Making an integrated-circuit computer chip, or semiconductor, is one of the world's most complex manufacturing processes. It involves hundreds of intricate steps, takes 60 to 70 days, and requires a rigorously controlled operating environment. And the infrastructure is almost prohibitively expensive. Today, a state-of-the-art fabrication plant costs close to $3bn and those costs are expected to reach $10bn by 2007 - a huge investment, especially when return is subject to the vagaries of a cyclical market.
Few companies are able or willing to undertake such an expensive and high-risk enterprise, a fact that largely explains the rise of the "fabless" semiconductor model. Fabless companies devote their resources to designing chips while outsourcing chip production, testing and packaging to large foundries and other specialists.
However, because there are multiple steps involved and because these steps need to be closely monitored across multiple, geographically dispersed providers, managing outsourced chip production is itself extremely challenging. This is true for companies of all sizes, but especially for those whose low volume puts them at the end of the queue when demand is high and who have limited access to manufacturers' support services. Such companies often have a harder time getting detailed technical assistance from the foundry, particularly in identifying yield problems and implementing yield-enhancing changes to the manufacturing process.
Enter eSilicon, the first fabless company to operate as a full-service intermediary. Based in Sunnyvale, Calif., eSilicon provides a turnkey solution to customers needing fast and predictable delivery of custom-designed chips. Launched in 2000 with venture-capital funding, eSilicon brings together all of the critical aspects of IC (integrated chip) design and manufacturing in a unified business process that enables companies to move from an initial concept to delivery of packaged, tested product.
Importantly, eSilicon does not just aggregate the capabilities of its supplier partners. It also maintains deep domain expertise in design and design methodology, yield analysis, product engineering, packaging and overall manufacturing logistics. And it leverages the internet to give customers 24/7 visibility into the entire process.
"For those people who want to do a custom semiconductor chip, the options they had were to go to a chip manufacturer and be captive to its path and its supply chain, or design their own and then go to somebody to get the wafers, and somebody else to do the assembly, and maybe write their own test program," says Gina Gloski, vice president and general manager of worldwide manufacturing operations at eSilicon. "There really wasn't an option in the middle and that is the niche we are filling. Customers who come to us can use a third-party foundry, they can pick and choose which intellectual property they want to use, they can decide on their test program. And they can see exactly what is going on at all times so there are no surprises."
Surprises are one thing you don't want to have when it comes to semiconductors. "Everything boils down to time and predictability with these companies," says Gloski. "Every day they face unparalleled time to market pressures as product life cycles get shorter and shorter. Being late can mean missing entire markets."
Moreover, a mistake can be extremely costly, notes Jonathan Oomigar, vice president for high-technology industries at Oracle. "On a single silicon wafer you might have $30,000 worth of semiconductors, so wafers are really more valuable than gold," he says.
Realizing a high yield from every wafer is imperative and yield must be constantly monitored. Current trends in manufacturing will only increase this pressure, as more capacity is compressed into ever-smaller footprints, and as manufacturers move to 12-inch wafers with 2.25 times the area of current silicon discs.
eSilicon uses its strong supplier relationships and on-staff expertise to address these issues, along with a robust infrastructure that combines proprietary software called eSilicon Access with financial, supply-chain management and shop-floor management modules from Oracle's E-Business Suite. A separate web-based solution from Syntricity Inc. supports eSilicon's yield management services.
"Unlike a lot of other companies where the infrastructure is added as a secondary piece, it was a primary piece of our foundation," says Gloski. "Early on we made the decision to invest in technology that not only would accomplish what we wanted but that would scale as the company grows."
That growth is proceeding apace. eSilicon already has two companies in production, six more in the design or ramp phase, and is talking with numerous others. It recently was named winner of the "Start Ups to Watch" award by the Fabless Semiconductor Association. This award recognizes companies for superior performance in the areas of innovation, market opportunity, growth, management team and strategic partners. To win, eSilicon beat out more than two dozen other nominated companies.
