. The consortium, however, has remained focused on
its objective of establishing a leadership position for U.S. manufacturers.
Corporate Strategic Objectives
A core set of overarching, strategic objectives have guided the consortium from
its very early period through the present day. These objectives were developed
in
cooperation with SEMATECH member companies and the U.S. Department of
Defense. A complete list of the Corporate Strategic Objectives follows.
• Provide member companies with the lowest cost production capability for
leading semiconductor devices. Reduce the rate of increase of capital costs
per unit output with increasing device complexity.
• Ensure access to a competitive supplier infrastructure capable of meeting the
members' requirements for selected key equipment, materials, models,
simulation tools and manufacturing systems:
··
• Provide cost-effective, flexible factory capabilities that can respond to process
and product changes with first pass success.
_•
_provide solutions to the semiconductor industry for environment, safety and
health conscious manufacturing.
• Meet each member company's target for return on investment.
• Champion the National Technology Roadmap for Semiconductors and work
closely with government and universities to implement timely improvements
in
semiconductor technology.
• Cooperate with all organizations involved
in
semiconductor R&D to develop a
research and education infrastructure necessary to sustain U.S. leadership
in
semiconductor technology.
5
• Maintain open forums for effective communication, collaboration and
consensus building within
the
SEMATECH community.
Select Accomplishments
By
nearly any measure, SEMATECH has been a resounding success. The most
obvious and frequently cited supporting evidence has been the dramatic
comeback of U.S. semiconductor and equipment manufacturers
in
the worldwide
market place (see Figures 1
and
2).
SEMATECH believes that the lion's share
of credit for the recovery
in
the semiconductor market goes to the employees of
its member companies. They have demonstrated
an
unswerving commitment to
innovation, aggressive product development and total quality business practices.
70
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Figure 1
Figure 2
In
the case of the semiconductor infrastructure, SEMATECH's work with the
equipment suppliers has
had
a profound impact. Since its inception, the
consortium has directed approximately 60% of its resources to technology
programs
in
the infrastructure and can be credited justly with the turnaround
in
this sector. The General Accounting Office,
in
a 1992 report, stated:
"SEMA
TECH
has demonstrated that a government-industry
R&D
consortium
on
manufacturing technology can help improve a
U.S.
industry's technological position while protecting
the
government's interest
that the consortium
be
managed well and public
funds
spent
appropriately. "
6
In
the same year, Jerry Hutcheson, CEO of VLSI Research, Inc., an independent
market research firm, offered the following:
"Every way I look at the data, I come back
to
the belief that this has got
to
be a SEMA TECH-driven increase [in world market share for
semiconductor equipment made
in
America.]"
Deliverables to the Department of Defense
• Restoration of
an
infrastructure of manufacturing equipment and materials
suppliers
in
most key areas of semiconductor technology
• A dramatic improvement
in
the performance-to-cost ratio for microelectronics
in
defense systems
• A capacity to exploit through manufacturing the investments DoD has made
in
system research and development
• A pathway to expanded use of commercial, off-the-shelf (COTS)
microelectronic devices for defense systems
National Return
on
Investment
Since SEMATECH was formed, the U.S. government has invested $848 million,
compared to $863 million by member companies.
In
return, the government has
realized more than $34.7 billion
in
tax revenue from SEMATECH's member
companies (see Figure 3).
7
Government
Return-on-
Investment
Figure 3
Semiconductor Factory Costs
Member Company
Investment
Government
Investment
Ten years ago, the cost of a new fabrication facility was doubling every 29
months. That rate of escalation has slowed to a 15% compound annual growth
rate
in
the nineties (see Figure 4). Minimizing the escalating cost of building and
equipping new manufacturing facilities
is
critical to keeping the industry
on
its
historical productivity curve.
10000
~
1000
~
I!!
-
r--
"8
100
..
j
:i
.5
10
1
1970
Escalating
Cost
of
Semiconductor
Manufacturing Facilities
(Based on Date
of
Fab Announcement)
~
1975
1980
Figure 4
8
_?'
1985
Year
~
1990
_:.-
..,....-.:
-
1995
2000
Source: VLSI RESEARCH INC
1040411
One of the most significant achievements SEMATECH can count among its
successes
is
its
role
as
architect of the National Technology Roadmap for
Semiconductors. SEMATECH
and
the Semiconductor Industry Association
(SIA) coordinated with all sectors of the U.S. semiconductor technology base,
including government, industry
and
academia,
to
produce a document that
enables a common vision among
all
stakeholders. The Roadmap provides a
framework for guiding research and development;
all
relevant segments of the
national
R&D
base can
be
efficiently enlisted
to
meet the increasingly complex
technology needs of the industry.
