E-Business Enters the Semiconductor Industry

John Baliga, Associate Editor -- Semiconductor International, 3/1/2001

		At a Glance
	The foremost reasons for adopting e-business strategies are cost savings, transaction speed and operational efficiency. Many approaches focus on e-procurement as a first step. In the end, the greatest benefits will come from shared, collaborative efforts of business processes in a real-time, flexible environment.

For decades, the semiconductor industry operated with a push mentality — "We make it, you buy it." Now companies are much more customer-focused and competitive. In this dynamic market, companies must manage lengthy manufacturing cycles, multiple-generation, multiple-product development and multiple outsourcing partners. Device manufacturers, designers and assembly and testing suppliers can use supply chain management and e-business solutions to allow them to more accurately gauge demand and maximize profits along the lifecycle of all device types. Especially in a down market, inefficiencies in operations have a dramatic impact on the bottom line.
The use of e-business in most industries is growing rapidly. The semiconductor business, with its short product lifecycles, penalties for late chip delivery, changing product yield and fluctuating demand, dictates better supply chain management for higher profitability.¹ Device manufacturers are challenged to match fab operations with changing demand. Leaders are looking to e-business to make existing supply chain management operations more flexible, efficient and cost-effective.

"A tight coupling between supply chain management and e-business are becoming essential to running a profitable, competitive company," said Rachael Simpson of AspenTech (Cambridge, Mass.). An effective supply chain requires close collaboration among all companies in the chain, typically fabless companies, foundries, integrated device manufacturers, assembly and packaging suppliers, various partners, customers, and equipment and materials suppliers. The winners, formerly characterized by technology advancements, now must advance the supply chain to succeed.¹

"We recognize that e-business solutions are here to stay. They allow us to increase customer service levels, reduce cycle times and minimize errors," said Robert Morse, vice president of production planning at Cypress Semiconductor (San Jose). E-business provides a way to automate routine tasks, increase processing speed and reduce associated costs. This can make a company more agile and better prepared to take necessary action. While people are most familiar with business-to-consumer (B2C) transactions over the Internet, the largest potential market is in business-to-business (B2B) transactions, which occur in greater volume, with or without e-business. Though e-business initially focused on e-procurement, resources are now dedicated to building the infrastructure to connect sales and operations planning across the entire trading network (Fig. 1).

1. Collaboration among partners and suitable information sharing helps improve the efficiency of a dynamic, demanding supply chain. (Source: AspenTech)

Advanced planning and scheduling infrastructure is important to reducing cycle times in the semiconductor industry since extensive resources are dedicated to modifying schedules and re-prioritizing work-in-process. A system can be designed to plan around, for instance, unscheduled tool downtime and command a rescheduling of order commitments. "You want to make sure that your order promising and demand fulfillment business process is intelligent enough to perform that function," explained Tony Levy of i2 Technologies (Dallas, Texas).

In many fabs, schedule changes due to unscheduled tool downtime are handled manually. "If the scheduling system is conducting real-time continuous monitoring of all the different tools in the factory, it can make those decisions on the fly, which is much more efficient than waiting for manual input," said John Fields of Symphony Systems (Campbell, Calif.).

In a highly competitive market, suppliers can differentiate themselves on the sell side by creating the necessary links between capable-to-promise data and collaborative planning to the sell-side solution (Table 1). From the purchasing side (Table 2), beyond streamlining the procurement process and reducing associated costs, an expanded communications link with suppliers can create opportunities to improve long-term contracts based on new information about the process.

Table 1. Sell-Side Marketplace Benefits
Reduced operating costs	• Lower total cost of ownership • Reduced cost of serving customers (order processing, product and MSDS management, financial settlement) • Transactional error cost avoidance (i.e. efficiency) • Faster time to market
Increased revenues	• Increased sales to new and existing customers • Greater access to information about purchasing behavior • Conversion of spot purchasers to contract purchasers • Faster time to market
Improved customer satisfaction	• Better availability of services and information • Improved order accuracy and speed
Reduced risk	• Integration with industry standard supply chain technology • Integration with industry standard manufacturing automation systems • Hosted, maintained and updated by the industry's leading supply chain provider

 

Table 2. Buy-Side Marketplace Benefits
Reduced operating costs	• Lower total cost of ownership • Reduced transaction costs • Transactional error cost avoidance (i.e. efficiency) • Fast time to benefit • Lower cost of raw materials (i.e. aggregated buys) • Improved downstream supply chain visibility • More efficient sourcing processes
Reduced risk	• Integration with industry standard supply chain technology • Integration with industry standard manufacturing automation systems • Hosted, maintained and updated by the industry's leading supply chain provider

Speed and reduced costs

Transaction speed is a key benefit to e-business — providing inventory tracking, automatic replenishment and adjustments to manufacturing schedules. Many believe the immediate communication of point-of-use, or point-of-sale, data is the crucial advantage to e-business. When a supplier receives real-time information about when and where its products are used, it has the best chance of rapidly responding to customer needs, while maintaining reducing inventories and depreciation risks. Companies also reduce cycle time by making components, for instance, for wafer or die processing tools, and only assembling systems upon order. The 8-12 week cycle time for wafer processing has also encouraged a made-to-assemble approach, with large inventories ready for packaging and test.

2. The most successful B2B scenarios will take place in a real-time collaborative environment with well-developed standards. (Source: Gartner Group )

All these time-saving approaches have one prerequisite: development of a collaborative relationship between business partners. Eventually, the most successful companies will share select, high-level information in a real-time collaborative environment, which requires standardization and changes to the current level of sharing (Fig. 2). "There is great reluctance to actually release the information required to do effective supply chain management and e-business," Fields said.