"There can be tax advantages in the way you manufacture and where."
The selection of Oracle as lead technology partner came early in eSilicon's life. Getting a systems infrastructure in place was critical, because the company's founders knew they would be unable to implement software at the same time they were beginning to ramp production for customers. "Each of our products is unique, so unlike a traditional semiconductor company that might start up and, as it grows, ramp to production with one product, then four months later bring on a second, then later on the third - I actually am ramping and in production right now with four different products simultaneously, all serving different market segments, all being in different technologies with different testing requirements and shipping locations," says Gloski. "There is no way we could be doing that and also bringing online an entirely new system."
eSilicon narrowed down its selection of system providers to three - Oracle, SAP and Mapics. Then, Gloski, who is a member of the FSA board, decided to survey the FSA membership as to what system they use. "Oracle came out No. 1 in that survey," she says. "We knew Oracle could handle the issues we were most concerned with, such as a reverse bill of materials and, frankly, Oracle was extremely aggressive in going after the middle market. And we didn't want to spend two years debating this decision."
After opting for Oracle in January 2002, eSilicon wanted to get up and running quickly. This was made easier since it was basically a greenfield implementation, with minimal legacy systems and processes that had to be accommodated. "Rather than create a bunch of new processes for how we were going to do purchasing and receiving, or whatever, it was just much simpler to say that, unless there was some reason we couldn't, we would build our processes around Oracle," Gloski says.
The implementation also was simplified by eSilicon's conscious decision to limit the scope of its supply chain. "We decided to have a few very strong strategic partners as opposed to many partners," says Gloski. "We did not want to have three or four foundry partners and three or four partners for assembly and packaging and testing," she says. Instead the company settled on a very few best-of class partners in these areas, with all fabrication being handled by Taiwan Semiconductor Manufacturing Co. (TSMC).
The Oracle implementation took only three months and was completed well before eSilicon began shipping product last October.
From the beginning eSilicon was intent on automating most of the data flow with its partners, focusing particularly on three crucial areas: wafer traceability, yield management, and step-by-step visibility to work in progress.
The first of these, traceability, relates to the ability to manage a "reverse bill of materials." Gloski explains that whereas manufacturing typically starts with components that are assembled into a final product, the reverse is true for semiconductors. There, the process starts with a wafer that eventually yields a large number of chips. In between are many complex manufacturing steps, during which some chip lots may be split and later re-merged. It is essential, however, that every chip be traceable back to its origin. "Being able to have lot traceability back to the mother wafer lot at the beginning is critical to running this business," says Gloski.
The primary reason is that if a problem shows up in a chip, the company has to be able to quickly check the genealogy to see if there might be other chips affected.
"We have built a complete genealogy capability into Oracle Shop Floor Management," says Oomigar. "When you get to the finished packaged product, you can trace it all the way back to the to raw silicon, and know every single step that it went through in very, very excruciating detail."
He cites other reasons for having this capability as well. "Some customers will only accept chips that are manufactured on a specific, pre-qualified line and genealogy can verify that," he says. Finally genealogy is useful for tax purposes. "There can be certain tax advantages in the way you manufacture and where you manufacture," he says. "So on the outside of the box of a finished product, it will usually state the key area where the product was fabbed and tested and assembled because certain tax breaks might be applicable. Or, for example, if you have to add value within the European Union to be sold there or to avoid duty, then it might go to Ireland first for final processing, and all that will be kept in the genealogy and the ultimate package will include this information on the outside."
Yield management, as noted earlier, is crucial to profitability. If yields drop for any reason, it is essential that eSilicon have this information immediately, without having to comb through a lot of "noise." As explained in an eSilicon white paper, the foundry publishes a multitude of yield-related reports, but much of the information involves normal fluctuations, making it difficult to identify truly worrisome trends. Indeed, the paper says, "the amount of manufacturing data supplied by the foundry is so large that analysis can be performed only through the use of a sophisticated statistical database equipped with data-mining capabilities and powerful statistical analytics."