The implementation of the research identified
in
the Roadmap
is
the
responsibility of the SIA, its member companies, their suppliers and the
R&D
infrastructure of government-supported organizations, universities
and
other
independent research groups.
In
particular, SEMATECH and the Semiconductor
Research Corporation (SRC) support the implementation of critical research
identified
in
the Roadmap.
An
emphasis
on
Environment, Safety
and
Health (ESH) has been a hallmark of
the SEMATECH program. Working closely with the Semiconductor Industry
Association, SEMATECH took the lead
in
developing a 15-year, national
strategic
road
map to address
ESH
issues
in
the semiconductor industry. The
benefits of the road map include aligning industry needs and trends,
benchmarking best practices, guiding suppliers
in
product development, and
enabling mapping of research
and
development plans. While under
development, the road map was reviewed by computer chip manufacturers,
suppliers, environmental and labor organizations,
and
members of Congress
and
their staff.
The
ESH
road
map focuses
on
five areas: worker protection and ergonomics;
tool design; chemical use reduction; emission reduction, and energy
and
water
reduction.
A few examples of SEMATECH's environmental accomplishments follow.
• SEMATECH has co-hosted international symposia which brought together
teams of leading experts to exchange information and develop next steps
on
water conservation, global warming and ergonomics.
• SEMATECH has made significant progress
in
waste reduction with its
reprocessing and recycling techniques. These systems reduce raw material
requirements and the transportation of sulfuric acid, and also reduce the use
9
of chemicals required for waste neutralization and disposal. SEMATECH
reuses more than 90% of these acids.
• SEMATECH helped draft and then worked with the industry to adopt uniform
ESH
guidelines for semiconductor equipment suppliers for the production of
equipment and parts.
Statutory Compliance
Grants to SEMATECH
In
accordance with the enabling legislation for SEMATECH (15 U.S.C.§§ 4601-
4606), the consortium entered into a memorandum of understanding with the
Secretary of Defense and has, throughout its existence, maintained a charter
that was agreed to by all representatives of the semiconductor industry that are
participating members of the consortium. Additionally, SEMATECH has
developed
an
annual operating plan
in
consultation with representatives of the
Department of Defense and, since its creation, the Semiconductor Technology
Council.
SEMATECH has, since its inception, received approximately one-half of its
funding from dues paid by its member companies and one-half from a federal
grant which has been administered by the Defense Advanced Research Projects
Agency of the U.S. Department of Defense. Federal statute mandated that
funding from federal, state and local governments could not account for more
than 50 percent of the total cost of SEMATECH's research and development
activities for a given fiscal year. GAO audits and reviews have shown that
SEMATECH has, without exception, met the letter and spirit of this
law.
SEMATECH retained an independent, commercial auditor to verify that funds
made available to SEMATECH by the United States government were expended
in
a manner that was consistent with the purposes outlined
in
the enabling
legislat1on~1nefirm's
cnarte-r
arret·
the annual operating plans. Without exception,
the auditor submitted to the Secretary of Defense, the Comptroller General and
SEMATECH management, annual reports certifying SEMATECH's compliance.
From SEMATECH's inception, the Secretary of Defense has been afforded the
opportunity to use all intellectual property, trade secrets and technical data
developed by SEMATECH
in
the same manner as a participant of SEMATECH.
SEMATECH has taken all steps necessary to maximize the timely and
expeditious transfer of technology developed and owned by SEMATECH to the
participants
in
SEMATECH, including the Department of Defense,
in
accordance
with the agreement between SEMATECH and its participants. Early
in
the
consortium's history, SEMATECH established a liaison officer to the Department
10
of Defense whose primary responsibility
was
to study
and
understand the
technical needs of the Department and proactively manage the transfer
and
insertion of technology
to
DoD.
Environment, Safety
and
Health Program
In
the years 1993, 1994,
and
1995, the House Armed Services Committee,
in
its
conference committee reports, recommended that SEMATECH spend specified
levels of funding for the development of environmentally conscious
semiconductor manufacturing methods
and
processes. Although the committee
report language did not rise to the level of federal statute, SEMATECH did
provide
an
annual accounting of its spending
on
ESH
programs to DARPA.