In conjunction with well-conceived business processes, documented business goals and rules of execution, the right e-business strategy can enhance productivity and reduce costs. "The task of setting up an information technology infrastructure for Web-enabled inter-enterprise communication is relatively simple and easy to customize," Simpson said. "The tough task is getting alliance partners to trust your organization enough to share their operational information."

Some of the suppliers offering e-business development solutions and/or supply chain management software include AspenTech, i2 Technologies, Symphony Systems, AvantCom Network Inc. (Sandpoint, Idaho), Avnet Inc. (Phoenix), BlackHog (Sunnyvale, Calif.), Manugistics Group Inc. (Rockville, Md.) and SAP (Walldorf, Germany).

Matching the market's moves

Fabs need to match production to demand, not just increase and maintain high productivity. Evidence of this need can be found in 300 mm automation standards.² The 300 mm fab calls for continuous and flexible processing capability. Each tool must have at least two ports, with the capability to prepare the next lot while one is in process. The 300 mm tool guidelines must accommodate complex material handling and tracking because a carrier can contain multiple lots.

To manage the balance between 300 mm semiconductor manufacturing constraints and demand, it is crucial to intelligently manage the complex operational issues of the fab, according to Mike Thompson, general manager of Brooks Automation's AutoSimulations Division (Bountiful, Utah). The company's simulation software takes historical and current business event data and tests a variety of fab operational scenarios in a virtual model to understand the impact of various actions before actual implementation.

Using larger wafers to increase productivity and reduce costs may pose an interesting dilemma at some point. Some think that point is occurring now with 300 mm processing, where the fabrication of one wafer too few can lead to a significant revenue loss and making one wafer too many exposes too many ICs to inventory depreciation risk. This view might be somewhat exaggerated, but it illustrates the need to implement solutions that more closely align production and demand.

The connection between fab automation systems and e-business systems should also be tight. In advanced fabs, the factory automation system makes use of the tools' flexibility. Demand forecasting with intelligent software will enable companies to optimize product revenues. This new scenario requires a tight connection between customers and fab floor activity.

Many understand the immediate need to tune scheduling with sales. However, issues often arise that question the need to adjust delivery dates when factory floor events occur, such as the unscheduled downtime of a bottleneck processing tool. In manufacturing, yield excursions require immediate action, but personnel may not see the need to adjust delivery dates as the excursion occurs and is rectified. The availability of yield projection data allows continual modification of available-to-promise data.

In another example, a wafer lot is held up in manufacturing because of an out-of-range critical dimension at the gate level. A decision must be made to release it for further processing or rework the last masking step. If the product is a microprocessor and the business climate is such that the company can "down-bin" and sell those ICs as a lower performance grade, the engineer could choose to forward the lot. This decision could take just minutes if fab personnel have the right decision-making tools.

The ways real-time information can be used to benefit the whole manufacturing, selling, delivery and yield-ramping processes are endless, and most have yet to be conceived and proven. Many of these ways involve highly complex decisions and large data transfers of confidential information. Modern computer and software technology, including encryption software, are now able to handle these tasks. Standards for communicating between diverse systems are crucial. RosettaNet, a Santa Ana, Calif.-based consortium designed to develop process standards for the electronics industry, is currently the standards system of choice.

Equally important, B2B communication needs to be highly granular. Companies are making careful decisions about determining levels of information sharing. Managers must not let routine transactions and reporting interfere with information flow.

Eliminating speed bumps

The customer side of e-business is often mistakenly limited to e-procurement. Simply automating the purchasing process can save much time and effort. Purchase orders can be issued electronically, eliminating the inefficiency of having workers draft and process every order. Automatic transactions are less likely to sit on someone's desk waiting to be processed, or be lost or misprocessed. Using a Web browser, the simplest e-procurement solutions automatically link a supplier and customer with little or no human oversight. Marcia Rabb, marketing manager for global customer service at Axcelis (Beverly, Mass.) estimates the cost savings associated with adopting e-procurement. "For every dollar that you invest in inventory you really spend another 35 cents for carrying costs, transaction costs, for inefficient ordering systems, freight charges and stocking," she said.

Sophisticated buy-side solutions enable purchasing with order tracking, delivery tracking, billing and financial settlement. Procurement can be tied to inventories and manufacturing scheduling. For example, systems can incorporate complex alert functionality that launches a message indicating material shortages based on predefined levels of variation. Material availability might vary within 10% without much alarm, but a 2% variation in other materials could trigger an alarm.

Toward seamless integration

E-business applications are often separated into categories of buy-side and sell-side. A sell-side application can improve the delivery of products to customers, and a buy-side application can improve the efficiency in dealing with a supplier base.

In many cases, implementation of an e-business solution is best performed in phases. First steps include Web-based employee benefits handling or the purchase and replenishment of indirect materials to prove the new e-process. Then, perhaps, a sell-side application is phased in, followed by a buy-side application, or vice-versa, with the ultimate plan of seamless e-business integration.

Marketplaces

Many players in the e-business arena participate in electronic marketplaces or exchanges. Public marketplaces provide a spot market with real-time information about product availability on the open market. They are well suited for buying and selling commodity and overstock products and materials, as well as providing a second source of supply in emergency situations.

Though public marketplaces have a place in B2B e-business, they are not likely to constitute the mainstream. Private marketplaces are more typical because they facilitate efficient interaction between established buyers and sellers. They can better ensure the transfer of production plans through the entire supply chain through more extensive information sharing, leading to real-time visibility into the supplier's inventory and planned responses to changing demand.

REFERENCES

1. J. Baliga, "Supply Chain Collaboration will Determine Future Success," Semiconductor International, Jan. 2001, p.81.
   

2. I300I Factory Guidelines: Version 2.0, International 300 mm Initiative, International SEMATECH. See www.sematech.org/public/resources/stds/reports.html.