For this, eSilicon uses a web-native software from Syntricity called dataConductor that is specifically designed to extract and predict yield information from foundry reports. "What happens is our suppliers post to our FTP [file transfer protocol] sites all the yield data that comes directly off the manufacturing equipment," says Gloski. "Then we go out and automatically grab that data and feed it into dataConductor, which gives my engineers the yield data that they need to see, by wafer and by project. It also sends alerts if yields go outside our set parameters."
To track the step-by-step movement of each order from receipt to delivery, eSilicon relies on Oracle. "Shop Floor Management brings in all of that information into a single repository so it can be tracked throughout the entire supply chain," says Oomigar. Despite this application's "shop floor" name, it actually was designed for virtual manufacturing environments, he notes. The majority of Shop Floor Management users are fabless companies.
"We have this all set up so that everything happens automatically," says Gloski. "The updates that occur when something moves from here to there are all automatic." Again, if anything is moving too slowly, eSilicon personnel receive an alert from the Oracle system.
Here is how the work flows through Oracle. As orders come in they are manually entered into the system. "We are not yet doing EDI interface with our customers," Gloski says. "That was not one of the critical things we had to bring up initially, but we will do that over time."
At this time a customer profile is created with master data, such as ship-to location, payment milestones and so on. But before production can begin, a product first has to be designed, prototyped and certified. These are engineering-intensive, hands-on steps. "An enhancement we will be looking to add over the next year will be to implement the Oracle projects module that will allow us to automatically tie all of our expenses, including labor, to a specific project," says Gloski.
Once qualification is complete and a product is ready to enter production, quantity orders are received and entered. "Then my planning people go and look at our supply-chain commitments and provide a delivery commit date, via Oracle, back to my order-fulfillment person," Gloski says. This supply-chain look includes manufacturing capabilities at partners' sites as well as transportation factors. "After my planning guys have looked at this and said here is my commit date, they then have to create a plan and send an electronic purchase order to our suppliers." Currently, the eSilicon planning engine is not running on Oracle, she says, but work is under way to implement Oracle's advanced planning module.
When an order hits the fab, tracking of each manufacturing step begins. "Our partners regularly post data to our FTP site," says Gloski. "We grab that and feed it into Oracle, and Oracle organizes and publishes the data" to eSilicon Access, a web interface that customers use to track their orders.
Making work-in-progress information available to customers is a key part of eSilicon's value proposition. To get this right, Oracle has to cleanse and cross-reference the data from different suppliers. The fab will give a customer order one number, for example, but different numbers may be attached when it moves to assembly, packaging and test. All of these numbers must be cross-referenced so that the customer sees the progress of a single order.
"Customers can go to the eSilicon web site, log on, and receive a portfolio of information on a single, user-friendly screen," says Gloski. "Instead of dealing with wafer lots and assembly lots and all the different pieces, what they see is finished goods.
"We don't publish every step in the process because that would be too much data," she adds. "Rather, we combine steps into categories that make sense to our customers." With this single-screen information easily available, "customers don't have to call us to see when their material is supposed to be delivered," she says.
Automation of data also fills important operational goals. "We wanted to have as much data as possible pass between us and our suppliers automatically so there would be the least possible amount of hand holding and least amount of data manipulation, because that translates into fewer people," says Gloski. "Instead of my planners playing the transactions, they are actually looking at data and identifying where any problems are and solving the problems. I would need three to four extra people doing this right now if I didn't have this level of automation."
With a robust infrastructure in place, eSilicon is well positioned to take advantage of both the anticipated cyclical upturn in semiconductor demand and in the growing trend toward outsourcing. Today, less than 20 percent of the global manufacturing of chips is outsourced to foundries, according to Frost & Sullivan, but in the next five to 10 years, foundries may well be making more than half the chips that come to market.
"eSilicon has a very innovative model," says Oomigar. "There are a lot of fabless companies out there, but I don't know of any that has this level of transparency and integration. These are people who know what they're doing."
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