In
each of the three years, SEMATECH's
ESH
program expenditures exceeded the
congressional guidelines, at times by more than twice the federal
recommendation. ·
Semiconductor Technology Council
Following the establishment of the Semiconductor Technology Council
in
1994,
the consortium has worked closely with the Council and has developed its
annual operating plans in cooperation with the STC. SEMATECH has provided
status reports to the STC at each of
its
meetings and has provided administrative
support to the Council.
SEMATECH's Future Relationship with DoD
l"he partnership between the U.S. semiconductor industry and the Department of
Defense, through SEMATECH, has proven to
be
invaluable. Industry and
government will continue
to
make considerable
R&D
investments
in
~emiGom:tugor
t~Gbnology
_f~r
into
the_
fuJuJ~
While industry objectives are
primarily aimed at ensuring continued productivity growth and product innovation,
DoD's principal--objective
is
to -ensure national-security. With
110
reversal of
recent troop reductions
in
the offing,
DoD
recognizes that technology
is
a "force
multiplier," offsetting the numerical advantage of potential adversaries.
As
the
first annual report of the Semiconductor Technology Council stated, ''The need
for
DoD
to take the lead
in
information technology
is
manifest. Studies
...
have
identified information technology as the foundation of modern warfighting."
So
long
as
the U.S. government continues to spend substantially
in
the area of
semiconductor
R&D,
it seems only logical that industry and government should
maintain a forum for open communication and programmatic collaboration.
Preserving the cooperative construct that has been demonstrated
in
SEMATECH will go a long way toward ensuring that the critical technology needs
11
identified
on
the
road
maps of industry and
DoD
will
be
addressed. Furthermore,
maintaining a formal mechanism for information sharing should minimize
unnecessary duplication of research efforts and allow each party to more
prudently manage limited
R&D
dollars.
The inherent alignment between the needs of the
U.S.
industry and
DoD
will not
diminish simply because SEMATECH's reliance
on
direct federal funding has
come to
an
end. It
is
important that the operational model for cooperative
R&D
which
is
manifest
in
SEMATECH not
be
abandoned simply because the funding
model of the enterprise
is
evolving.
That SEMATECH and
DoD
should continue cooperation beyond 1997
is
clear.
Their
is
no requirement that the existing cooperative framework, e.g., the grant
agreement, memorandum of understanding and enabling legislation be
terminated. Elements of the framework for continued cooperation include, but
are not limited
to,
the following:
• ,DARPA should continue its participation as a non-voting observer
on
the
SEMATECH Board of Directors and the Executive Technical Advisory Board.
• DARPA (or a
DoD
designee of their choice)
is
encouraged to attend meetings
of the Focus Technical Advisory Boards and Project Technical Advisory
Boards.
• DARPA and SEMATECH should conduct a joint, annual review during which
the annual operating and long range strategic plans of each organization will
be shared. {DARPA should share no government classified information with
SEMATECH during the course of such reviews.)
• SEMATECH should continue to be
an
invited participant
in
meetings of the
Semiconductor Technology Council. Because SEMATECH has ceased to
seek federal funds, the possibility of formal SEMATECH representation
on
the STC should
be
considered.
• Pursuant to
P.L.
100-180, SEMATECH will continue the use of all assets
purchased with regular (commingled) operating funds, unless and until
dissolution of the corporation.
• Pursuant to its status as a wholly private, nonprofit corporation and consistent
with
P.L.
104-66, SEMATECH will no longer be subject to audits by the GAO
or other federal audit or oversight agencies.
12
• Pursuant to its status
as
a wholly private, nonprofit corporation, SEMATECH
will
no
longer be subject to the regulations and requirements set forth
in
OMB
circulars
A-11
0,
A-122 and A-133.
Summary
The bold experiment
in
industry-government cooperation known
as
SEMATECH
has been a remarkable success. The
U.S.
has regained a position of
preeminence
in
the global semiconductor industry and a rigorous model for
cooperative research and development has been demonstrated. The success
realized by the participants would never have been possible without the vision
and commitment of countless supporters
in
the Congress and several
Administrations. Their willingness to forego traditional regulatory burdens and
break new ground
in
collaborative research should
be
commended.
SEMATECH
and
DoD
should not stop short, but should build
on
their success
and develop a framework for continued cooperation
in
1998 and beyond.
--------
13
